October 20, 2003
Dear Delta Shareholders:
On behalf of the Board of Directors, it is a pleasure to invite you to
attend the Annual Meeting of Shareholders to be held at 10:00 a.m. on December
1, 2003, in Denver, Colorado at Delta's corporate offices located at 475
Seventeenth Street, Suite 1400, Denver, Colorado 80202.
Business matters expected to be acted upon at the meeting are described
in detail in the accompanying Notice of the Annual Meeting and Proxy
Statement. Members of management will report on our operations, followed by a
period for questions and discussion.
We hope you can attend the meeting. Regardless of the number of shares
you own, your vote is very important. Please ensure that your shares will be
represented at the meeting by signing and returning your proxy now, even if
you plan to attend the meeting.
Thank you for your continued support.
Sincerely,
Aleron H. Larson, Jr.
Chairman of the Board
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 1, 2003
TO THE SHAREHOLDERS OF DELTA PETROLEUM CORPORATION:
As a shareholder of Delta Petroleum Corporation, a Colorado corporation
("Delta" or 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
Delta's corporate offices, 475 17th Street, Suite 1400, Denver, Colorado
80202, on Monday, December 1, 2003, at 10:00 a.m. (local time) for the
following purposes:
1) To elect seven directors;
2) To consider and vote upon the ratification of the appointment of
KPMG LLP as independent auditors for Delta for the fiscal year
ending June 30, 2004; and
3) To transact such other business as may be properly brought before
the meeting and any adjournments thereof.
Shareholders of Delta of record at the close of business on October 20,
2003 are entitled to vote at the meeting and all adjournments thereof.
A majority of the outstanding shares of Common Stock of Delta 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 Delta'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
October 20, 2003
PROXY STATEMENT
OF
DELTA PETROLEUM CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 1, 2003
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (our "Board" or our "Board of Directors") of Delta
Petroleum Corporation ("us," "our," "we" or "Delta") of proxies to be voted
at our Annual Meeting of Shareholders (the "Annual Meeting" or the "Meeting")
to be held on December 1, 2003, at our corporate offices, 475 17th Street,
Suite 1400, Denver, Colorado 80202, at 10:00 a.m., and at any adjournment
thereof. Each shareholder of record at the close of business on October 20,
2003 of shares of our 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
30, 2003, there were 24,418,572 shares of Common Stock issued and outstanding.
Shares represented by properly executed proxy cards received by us 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; and (ii) the ratification of
the appointment of KPMG LLP as our independent auditors for the fiscal year
ending June 30, 2004.
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 our
Secretary at 475 17th Street, Suite 1400, 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 enclosed proxy card are expected to be
first sent to our shareholders on or about October 30, 2003.
Votes cast in favor of and against proposed actions (whether in person or
by proxy) will be counted for us by our Secretary at the Meeting, but this
count may be at least partially based upon information tabulated for us by our
transfer agent or others. Proxies that include abstentions and broker
non-votes will be counted as being present for the purpose of determining
whether or not a quorum is present, but will not be counted as votes for or
against particular agenda items.
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 our 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)
Our Directors are elected annually by the shareholders to serve until the
next Annual Meeting of Shareholders and until their respective successors are
duly elected. Our bylaws provide that the number of directors comprising the
whole Board shall from time to time be fixed and determined by resolution
adopted by our Board of Directors. Our Board has established the size of the
Board for the ensuing year at seven directors. Accordingly, our Board is
recommending that our seven current directors be re-elected. If any nominee
becomes unavailable for any reason, a substitute nominee may be proposed by
our Board and the shares represented by proxy will be voted for any substitute
nominee, unless the Board reduces the number of directors. We have 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.
We recommend a vote for these nominees.
NOMINEES FOR RE-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-K.
Name Age Positions Period of Service
- --------------------- --- ------------------------ -------------------
Aleron H. Larson, Jr.* 58 Chairman of the Board, May 1987 to Present
Secretary, and a Director
Roger A. Parker* 41 President, Chief May 1987 to Present
Executive Officer and
a Director
Jerrie F. Eckelberger* 59 Director September 1996
to Present
James B. Wallace* 74 Director November 2001 to
Present
Joseph L. Castle II* 71 Director June 2002 to Present
Russell S. Lewis* 48 Director June 2002 to Present
John P. Keller* 64 Director June 2002 to Present
Kevin K. Nanke 38 Treasurer and Chief December 1999
Financial Officer to Present
* Nominees for re-election as directors.
2
The following is biographical information as to the business experience
of each of our current officers and directors.
Aleron H. Larson, Jr. has operated as an independent in the oil and gas
industry individually and through public and private ventures since 1978. Mr.
Larson served as the Chairman, Secretary, CEO and a Director of Chippewa
Resources Corporation, a public company then listed on the American Stock
Exchange from July 1990 through March 1993 when he resigned after a change of
control. Mr. Larson serves as Chairman of the Board, Secretary and Director
of Amber Resources Company ("Amber"), a public oil and gas company which is
our majority-owned subsidiary. 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 served as the President, a Director and Chief Operating
Officer of Chippewa Resources Corporation from July of 1990 through March 1993
when he resigned after a change of control. Mr. Parker also serves as
President, Chief Executive Officer and Director of Amber. He has operated as
an independent in the oil and gas industry individually and through public and
private ventures since 1982. He received a Bachelor of Science in Mineral
Land Management from the University of Colorado in 1983. He serves on the
Board of Directors for the Independent Producers Association of the Mountain
States (IPAMS), Community Bankshares, Inc. and on the Board Advisory Council
for The Leeds School of Business at the University of Colorado-Boulder.
Jerrie F. Eckelberger is an investor, real estate developer and attorney
who has practiced law in the State of Colorado since 1971. 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. From 1975 to present, Mr.
Eckelberger has practiced law in Colorado and is presently a member of the law
firm of Eckelberger & Jackson, LLC. Mr. Eckelberger previously served as an
officer, director and corporate counsel for Roxborough Development
Corporation. Since March 1996, Mr. Eckelberger has acted as 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, L.L.C., 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 the Managing Member of the
Woods at Pole Creek, a Colorado limited liability company, specializing in
real estate development.
James B. Wallace has been involved in the oil and gas business for over
40 years and has been a partner of Brownlie, Wallace, Armstrong and Bander
Exploration in Denver, Colorado since 1992. From 1980 to 1992 he was Chairman
of the Board and Chief Executive Officer of BWAB Incorporated. Mr. Wallace
currently serves as a member of the Board of Directors and formerly served as
the Chairman of Tom Brown, Inc., an oil and gas exploration company listed on
the New York Stock Exchange. He received a B.S. Degree in Business
Administration from the University of Southern California in 1951.
3
Joseph L. Castle II has been a Director of Castle Energy Corporation
("Castle") since 1985. Mr. Castle is the Chairman of the Board of Directors
and Chief Executive Officer of Castle, having served as Chairman from December
1985 through May 1992 and since December 20, 1993. Mr. Castle also served as
President of Castle from December 1985 through December 20, 1993, when he
reassumed his position as Chairman of the Board. Previously, Mr. Castle was
Vice President of Philadelphia National Bank, a corporate finance partner at
Butcher and Sherrerd, an investment banking firm, and a Trustee of The Reading
Company. Mr. Castle has worked in the energy industry in various capacities
since 1971. Mr. Castle is also a director of Comcast Corporation and Charming
Shoppes, Inc. Since May of 2000, Mr. Castle has served as the Chairman of the
Board of Trustees of the Diet Drug Products Liability ("Phen-Fen") Settlement
Trust.
Russell S. Lewis has been a director of Castle since April 2000. From
1994 to 1999, Mr. Lewis was the Chief Executive Officer of TransCore, Inc., a
company which sells and installs electronic toll collection systems. Since
1999, Mr. Lewis has been the owner and President of Lewis Capital Group, a
company investing in and providing consulting services to growth-oriented
companies. Since March 2000, Mr. Lewis has also been Senior Vice President of
Corporate Development at VeriSign, Inc. In February of 2002, Mr. Lewis joined
VeriSign full-time as Executive Vice President and General Manager of
VeriSign's Global Registry Services Group, which maintains the authoritative
database for all ".com", ".net" and ".org" domain names in the Internet.
John P. Keller has been a director of Castle since April 1997. Since
1972, Mr. Keller has served as the President of Keller Group, Inc., a
privately-held corporation with subsidiaries in Ohio, Pennsylvania and
Virginia. In 1993 and 1994, Mr. Keller also served as the Chairman of
American Appraisal Associates, an appraisal company. Mr. Keller is also a
director of A.M. Castle & Co.
Kevin K. Nanke, Treasurer and Chief Financial Officer, joined Delta in
April 1995. Since 1989, he has been involved in public and private accounting
with the oil and gas industry. Mr. Nanke received a Bachelor of Arts in
Accounting from the University of Northern Iowa in 1989. Prior to working
with us, he was employed by KPMG LLP. He is a member of the Colorado Society
of CPA's and the Council of Petroleum Accounting Society.
There is no family relationship among or between any of our Officers
and/or Directors.
Messrs. Castle, Lewis and Keller were proposed for appointment to the
Board by Castle Energy Corporation pursuant to the Purchase and Sale Agreement
between Delta and Castle Energy Corporation effective October 1, 2001.
Messrs. Castle, Lewis and Keller are also directors of Castle Energy
Corporation.
Messrs. Castle, Wallace and Eckelberger serve as the Incentive Plan
Committee and as the Compensation Committee.
Messrs. Lewis, Keller, Eckelberger and Wallace serve as the Audit
Committee and the Nominating Committee.
All directors will hold office until the next annual meeting of
shareholders.
All of our officers will hold office until the next annual directors'
meeting. There is no arrangement or understanding among or between any such
4
officers or any persons pursuant to which such officer is to be selected as
one of our officers.
BOARD OF DIRECTORS AND COMMITTEES
During fiscal year 2003 our Board of Directors met on six occasions
either in person or by phone or in lieu thereof acted by consent. Our Board
has appointed four committees: the Audit, Compensation, Nominating and
Incentive Plan Committees. The non-employee directors, Messrs. Eckelberger
and Wallace, currently serve on all four committees and both are necessary to
constitute a quorum. During fiscal year 2003 our Compensation Committee met
on two occasions, our Audit Committee on three occasions, and our Incentive
Plan Committee on two occasions, either in person or by phone or, in lieu
thereof, acted by consent. The Nominating Committee is newly formed and did
not meet during fiscal year 2003. Each Director attended at least 75% of the
aggregate number of meetings held by the Board of Directors and its committees
held in person or by phone during the time each such Director was a member of
the Board or of any committee of the Board.
Our Compensation Committee makes recommendations to our Board in the area
of executive compensation. Our Audit Committee is appointed for the purpose
of overseeing and monitoring our 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 our 2002 Incentive Plan. Non-employee
directors are automatically awarded options on an annual basis under a fixed
formula under our 2002 Incentive Plan. (See "Compensation of Directors").
The Nominating Committee is newly formed and will make recommendations to the
Board of the persons who shall be nominated for election as Directors. The
Nominating Committee will consider persons suggested by shareholders for
nomination. Any shareholder wishing to submit a suggestion for a nominee
should submit his/her request to the Nominating Committee in care of the
Secretary of Delta.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 2003, James B. Wallace, Jerrie F.
Eckelberger and Joseph L. Castle II served as members of the Compensation
Committee. Joseph L. Castle II is Chairman of the Board and Chief Executive
Officer of Castle Energy Corporation, a principal shareholder of Delta.
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 our executive officers, directors and persons who beneficially own
more than ten percent (10%) of a registered class of our equity securities, to
file initial reports of securities ownership of Delta and reports of changes
in ownership of equity securities of Delta with the Securities and Exchange
Commission ("SEC"). Such persons also are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.
To our knowledge, during the fiscal year ended June 30, 2003, our
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 us by our officers and directors and their written
representations that such reports accurately reflect all reportable
transactions.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
SHAREHOLDERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
The following table presents information concerning persons known by
us to own beneficially 5% or more of our issued and outstanding voting
securities at September 30, 2003:
Name and Address Amount and Nature
of Beneficial of Beneficial Percent
Title of Class (1) Owner Ownership of Class(2)
Common stock Aleron H. Larson, Jr. 1,843,590 shares(3) 7.02%
(includes options 475 17th St., #1400
for common stock) Denver, CO 80202
Common stock Roger A. Parker 1,820,801 shares(4) 7.05%
(includes options 475 17th St., #1400
for common stock) Denver, CO 80202
Common stock Castle Energy 9,948,289 shares(5) 40.74%
Corporation
One Radnor Corporate
Center, Suite 250
Radnor, PA 19087
- ------------------------------
(1) We have an authorized capital of 300,000,000 shares of $.01 par value
Common Stock of which 24,418,572 shares were issued and outstanding as of
September 30, 2003. We also have an authorized capital of 3,000,000 shares of
$.10 par value preferred stock of which no shares are outstanding.
(2) The percentage set forth after the shares listed for each beneficial
owner is based upon total shares of Common Stock outstanding at September 30,
2003 of 24,418,572. 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 4,000 shares owned by his children and 314,590 options to
purchase 314,590 shares of Common Stock at $0.05 per share until September 21,
2008 for 39,590 of the options, until September 1, 2008 for 175,000 of the
options and until December 10, 2008 for 100,000 of the options. Also includes
options to purchase 100,000 shares of Common Stock at $1.75 per share until
November 5, 2009; options to purchase 300,000 shares of Common Stock at $3.75
per share until July 14, 2010; options to purchase 250,000 shares of Common
Stock at $5.00 per share until October 9, 2010; options to purchase 200,000
shares of Common Stock at $3.29 per share until January 8, 2011; options to
purchase 175,000 shares of Common Stock at $2.38 per share until October 5,
2011; and options to purchase 500,000 shares of Common Stock at $5.29 per
share until August 26, 2013.
(4) Includes 395,801 shares owned by Mr. Parker directly. Also includes
options to purchase 300,000 shares of Common Stock at $3.75 per share until
July 14, 2010; options to purchase 250,000 shares of Common Stock at $5.00 per
share until October 9, 2010; options to purchase 200,000 shares of Common
6
Stock at $3.29 per share until January 8, 2011; options to purchase 175,000
shares of Common Stock at $2.38 per share until October 5, 2011; and options
to purchase 500,000 shares of Common Stock at $5.29 per share until August 26,
2013.
(5) Includes 9,566,000 shares owned directly by Castle Energy Corporation and
382,289 shares held by a wholly owned subsidiary. Joseph L. Castle II is an
officer, director and principal shareholder of Castle Energy Corporation and
is deemed to share beneficial ownership of these shares.
(b) Security Ownership of Management:
Name and Address Amount and Nature
of Beneficial of Beneficial Percent
Title of Class (1) Owner Ownership of Class(2)
Common Stock Aleron H. Larson, Jr. 1,843,590 shares(3) 7.02%
Common Stock Roger A. Parker 1,820,801 shares(4) 7.05%
Common Stock Kevin K. Nanke 834,407 shares(5) 3.31%
Common stock James B. Wallace 52,500 shares(6) .21%
Common stock Jerrie F. Eckelberger 20,725 shares(7) .08%
Common stock Russell S. Lewis 20,000 shares(8) .08%
Common stock John P. Keller 20,000 shares(8) .08%
Common Stock Joseph L. Castle, II 9,948,289 shares(9) 40.74%
Common stock Officers and Directors 14,559,952 shares(10) 50.95%
as a Group (8 persons)
- ------------------------------
(1) See Note (1) to preceding table; includes options.
(2) See Note (2) to preceding table.
(3) See Note (3) to preceding table.
(4) See Note (4) to preceding table.
(5) Consists of 25,000 shares of Common Stock owned directly by Mr. Nanke;
options to purchase 34,047 shares of Common Stock at $1.125 per share until
September 1, 2008; options to purchase 25,000 shares of Common Stock at
$1.5625 per share until December 12, 2008; options to purchase 100,000 shares
of Common Stock at $1.75 per share until May 12, 2009; options to purchase
75,000 shares of Common Stock at $1.75 per share until November 5, 2009;
options to purchase 125,000 shares of Common Stock at $3.75 per share until
July 14, 2010; options to purchase 100,000 shares of Common Stock at $3.29
until January 9, 2011;options to purchase 100,000 shares of Common Stock at
$2.38 per share until October 5, 2011; options to purchase 200,000 shares of
Common Stock at $5.29 per share until August 26, 0003.
(6) Includes 30,000 shares of Common Stock; options to purchase 2,500 shares
at $2.02 per share until February 5, 2002 and options to purchase 20,000
shares at $1.87 per share until February 7, 2013.
(7) Includes 725 options to purchase shares of Common Stock at $2.98 per
share until December 31, 2006 and options to purchase 20,000 shares of Common
Stock at $2.02 until February 5, 2012.
(8) Includes 20,000 options to purchase shares of Common Stock at $1.87 per
share until February 7, 2013.
7
(9) Represents the 9,948,289 shares beneficially owned by Castle Energy
Corporation of which Mr. Castle is a controlling person.
(10) Includes all warrants, options and shares referenced in footnotes (3),
(4), (5), (6), (7), (8) and (9) above as if all warrants and options were
exercised and as if all resulting shares were voted as a group.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Long-Term
Compensation
Annual ------------
Compensation Awards
-------------------- ------------
Securities
Underlying
Name and Options/ All Other
Principal Position Period Salary(1) Bonus SARs(#) Compensation($)(6)
- ------------------------ ---------- --------- -------- ----------- ------------------
Roger A. Parker Year Ended
President, Chief Executive 6/30/03 $240,000 $272,000 - $40,000
Officer and Director Year Ended
6/30/02 240,000 144,000 175,000(2) 20,000
Year Ended
6/30/01 198,000 91,000 750,000(3) 5,940
Aleron H. Larson, Jr. Year Ended
Chairman, Secretary 6/30/03 $240,000 $192,500 - $40,000
and Director Year Ended
6/30/02 240,000 144,000 175,000(2) 20,000
Year Ended
6/30/01 198,000 91,000 750,000(3) 5,940
Kevin K. Nanke Year Ended
Chief Financial Officer 6/30/03 $180,000 $130,000 - $40,000
and Treasurer Year Ended
6/30/02 144,000 86,400 100,000(4) 20,000
Year Ended
6/30/01 120,000 55,000 225,000(5) 3,600
- ------------------------
(1) Includes reimbursement of certain expenses.
(2) Includes options to purchase 175,000 shares of Common Stock at $2.38 per
share until October 5, 2011.
(3) Includes options to purchase 300,000 shares of Common Stock at $3.75 per
share until July 14, 2010; options purchase 250,000 shares of Common Stock at
$5.00 per share until October 9, 2010; and options to purchase 200,000 shares
of Common Stock at $3.29 per share until January 8, 2011.
(4) Includes options to purchase 100,000 shares of Common Stock at $2.38 per
share until October 5, 2011.
8
(5) Includes options to purchase 125,000 shares of Common Stock at $3.75 per
share until July 14, 2010; and options to purchase 100,000 shares of Common
Stock at $3.29 per share until January 8, 2011.
(6) Represents amounts contributed under the Company's Simple IRA Plan and
Profit Sharing Plan.
AGGREGATED OPTIONS/EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Shares Options at Options at
Acquired June 30, 2003 (#) June 30, 2003 ($)
on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- --------------------- ------------ -------- ---------------- ------------------
Roger A. Parker 100,000 $190,000 925,000 / 0 $ 787,000 / 0
President, Chief Executive
Officer and Director
Aleron H. Larson, Jr. 51,100 $194,300 1,339,590 / 0 $2,495,000 / 0
Chairman, Secretary
and Director
Kevin K. Nanke 0 0 559,047 / 0 $1,141,000 / 0
Chief Financial
Officer and Treasurer
Compensation of Directors
As a result of elections made by non-employee directors under the
formulas provided in our 2001 Incentive Plan, as amended, we granted options
to non-employee directors after the calendar year end as follows:
Number Exercise Expiration
Director of Options Price Date
Jerrie F. Eckelberger 20,000 1.87/sh 2/7/13
James B. Wallace 20,000 1.87/sh 2/7/13
John P. Keller 20,000 1.87/sh 2/7/13
Russell S. Lewis 20,000 1.87/sh 2/7/13
In addition, the outside non-employee directors are each paid $500 per
month.
Employment Contracts and Termination of Employment and Change-in-Control
Agreement
On November 1, 2001, our Compensation Committee authorized us to enter
into employment agreements with our Chairman, President and Chief Financial
Officer, which employment agreements replaced and superseded the prior
employment agreements with these persons. The employment agreements provide
9
for minimum salaries which may be and have been raised from time to time by
the Compensation Committee and Board of Directors. For fiscal 2004 our
Chairman will receive a salary of $275,000, our President a salary of $340,000
per year and our Chief Financial Officer a salary of $200,000 per year. Their
employment agreements have three-year terms and include provisions for cars,
parking and health insurance. Terms of their 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 we have a change in control, as
defined in our 2001 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, we will immediately
cause all of each employee's then outstanding unexercised options to be
exercised by us on behalf of the employee and we will pay the employee's
federal, state and local taxes applicable to the exercise of the options and
warrants.
Retirement Savings Plan
During 1997 we 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. On May 21, 2002, we
adopted a Profit Sharing Plan to replace the Simple IRA plan, and during the
year ended June 30, 2003 we contributed $147,000 under the Simple and Profit
Sharing Plans.
Equity Compensation Plan Information
The following table provides information about the Common Stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of June 30, 2003.
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted-Average Equity Compensation
Be Issued upon Exercise Exercise Price of Plans (excluding securities
of Outstanding Options, Outstanding Options reflected in the second
Plan Category Warrants and Rights Warrants and Rights column)
- ---------------------------------------------------------------------------------------------------
Equity Compensation 3,410,987 $3.15 1,750,000
Plans Approved by
Stockholders
Equity Compensation 0 $ 0 0
Plans Not Approved by
Stockholders
10
REPORT OF THE COMPENSATION PLAN COMMITTEE
REGARDING COMPENSATION ISSUES
The objective of our Compensation Committee is to design our executive
compensation program to enable us 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 our success in creating
shareholder value.
In furtherance of this objective, the Compensation Committee has
determined that the program should have the following components:
BASE SALARIES: Our Committee believes that we should offer competitive
base salaries to enable us to attract, motivate and retain capable executives.
Our Committee has in the past determined levels of the base compensation using
published compensation surveys and other information for energy and similar
sized companies. Our Committee may or may not use such surveys or other
information to determine levels of base compensation in the future.
LONG-TERM INCENTIVES: Our 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 our
executive officers to own and hold our stock and tie their long-term economic
interests directly to those of our shareholders. Long-term compensation can
be provided in the form of restricted stock or stock options or other grants
under our 2001 Incentive Plan, as amended.
With specific reference to our officers, our Committee attempts to
exercise great latitude in setting salary and bonus levels and granting stock
options. Philosophically, our 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 us.
Our Committee believes that its objective 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 our profits or
share price. It is our 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. Our Committee
believes that compensation levels during 2002 adequately reflect our
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 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 we generally intend to qualify payment of
compensation under section 162(m), we reserve the right to pay compensation to
our executives from time to time that may not be tax deductible.
11
MEMBERS OF THE COMPENSATION COMMITTEE:
Joseph L. Castle II
James B. Wallace
Jerrie F. Eckelberger
REPORT OF THE AUDIT COMMITTEE
Delta has a standing Audit Committee of the Board of Directors (the
"Audit Committee"). The Audit Committee consists of Messrs. Wallace,
Eckelberger, Keller and Lewis, who are independent (as defined in the Nasdaq
listing standards). The Audit Committee operates pursuant to a charter (the
"Audit Committee Charter") approved and adopted by the Board. A copy of the
Audit Committee Charter was attached to the Proxy Statement for the Annual
Meeting held in August 2001. The Audit Committee held three meetings in
fiscal 2003. The Audit Committee, on behalf of the Board, oversees Delta's
financial reporting process. In fulfilling its oversight responsibilities,
the Audit Committee reviewed and discussed the audited financial statements
and footnotes thereto in Delta's fiscal 2003 Annual Report on Form 10-K with
management and independent public accountants.
The Audit Committee has discussed with Delta's independent public
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended.
The Audit Committee has discussed with Delta's independent public
accountants their independence from management and Delta, and received
confirmation from them regarding their independence required by the
Independence Standards Board Standard No. 1.
Based on the Audit Committee's review of the foregoing and discussions
with management and Delta's independent public accountants, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in Delta's Annual Report on Form 10-K for the last
fiscal year for filing with the SEC.
MEMBERS OF THE AUDIT COMMITTEE:
Jerrie F. Eckelberger
James B. Wallace
John P. Keller
Russell S. Lewis
PERFORMANCE GRAPH
The performance graph shown below was prepared using data prepared by CTA
Public Relations. As required by applicable rules of the SEC, the graph was
prepared based upon the following assumptions:
1. $100 was invested in Common Stock, the Nasdaq Composite Index (U.S.)
and the Peer Group (as defined below) on June 30, 1998.
2. Peer Group investment is weighted based on the market capitalization
of each individual company within the Peer Group at the beginning of each
year.
3. Dividends are reinvested on the ex-dividend dates.
12
The companies that comprise the Company's Peer Group are: Tipperary
Corporation; United States Exploration, Inc.; Nuevo Energy Co.; Range
Resources Corporation; and Equity Oil Company.
COMPARATIVE CUMULATIVE TOTAL RETURNS
DELTA PETROLEUM CORPORATION
NASDAQ COMPOSITE INDEX AND PEER GROUP
(Performance results through June 30, 2003)
[STOCK PERFORMANCE GRAPH OMITTED]
6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 6/30/03
Delta Petroleum Corporation $100.00 $ 71.58 $112.73 $131.71 $111.67 $131.14
Nasdaq Composite Index $100.00 $ 46.63 $ 67.34 $ 85.98 $ 77.51 $ 92.26
Peer Group $100.00 $ 65.66 $209.32 $114.07 $ 77.23 $ 85.65
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a list of certain relationships and related party
transactions that occurred during our past fiscal year and the two previous
fiscal years, as well as transactions that occurred since the beginning of our
last fiscal year or are currently proposed:
We have a month to month consulting agreement with Messrs. Burdette A.
Ogle and Ronald Heck (collectively "Ogle"), a less than 10% shareholder, which
provides for a monthly fee of $10,000.
We annually pay Ogle a $350,000 minimum production payment as payment
for interests in certain undeveloped Federal Units offshore Santa Barbara
which were assigned to us by Ogle. This payment is recorded as an addition to
undeveloped offshore California properties. As of June 30, 2003, we have paid
a total of $2,950,000 in minimum royalty payments and is to pay a minimum of
$350,000 annually until the earlier of: 1) when production payments accumulate
to $8,000,000; 2) when 80% of the ultimate reserves of any lease under the
agreement have been produced; or 3) 30 years from the date of purchase,
January 3, 1995.
In December 2001 and January 2002, we entered into amendments that
permitted us to make the $350,000 payment due January 3, 2002 in installments
through October 2002.
Our Board of Directors has granted each of our officers the right to
participate in the drilling on the same terms as us in up to a five percent
(5%) working interest in any well drilled, re-entered, completed or
recompleted by us on our acreage (provided that any well to be re-entered or
recompleted is not then producing economic quantities of hydrocarbons). On
March 12, 2003, the Board of Directors rescinded this right. The officers did
not participate in any such wells during fiscal 2003.
On November 1, 2001, our Compensation Committee authorized us to enter
into employment agreements with our Chairman, President and Chief Financial
Officer, which employment agreements replaced and superseded the prior
employment agreements with such persons. The employment agreements have three
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
13
the event we have a change in control, as defined in our 2001 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, we will immediately cause all of
each employee's then outstanding unexercised options to be exercised by us on
behalf of the employee with us paying the employee's federal, state and local
taxes applicable to the exercise of the options and warrants.
During fiscal 2001 and 2000, Mr. Larson and Mr. Parker guaranteed
certain borrowings which have subsequently been paid in full. As
consideration for the guarantee of our indebtedness, each officer was assigned
a 1% overriding royalty interest ("ORRI") in the properties acquired with the
proceeds of the borrowings. Each officer earned approximately $108,000,
$71,000 and $83,000 for their respective 1% ORRI during fiscal 2003, 2002 and
2001, respectively.
At June 30, 2003, we had $72,000 of receivables from officers and
directors. These amounts include drilling costs, and lease operating expense
on wells owned by the officers and directors and operated by us. The amounts
are due on open account and are non-interest bearing.
Effective June 1, 2002, Mr. Parker exchanged properties with a fair
market value of approximately $150,000 in exchange for a reduction in joint
interest billing owed to us. The fair market value was initially determined
by our internal engineer and verified by our independent engineer.
On January 18, 2001 and April 13, 2001, Franklin Energy LLC, an affiliate
of BWAB, earned 20,250 and 10,000 shares of the Company's common stock,
respectively for its assistance in the purchase and sale of the certain oil
and gas properties. The shares issued were valued at $121,000 which was a 10%
discount to market, based on the quoted market price of our stock at the date
of the acquisition. The shares were accounted for as an adjustment to the
purchase price and capitalized to oil and gas properties.
On January 3, 2001, we granted an option to acquire 50% of the properties
acquired under the Ogle transaction discussed above to Evergreen Resources,
Inc. ("Evergreen"), a less than 10% shareholder, until September 30, 2001.
The option expired September 30, 2001.
On February 12, 2001, our Board of Directors permitted Aleron H. Larson,
Jr., Chairman, Roger A. Parker, President, and Kevin Nanke, our Chief
Financial Officer, to purchase working interests of 5% each for Messrs. Larson
and Parker and 2-1/2% for Mr. Nanke in our Cedar State gas property located in
Eddy County, New Mexico and in our Ponderosa Prospect consisting of
approximately 52,000 gross acres in Harding and Butte Counties, South Dakota
held for exploration. These officers were authorized to purchase these
interests on or before March 1, 2001 at a purchase price equivalent to the
amounts paid by us for each property as reflected upon our books by delivering
to us shares of our common stock at the February 12, 2001 closing price of
$5.125 per share, the market closing price on that date. Messrs. Larson and
Parker each delivered 10,256 shares in fiscal 2002 and 31,310 shares in fiscal
2001, and Mr. Nanke delivered 5,128 shares in fiscal 2002 and 15,655 shares in
fiscal 2001 in exchange for their respective interests in these properties.
Also on February 12, 2001, we granted Messrs. Larson, Parker and Nanke the
right to participate in the drilling of the Austin State #1 well in Eddy
County, New Mexico by committing on February 12, 2001 (prior to any bore hole
knowledge or information relating to the objective zone or zones) to pay 5%
each for Messrs. Larson and Parker and 2-1/2% for Mr. Nanke of Delta's working
14
interest costs of drilling and completion or abandonment costs which costs
were paid in Delta common stock at $5.125 per share, the market closing price
on that date. All of these officers committed to participate in the well.
Directors and officers were issued options and warrants as disclosed in
"Executive Compensation" above.
All past and future and ongoing transactions with affiliates are and will
be on terms which our management believes are no less favorable than could be
obtained from non-affiliated parties. All future and ongoing loans to our
affiliates, officials and shareholders will be approved by the majority vote
of disinterested directors.
APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal 2 of the Proxy)
Subject to ratification by our shareholders, the Board has designated the
firm of KPMG LLP, Suite 2300, 707 17th Street, Denver, Colorado 80202, as
independent auditors to examine and audit our financial statements for the
fiscal year 2003. This firm has audited our financial statements for five
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 our shareholders 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 LLP.
Audit Fees. The fees billed for professional services rendered by the
independent auditors for the audit of Delta's financial statements during the
year ended June 30, 2003, and for the reviews of the financial statements
included in Delta's Forms 10-Q during the last fiscal year, amounted to
$108,000.
Financial Information Systems Design and Implementation Fees. The
independent auditors did not provide professional services during fiscal 2003
relating to financial information systems design and implementation.
All Other Fees. The fees billed by the independent auditors during the
fiscal year ended June 30, 2003 for non-audit services rendered amounted to
$22,500. These fees were related to consultation about accounting matters and
other Securities and Exchange Commission filings. The Audit Committee has
considered the other fees paid to KPMG LLP and concluded that they do not
impair the independence of KPMG LLP.
A representative of KPMG 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.
15
SHAREHOLDER PROPOSALS
Any shareholder proposals to be included in the Board of Directors'
solicitation of proxies for the 2004 Annual Meeting of Shareholders must be
received by Aleron H. Larson, Jr., Secretary, at 475 17th Street, Suite 1400,
Denver, Colorado 80202, prior to July 2, 2004 in order to be included in the
proxy statement and proxy relating to that meeting.
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 judgment 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 us.
Additional solicitation by mail, telephone, telegraph or personal solicitation
may be done by our directors, officers and regular employees. 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 us
for their reasonable expenses.
AVAILABLE INFORMATION. Upon request of any shareholder, our Annual
Report for the year ended June 30, 2003 filed with the SEC on Form 10-K,
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 our Secretary at 475 17th Street, Suite 1400,
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/Secretary
October 20, 2003
16
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 at Delta's corporate offices at 475
17th Street, Suite 1400, Denver, Colorado 80202 on Monday, December 1, 2003,
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 seven nominees to
the Board of Directors:
Aleron H. Larson, Jr. [ ] [ ] [ ]
Roger A. Parker [ ] [ ] [ ]
Jerrie F. Eckelberger [ ] [ ] [ ]
James B. Wallace [ ] [ ] [ ]
Joseph L. Castle II [ ] [ ] [ ]
Russell S. Lewis [ ] [ ] [ ]
John P. Keller [ ] [ ] [ ]
Proposal 2: To ratify the appointment of [ ] [ ] [ ]
KPMG 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 and 2. All prior proxies are
revoked. This proxy will also be voted in accordance with the discretion of
the proxy or proxies 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.