SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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DELTA PETROLEUM CORPORATION
____________________________________________________________________________
(Name of Registrant as Specified in its Charter)
____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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__________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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DELTA PETROLEUM CORPORATION
475 SEVENTEENTH STREET, SUITE 1400
DENVER, COLORADO 80202
(303) 293-9133
November 17, 2004
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
21, 2004, in Denver, Colorado in the Bluebell I Room of the Pinnacle Club, 555
17th Street, 37th Floor, 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 21, 2004
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 in the
Bluebell I Room of the Pinnacle Club, 555 17th Street, 37th Floor, Denver,
Colorado 80202, on Tuesday, December 21, 2004, at 10:00 a.m. (MST) for the
following purposes:
1) To elect nine directors;
2) To consider and vote upon the approval of Delta's 2004 Incentive
Plan;
3) 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, 2005; and
4) 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 November 17,
2004 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
November 17, 2004
PROXY STATEMENT
OF
DELTA PETROLEUM CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ONDECEMBER 21, 2004
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 21, 2004, Bluebell I Room of the Pinnacle Club, 555
17th Street, 37th Floor, Denver, Colorado 80202, at 10:00 a.m., and at any
adjournment thereof. Each shareholder of record at the close of business on
November 17, 2004 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 November 17, 2004, there were 40,026,449 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; (ii) the approval of Delta's
2004 Incentive Plan; and (iii) the ratification of the appointment of KPMG LLP
as our independent auditors for the fiscal year ending June 30, 2005.
As to any other business which may properly come before the Meeting, the
persons named on the proxy card will vote according to their judgment. 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 November 22, 2004.
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 eight directors. Accordingly, our Board is
recommending that our nine current directors be re-elected. If any nominee
1
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
---- --- --------- -----------------
Roger A. Parker* 42 President, Chief Executive May 1987 to Present
Officer and a Director
Aleron H. Larson, Jr.* 59 Chairman of the Board, May 1987 to Present
Secretary, and a Director
Jerrie F. Eckelberger* 60 Director September 1996 to
Present
James B. Wallace* 75 Director November 2001 to Present
Joseph L. Castle II* 72 Director June 2002 to Present
Russell S. Lewis* 49 Director June 2002 to Present
John P. Keller* 65 Director June 2002 to Present
Jordan R. Smith* 70 Director October 1, 2004 to
Present
Neal A. Stanley* 57 Director October 31, 2004 to
Present
Kevin K. Nanke 39 Chief Financial Officer December 1999 to Present
and Treasurer
John R. Wallace 44 Executive Vice President, December 2003 to Present
Exploration and Chief
Operating Officer
___________________
* Nominees for re-election as directors.
The following is biographical information as to the business experience
of each of our current officers and directors.
Roger A. Parker has operated as an independent in the oil and gas
industry individually and through public and private ventures since 1982. He
2
was at various times, from 1982 to 1989, a Director, Executive Vice President,
President and shareholder of Ampet, Inc. He has also 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 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 is a board member of the
Independent Producers Association of the Mountain States (IPAMS). He also
serves on other boards including Community Banks of Colorado.
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.
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 been engaged in the private practice of law 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 engaged in the
investment and development of Colorado real estate through several private
companies in which he is a principal.
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 then
listed on the New York Stock Exchange. He received a B.S. Degree in Business
Administration from the University of Southern California in 1951.
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
3
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.
Jordan R. Smith has been a director of the Company since October 1, 2004.
Mr. Smith is President of Ramshorn Investments, Inc., a wholly owned
subsidiary of Nabors Drilling USA LP, where he is responsible for drilling and
development projects in a number of producing basins in the United States. He
has served in such capacity for more than the past five years. Mr. Smith has
served on the Board of the University of Wyoming Foundation and the Board of
the Domestic Petroleum Council, and is also Founder and Chairman of the
American Junior Golf Association. Mr. Smith received Bachelors and Masters
Degrees in geology from the University of Wyoming in 1956 and 1957,
respectively.
Neal A. Stanley has been a director of the Company since October 31,
2004. Since June 2003, Mr. Stanley has been President of Teton Oil & Gas
Corporation in Denver, Colorado. From 1996 to June 2003, he was Senior Vice
President Western Region for Forest Oil Corporation. Mr. Stanley has
approximately forty years of experience in the oil and gas business. Since
1995, he has been a member of the Executive Committee of the Independent
Petroleum Association of Mountain States, and served as its President from
1999 to 2001. Mr. Stanley received a BS Degree in Mechanical Engineering form
the University of Oklahoma in 1975.
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.
John R. Wallace, Executive Vice President, Exploration and Chief
Operating Officer, joined Delta in October 2003 initially as an employee and
became an executive officer in December 2003. Mr. Wallace was Vice President
of Exploration and Acquisitions for United States Exploration, Inc. ("USX"), a
publicly-held oil and gas exploration company, from May 1998 to December 2003,
when he became employed by Delta. For more than five years prior to joining
USX, Mr. Wallace was President of The Esperanza Corporation, a privately held
oil and gas acquisition company, and Vice President of Dual Resources, Inc., a
4
privately held oil and gas exploration company. Esperanza effected more than
25 acquisitions of producing properties throughout the United States. In
addition, Esperanza formed and administered royalty programs for private
investors, primarily in the Rocky Mountain region, and has participated in a
number of international exploration projects. Dual Resources is in the
business of engineering and selling exploration prospects, several of which
have resulted in new field discoveries. Mr. Wallace is the son of John B.
Wallace, a Director of the Company.
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 served as the Incentive Plan
Committee and as the Compensation Committee until October 1, 2004. Effective
on that date, these committees are composed of Messrs. Eckelberger, Lewis,
Keller and Smith, all of whom are independent directors as
Messrs. Lewis, Keller, Eckelberger and Wallace served as the Audit
Committee and the Nominating Committee until October 1, 2004. Effective on
that date, these committees are composed of Messrs. Eckelberger, Lewis, Keller
and Smith, all of whom are independent directors. The Board of Directors has
determined that Mr. Russell Lewis is an "audit committee financial expert" as
that term is defined by SEC rules.
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
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 2004 our Board of Directors met on 16 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. Four directors, Messrs. Eckelberger Lewis, Keller and Smith
currently serve on all four committees. Each of these Directors is
"independent" as that term is defined by the Nasdaq Stock Market Marketplace
Rules. During fiscal year 2004 our Compensation Committee met on three
occasions, our Audit Committee on five occasions, and our Incentive Plan
Committee on three 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 2004. 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 Incentive Plans.
5
The Nominating Committee makes recommendations to the Board of the
persons who shall be nominated for election as Directors. On October 29,
2004, the Board of Directors adopted a charter for the Nominating Committee.
A copy of the charter is available on Delta's website (www.deltapetro.com.)
The Nominating Committee has not established any minimum qualifications for
persons to be considered for nomination, but will be guided by the following
criteria: that the individual be of the highest character and integrity; be
free of any conflict of interest that would violate any applicable law or
regulation or interfere with proper performance of the responsibilities of a
Director; possess substantial and significant experience that would be of
particular importance to Delta in the performance of the duties of a Director;
have sufficient time available to devote to the affairs of Delta; and have a
desire to represent the balanced best interests of the shareholders as a
whole.
Shareholders who wish to recommend persons to the Nominating Committee
should submit a letter addressed to the Chairperson of the Nominating
Committee no later than 120 days prior to the date of the next Annual Meeting
of Shareholders that sets forth the name, age, and address of the person
recommended for nomination; the principal occupation or employment of the
person recommended for nomination; a statement that the person is willing to
be nominated and will serve if elected; and a statement as to why the
shareholder believes that the person should be considered for nomination for
election to the Board of Directors and how the person meets the criteria to be
considered by the Committee described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 2004, 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.
Effective October 1, 2004, the Compensation Committee is composed of Jerrie F.
Eckelberger, Russell S. Lewis, John P. Keller and Jordan R. Smith. Messrs.
Lewis and Keller are also directors of Castle Energy Corporation.
CODE OF ETHICS
The Board of Directors adopted a Code of Business Conduct and Ethics in
November 2003 (and amended in October 2004), which applies to all of the
Company's Executive Officers, Directors and employees. A copy of the Code of
Business Conduct and Ethics is available in the" Conduct and Ethics" section
of the Company's website (www.deltapetro.com) or by writing to our Corporate
Secretary at 475 Seventeenth Street, Suite1400, Denver, Colorado 80202.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders wishing to contact the Board of Directors or a specified
members or committees of the Board should send correspondence to the Corporate
Secretary, Delta Petroleum Corporation 475 Seventeenth Street, Suite1400,
Denver, Colorado 80202. All communications so received from stockholders of
the Company will be forwarded to the members of the Board of Directors, or to
a specific Board member or committee if so designated by the stockholder. A
stockholder who wishes to communicate with a specific Board member or
committee should send instructions asking that the material be forwarded to
the Director or to the appropriate committee chairman. All stockholders are
also encouraged to communicate directly with both Officers and Directors
regarding issues affecting the Company at the Annual Meeting of Shareholders.
6
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, 2004, our
officers and directors complied with all applicable Section 16(a) filing
requirements, except as stated below. 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.
Jerrie F. Eckelberger, a Director, filed two Form 4's reporting two
transactions late; and Russell S. Lewis, John P. Keller and James B. Wallace,
Directors, each filed one Form 4 reporting one transaction late.
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 November 15, 2004:
Amount and Nature
Name and Address of Beneficial Percent
Title of Class(1) of Beneficial Owner Ownership of Class(2)
- ----------------- ------------------- ----------------- -----------
Common stock Sprott Asset Management, Inc. 7,077,600 shares 17.69%
Suite 2700 South Tower
Royal Bank Plaza
Toronto, Ontario M5J 2J1
Canada
Common stock Castle Energy Corporation 7,000,000 shares(3) 17.49%
One Radnor Corporate
Center, Suite 250
Radnor, PA 19087
Common stock Edward Mike Davis 2,496,232 shares 6.24%
200 Rancho Circle
Las Vegas, Nevada 89107
___________________________
(1) We have an authorized capital of 300,000,000 shares of $.01 par value Common
Stock of which 40,026,449 shares were issued and outstanding as of November 15,
2004. 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 November 15, 2004 of
7
40,026,449. 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) 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:
Amount and Nature
Name of of Beneficial Percent
Title of Class(1) Beneficial Owner Ownership of Class(2)
- ----------------- ---------------- ----------------- -----------
Common Stock Aleron H. Larson, Jr. 1,689,000 (3) 4.05%
Common Stock Roger A. Parker 1,808,201 (4) 4.36%
Common Stock Kevin K. Nanke 834,047 (5) 2.04%
Common Stock John R. Wallace 207,200 (6) .52%
Common stock James B. Wallace 52,500 (7) .13%
Common stock Jerrie F. Eckelberger 23,725 (8) .06%
Common stock Russell S. Lewis 40,000 (9) .10%
Common stock John P. Keller 40,000 (9) .10%
Common Stock Joseph L. Castle, II 7,000,000(10) 17.49%
Common Stock Jordan R. Smith -0- --
Common Stock Neal A. Stanley -0- --
Common stock All Officers and Directors 11,694,673(11) 26.41%
as a Group (11 persons)
_________________________
(1) See Note (1) to preceding table; includes options.
(2) See Note (2) to preceding table.
(3) Includes 4,000 shares owned by his children, options to purchase
60,000 shares of Common Stock at $0.05 per share until September 1,
2008; options to purchase 100,000 shares of Common Stock at $0.05
per share until December 10, 2008; options to purchase 100,000 shares
of Common Stock at $1.75 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 383,201 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 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) 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
8
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; and options to purchase
250,000 shares of Common Stock at $5.29 per share until August 26,
2013.
(6) Includes 7,200 shares of Common Stock owned directly by Mr. John
Wallace and options to purchase 200,000 shares at $5.44 per share
until December 3, 2013.
(7) Includes 10,000 shares of Common Stock owned directly by Mr. James B.
Wallace; options to purchase 2,500 shares at $2.02 per share until
February 5, 2002, options to purchase 20,000 shares at $1.87 per
share until February 7, 2013 and options to purchase 20,000 shares
at $2.38.
(8) Includes 3,000 shares of Common Stock owned directly by Mr. Jerrie
F. Eckelberger; options to purchase 725 shares at $2.98 per share
until December 31, 2006 and options to purchase 20,000 shares of
Common Stock at $2.2.31 until February 4, 2014.
(9) Includes 20,000 options to purchase shares of Common Stock at $1.87
per share until February 7, 2013 and 20,000 options to purchase
shares of Common Stock at $2.31 until February 4, 2014.
(10) Represents the 7,000,000 shares beneficially owned by Castle Energy
Corporation of which Mr. Castle is a controlling person.
(11) Includes all warrants, options and shares referenced in footnotes
(3), (4), (5), (6), (7), (8), (9) and (10) above as if all warrants
and options were exercised and as if all resulting shares were voted
as a group.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Long-term
Compensation
------------
Awards
------------
Annual Securities
Compensation Underlying
Name and ------------------- Options / All Other
Principal Position Period Salary(1) Bonus SARs (#) Compensation ($)(7)
- ------------------ ------ --------- -------- ------------- -------------------
Roger A. Parker Year Ended
President, Chief 6/30/04 $340,000 $340,000 500,000 (2) $41,000
Executive Officer and Year Ended
Director 6/30/03 240,000 272,000 - 40,000
Year Ended
6/30/02 240,000 144,000 175,000 (3) 20,000
Aleron H. Larson, Jr. Year Ended
Chairman, Secretary 6/30/04 $275,000 $200,000 500,000 (2) $41,000
and Director Year Ended
6/30/03 240,000 192,500 - 40,000
Year Ended
6/30/02 240,000 144,000 175,000 (3) 20,000
Kevin K. Nanke Year Ended
Chief Financial Officer 6/30/04 $200,000 $200,000 250,000 (4) $41,000
and Treasurer Year Ended
6/30/03 180,000 130,000 - 40,000
Year Ended
6/30/02 144,000 86,400 100,000 (5) 20,000
John R. Wallace Year Ended
Executive Vice President 6/30/04 $150,000 $200,000 100,000 (6) $ -
and Chief Operating
Officer
__________________________
(1) Includes reimbursement of certain expenses.
(2) Includes options to purchase 500,000 shares of Common Stock at $5.29 per share until August
26, 2013.
(3) Includes options to purchase 175,000 shares of Common Stock at $2.38 per share until October
5, 2011.
(4) Includes options to purchase 250,000 shares of Common Stock at $5.29 per share until August
26, 2013.
(5) Includes options to purchase 100,000 shares of Common Stock at $2.38 per share until October
5, 2011.
(6) Includes options to purchase 200,000 shares of Common Stock at $5.44 per share until
December 8, 2013.
(7) Represents amounts contributed under the Company's Simple IRA Plan and Profit Sharing Plan.
10
OPTION / SAR GRANTS IN LAST FISCAL YEAR
___________________________________________________________________________________________________
Potential realizable value
at assumed annual rates of
stock price appreciation
Individual Grants for option term (a)
___________________________________________________________________________________________________
Percent of
Number of total options
securities / SARs
underlying granted to
option / employees
SARs in fiscal price Expiration 5%($) 10%($)
Name granted(#) year ($/Sh) date $ $
___________________________________________________________________________________________________
Roger A. Parker 500,000 28.8% $5.29 8/26/2013 $1,710,593 $4,334,979
Aleron H. Larson, Jr. 500,000 28.8% $5.29 8/26/2013 $1,710,593 $4,334,979
Kevin K. Nanke 250,000 14.4% $5.29 8/26/2013 $ 831,713 $2,017,724
John R. Wallace 200,000 11.5% $5.44 12/8/2003 $ 684,237 $1,733,992
___________________________________________________________________________________________________
(a) The assumed annual rates of stock price appreciation used in showing the potential realizable
value of stock option grants are prescribed by rules of the SEC. The actual realized value of
the options may be significantly greater or less than the amounts shown. For options granted
during fiscal 2004 at exercise prices of $5.29 and $5.44, the value shown for 5% and 10%, for
the $5.29 exercise price appreciation equate to common stock prices of $8.62 and $13.72,
respectively, and at the values shown for 5% and 10% appreciation for the $5.44 exercise price,
appreciation equate to common stock prices of $8.86 and $14.41, respectively, at the expiration
date of the options, prices which have already been substantially exceeded.
AGGREGATED OPTIONS/EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Shares Options at Options at
Acquired June 30, 2004(#) June 30, 2004($)
on Realized Exercisable/ Exercisable/
Name Exercise(#) ($) Unexercisable Unexercisable
---- ----------- ---------- ---------------- ----------------
Roger A. Parker -- -- 1,425,000/0 $13,071,750/0
Aleron H. Larson, Jr. 134,590 $1,248,259 1,705,000/0 $16,635,750/0
Kevin K. Nanke -- -- 809,047/0 $ 8,139,817/0
John R. Wallace -- -- 0/200,000 $0/$1,602,000
11
Compensation of Directors
As a result of elections made by non-employee directors under the
formulas provided in our 2002 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 $2.31/sh 2/4/14
James B. Wallace 20,000 2.31/sh 2/4/14
John P. Keller 20,000 2.31/sh 2/4/14
Russell S. Lewis 20,000 2.31/sh 2/4/14
In addition, 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 provided
for minimum salaries which could be and were raised from time to time by the
Compensation Committee and Board of Directors. For fiscal 2004 our Chairman
received 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 had three-year terms and include provisions for cars, parking and
health insurance. These employment agreements expired on October 31, 2004.
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, 2004 we contributed $262,000 under the Simple Sharing
Plan.
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, 2004.
12
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities Weighted-Average Equity Compensation
To 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 4,700,772 $4.10 --
Plans Approved by
Stockholders
Equity Compensation -- -- --
Plans Not Approved by
Stockholders
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 Incentive Plans.
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
13
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 fiscal 2004 adequately reflect our
compensation goals and policies.
In addition, the Committee retained Pearl Meyer & Partners, Executive
Compensation Consultants, a Clark Consulting Practice, of Houston, Texas to
provide consultation and assistance to the committee relating to executive and
director compensation. Pearl Meyer & Partners identified approximately sixteen
companies as a peer group for the purpose of compensation comparison and
evaluation. Materials, consultation and recommendations provided by Pearl
Meyer & Partners were used to assist the Committee in determining executive
compensation for fiscal year 2004.
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.
MEMBERS OF THE COMPENSATION COMMITTEE (UNTIL OCTOBER 1, 2004):
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"). Effective October 1, 2004, the Audit Committee consists
of Messrs. Eckelberger, Keller Lewis and Smith, 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, as amended, is attached as
Appendix A to this Proxy Statement. The Audit Committee held five meetings in
fiscal 2004. 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 2004 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
14
statements be included in Delta's Annual Report on Form 10-K for the fiscal
year ended June 31, 2004, for filing with the SEC. The Audit Committee also
approved the selection of KPMG to serve as the Company's independent public
accountants for the fiscal year ending June 30, 2004.
MEMBERS OF THE AUDIT COMMITTEE (UNTIL OCTOBER 1, 2004):
Jerrie F. Eckelberger
John P. Keller
Russell S. Lewis
James B. Wallace
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, 1999.
2. The New Peer Group and the Old Peer Group investment is weighted
based on the market capitalization of each individual company within each Peer
Group at the beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The Company has selected a New Peer Group as result of the fact that
three of the five companies that comprised the Old Peer Group are no longer
publicly held, and management believes that a peer group that only contains
two companies does not provide an adequate basis for comparison. The New Peer
Group continues to include the two companies that were included in the Old
Peer Group. The other seven companies were selected from active oil and gas
companies with a market capitalization similar to or larger than the Company.
The companies that comprise the New Peer Group are: Tipperary
Corporation; Range Resources Corporation; St Mary Land & Exploration Co.; Edge
Petroleum Corp.; Plains Exploration & Production Co.; Brigham Exploration Co.;
Forest Oil Corp.; Whiting Petroleum Corp.; and Cimarex Energy Co.
The companies that comprise the Company's Old Peer Group are: Tipperary
Corporation; United States Exploration, Inc.; Nuevo Energy Co.; Range
Resources Corporation; and Equity Oil Company. United States Exploration,
Inc.; Nuevo Energy Co.; and Equity Oil Company each ceased to be public
entities during our fiscal year ended June 30, 2004.
15
COMPARATIVE CUMULATIVE TOTAL RETURNS
DELTA PETROLEUM CORPORATION
NASDAQ COMPOSITE INDEX AND PEER GROUP
(Performance results through June 30, 2004)
[GRAPH]
6/30/99 6/30/00 6/30/01 6/30/02 6/30/03 6/30/04
------- ------- ------- ------- ------- -------
Delta Petroleum Corporation $100.00 $157.49 $184.00 $156.01 $183.21 $538.03
Nasdaq Composite Index 100.00 318.79 173.73 117.62 130.44 164.60
New Peer Group 100.00 150.72 173.31 174.84 201.56 305.05
Old Peer Group 100.00 144.41 184.39 166.22 197.86 427.57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a list of certain relationships and related party
transactions that occurred during our past fiscal year, as well as
transactions that occurred since the beginning of our last fiscal year or are
currently proposed:
At June 30, 2004, we had $ 18,000 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
were paid subsequent to the end of our fiscal year.
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 $66,000, $108,000 and $71,000
for their respective 1% ORRI during fiscal 2004, 2003 and 2002, respectively.
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
interest costs of drilling and completion or abandonment costs which costs
16
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.
During the fiscal year ended June 30, 2004, we used a jet aircraft owned
by an entity that is 50% owned by Roger A. Parker, our President. We paid
that entity a total of $121,000 for the use of that aircraft. These amounts
represented the actual costs of the operation of the aircraft for which Mr.
Parker was responsible.
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.
2004 INCENTIVE PLAN
(Proposal 2 of the Proxy)
The Board of Directors adopted the 2004 Incentive Plan (the "2004 Plan")
on September 29, 2004, subject to approval by the shareholders of Delta at the
Annual Meeting.
PURPOSE OF THE 2004 PLAN
The purpose of the 2004 Plan is to enable Delta to attract officers and
other key employees and consultants and to provide them with appropriate
incentives and rewards for superior performance. The 2004 Plan affords Delta
the ability to respond to changes in the competitive and legal environments by
providing Delta with flexibility in key employee and executive compensation.
This plan is designed to be an omnibus plan allowing Delta to grant a wide
range of compensatory awards including stock options, stock appreciation
rights, phantom stock, restricted stock, stock bonuses and cash bonuses. The
2004 Plan is intended to encourage stock ownership by recipients by providing
for or increasing their proprietary interests in Delta, thereby encouraging
them to remain in Delta's employment.
DESCRIPTION OF THE 2004 PLAN
GENERAL. The following general description of certain features of the
2004 Plan is qualified in its entirety by reference to the 2004 Plan, which is
attached as Appendix B. Subject to adjustment as provided in the 2004 Plan,
the number of shares of Common Stock that may be issued or transferred, plus
the amount of shares of Common Stock covered by outstanding awards granted
under the 2004 Plan, shall not in the aggregate exceed 1,650,000.
ELIGIBILITY. Officers, including officers who are members of the Board
of Directors, and other key employees of and consultants and advisors to Delta
may be selected by the Committee (as defined below) to receive benefits under
the 2004 Plan. Non-employee Directors will only participate under special
provisions set forth in the 2004 Plan.
TERMS OF OPTIONS AND OTHER POSSIBLE AWARDS. The 2004 Plan authorizes the
granting of options to purchase shares of Common Stock, stock appreciation
rights ("SARs"), limited subscription rights ("LSARs"), phantom stock,
restricted shares, stock bonuses and cash bonuses. The terms applicable to
these various types of awards, including those terms that may be established
17
by the Board of Directors when making or administering particular awards, are
set forth in detail in the 2004 Plan.
TRANSFERABILITY OF AWARDS. Except as may be limited by the Committee at
the time of grant, and except for Restricted Stock, awards granted under the
2004 Plan may be transferred or assigned to others. The transfer of options
and other awards could have the effect of reducing the incentive effect of the
award to the extent that after a transfer the holder may not have any direct
relationship with us.
OPTIONS. The Committee may grant Options that entitle the optionee to
purchase shares of Common Stock at a price less than, equal to or greater than
market value on the date of grant. The option price is payable at the time of
exercise (i) in cash or cash equivalent, or (ii) by the transfer to Delta of
shares of Common Stock that are already owned by the optionee and have a value
at the time of exercise equal to the option price. In addition, at the time
of grant the Committee may provide that an Option may be exercised in a
"cashless" transaction in which the holder may surrender all or a portion of
the Option and receive the number of shares of Common Stock equal in value to
the Fair Market Value per share at the date of surrender less than the
exercise price per share of the Option, multiplied by the number of shares
which may be purchased under the Option, or portion thereof, being
surrendered.
Options granted under the 2004 Plan may be Options that are intended to
qualify as incentive stock options ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986 ("Code") or Options that are not intended
to so qualify. The 2004 Plan permits the granting of incentive stock options
or nonqualified stock options at the discretion of the Committee. The
exercise price for nonqualified stock options granted may not be less than the
fair market value per share of Common Stock on the date of grant. The exercise
price for ISOs may not be less than the fair market value per share of Common
Stock on the date of grant, and ISOs granted to persons owning more than 10%
of Delta's voting stock must have an exercise price of not less than 110% of
the fair market value per share of Common Stock on the date of grant. All
ISOs granted must be exercised within ten years of grant, except that ISOs
granted to 10% or more shareholders must be exercised within five years of
grant. The aggregate market value (as determined as of the date of grant) of
the Common Stock for which any optionee may be awarded ISOs which are first
exercisable by such optionee during any calendar year may not exceed $100,000.
The Committee may specify the conditions, including as and to the extent
determined by the Committee, the period or periods of continuous employment of
the optionee by Delta or any subsidiary that are necessary before the Options
will become exercisable. The 2004 Plan also provides that in the event of a
change in control of Delta or other similar transaction or event, each Option
granted under the 2004 Plan shall become fully and immediately exercisable.
STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") granted
under the 2004 Plan may be either freestanding or granted in tandem with an
Option. Limited Stock Appreciation Rights ("LSARs") may only be granted in
connection with the grant of an Option and may only be exercisable in the
event of a change in control in lieu of exercising the Option. SARs and LSARs
represent the right to receive from Delta the difference ("Spread"), or a
percentage thereof not in excess of 100 percent, between the base price per
share of Common Stock in the case of a freestanding SAR, or the option price
of the related Options in the case of a tandem SAR or LSAR, and the market
value of the Common Stock on the date of exercise of the SAR or LSAR. Tandem
SARs may only be exercised at a time when the related Option Right is
18
exercisable, and the exercise of a tandem SAR requires the surrender of the
related Option Right for cancellation. A freestanding SAR must specify the
conditions that must be met before the SAR becomes exercisable and may not be
exercised more than 10 years from the date of grant.
PHANTOM STOCK. The Committee may grant shares of Phantom Stock under the
2004 Plan pursuant to an agreement approved by the Committee which provides
for vesting conditions it deems appropriate. Upon vesting of a share of
Phantom Stock the participant will receive in cash a sum equal to the fair
market value of a share of Common Stock on the date of vesting plus an amount
of cash equal to the aggregate amount of cash dividends paid on each share of
Delta's Common Stock commencing on the date of grant of the Phantom Stock. In
the event of a change in control, all shares of unvested Phantom Stock
outstanding shall become immediately vested.
RESTRICTED SHARES. An award of Restricted Shares involves the immediate
transfer by Delta to a participant of ownership of a specific number of shares
of Common Stock in consideration of the performance of services or, as and to
the extent determined by the Committee, the achievement of certain performance
criteria. The participant is entitled immediately to voting, dividend and
other ownership rights in the shares. The transfer may be made without
additional consideration from the participant or in consideration of a payment
by the participant that is less than the market value of the shares on the
date of grant, as the Board of Directors may determine. In the event of a
change in control, unvested Restricted Stock shall become immediately vested.
STOCK BONUSES. The Committee may grant Stock Bonuses under the 2004 Plan
in such amounts as it shall determine from time to time. Stock Bonuses shall
be paid at such times and subject to the conditions the Committee determines
at the time of the grant.
CASH BONUSES. Subject to the provisions of the Plan, the Committee may
grant, in connection with any grant of Restricted Stock or Stock Bonus or at
any time thereafter, a cash bonus, payable after the date on which a
Participant is required to recognize income for federal income tax purposes in
connection with such Restricted Stock or Stock Bonus, in such amounts as the
Committee shall determine. However, in no event shall the amount of a Cash
Bonus exceed 50% of the fair market value of the related shares of Restricted
Stock or Stock Bonus.
ADJUSTMENTS. The maximum number of shares of Common Stock that may be
issued or transferred under the 2004 Plan, the number of shares covered by
outstanding awards and the option prices or base prices per share applicable
thereto, are subject to adjustment in the event of stock dividends, stock
splits, combinations of shares, recapitalizations, mergers, consolidations,
spin-offs, reorganizations, liquidations, issuances of rights or warrants, and
similar transactions or events.
ADMINISTRATION AND AMENDMENTS. The 2004 Plan is administered by the
Committee designated by the Board of Directors. With regard to grants to
members of the Committee, the full Board will serve as the Committee. In
connection with its administration of the 2004 Plan, the Committee is
authorized to interpret the 2004 Plan and related agreements and other
documents. The Committee may make grants to participants under any or a
combination of all of the various categories of awards that are authorized
under the 2004 Plan. The Committee may, with the concurrence of the affected
participant, cancel any agreement evidencing an award granted under the 2004
Plan. In the event of any such cancellation, the Committee may authorize the
granting of a new award under the 2004 Plan in such manner, at such price and
19
subject to such other terms, conditions and discretion as would have been
applicable under the 2004 Plan had the canceled award not been granted.
The 2004 Plan may generally be amended from time to time by the Board of
Directors, but without further approval by the shareholders of Delta, except
that no such amendment (unless expressly allowed pursuant to the adjustment
provisions described above) may increase the aggregate number of shares that
may be issued under the 2004 Plan.
TAX CONSEQUENCES TO DELTA. To the extent that a participant recognizes
ordinary income in the circumstance described above, Delta will be entitled to
a corresponding deduction provided that, among other things, (i) the income
meets the test of reasonableness, is an ordinary and necessary business
expense, is not subject to the annual compensation limitation set forth in
Section 162(m) of the Code and is not an "excess parachute payment" within the
meaning of Section 280G of the Code, and (ii) any applicable withholding
obligations are satisfied.
NEW PLAN BENEFITS
No options or awards have been granted under the 2004 Plan. The future
benefits or amounts that would be received under the 2004 Plan by executive
officers, directors and non-executive officer employees are discretionary and
are therefore not determinable at this time.
VOTE REQUIRED FOR APPROVAL; BOARD RECOMMENDATION
Pursuant to the Nasdaq shareholder approval requirements, the affirmative
vote of a majority of the votes cast on the proposal in person or by proxy is
required to approve the 2004Plan. In order for Delta to be able to grant
incentive stock options under the 2004 Plan, the affirmative vote of a
majority of the shares outstanding, in person or by proxy, is required.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal 3 of the Proxy)
Subject to ratification by our shareholders, the Audit Committee has
selected 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 2005. This firm has audited our financial statements for
six years and is considered to be well qualified. The selection of such firm
as auditors is being submitted for ratification 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 Audit Committee in order to give our shareholders an opportunity to
vote on the designation of auditors. In the event that a majority of the
votes represented at the Annual Meeting are not voted in favor of the
appointment of KPMG LLP, the Audit Committee will reconsider their decision.
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.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees. The fees billed for professional services rendered by KPMG
LLP for the audit of Delta's financial statements for the fiscal years ended
20
June 30, 2004 and 2003, and for the reviews of the financial statements
included in Delta's Forms 10-Q during those fiscal years, amounted to $178,000
and $108,000, respectively.
Audit Related Fees. The fees billed for professional services rendered by
KPMG LLP for assurance and related services that are reasonably related to the
performance of the audit or review of Delta's financial statements, that are
not included in audit fees above, billed in the fiscal years ended June 30,
2004 and 2003, amounted to $24,000and $23,000, respectively.
Tax Fees. Not Applicable.
All Other Fees. The fees billed by KPMG LLP during the fiscal years
ended June 30, 2004 and 2003 for all other services rendered amounted to
$80,000 and $-0-, respectively. These fees were related to consulting
services related to compliance with the Sarbanes Oxley Act of 2002.
Audit Committee Pre-Approval Policy. The Company's independent
accountants may not be engaged to provide non-audit services that are
prohibited by law or regulation to be provided by it, nor may the Company's
principal accountant be engaged to provide any other non-audit service unless
it is determined that the engagement of the principal accountant provides a
business benefit resulting from its inherent knowledge of the Company while
not impairing its independence. The Audit Committee must pre-approve
permissible non-audit services. During the fiscal year ended June 30, 2004,
the Audit Committee approved 100% of the non-audit services provided to Delta
by the independent auditors.
THE AUDIT COMMITTEE RECOMMENDS A VOTE FOR THIS PROPOSAL.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be included in the Board of Directors'
solicitation of proxies for the 2005 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 20, 2005 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.
21
AVAILABLE INFORMATION
Upon request of any shareholder, our Annual Report for the year ended
June 30, 2004 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
November 17, 2004
22
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 Bluebell I Room of the Pinnacle
Club, 555 17th Street, 37th Floor, Denver, Colorado 80202 on Tuesday, December
21, 2004, at 10:00 a.m. (MST), 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 nine 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 [ ] [ ] [ ]
Jordan R. Smith [ ] [ ] [ ]
Neal A. Stanley [ ] [ ] [ ]
Proposal 2: To approve Delta's 2004 Incentive
Plan [ ] [ ] [ ]
Proposal 3: 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, 2 and 3. 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.
APPENDIX A
DELTA PETROLEUM CORPORATION
AUDIT COMMITTEE CHARTER
(As Amended on September 29, 2004)
The Audit Committee ("the Committee"), of the Board of Directors ("the Board")
of Delta Petroleum Corporation ("the Company"), will have the oversight
responsibility, authority and specific duties as described below.
COMPOSITION
The Committee will be comprised of three or more directors as determined by
the Board. All members of the Committee will meet the independence and
experience requirements of the Nasdaq Stock Market (Nasdaq) then in effect. At
least one of the members shall have past employment experience in finance or
accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the individual's
financial sophistication, as required by Nasdaq rules. The members of the
Committee will be elected annually at the annual meeting of the full Board and
will be listed in the annual report to shareholders. One of the members of
the Committee will be elected Committee Chair by the Board, provided that the
Committee Chairman shall have those qualifications mandated by applicable law
and Nasdaq listing requirements.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission (SEC); (ii) the system of internal controls that
management has established; and (iii) the audit process.
The Audit Committee is directly responsible for the appointment, compensation,
retention and oversight of the work of the public accounting firm engaged for
the purpose of preparing or issuing an audit report or related work or
performing other audit, review or attest services for the Company, and such
public accounting firm must report directly to the Committee. In addition,
the Audit Committee must pre-approve all non-audit services provided by the
independent auditors.
The Committee must establish procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting controls or
auditing matters, including procedures for the confidential, anonymous
submission by employees of the issuer of concerns regarding questionable
accounting or auditing matters. In addition, the Committee provides an avenue
for communication between the independent auditors, financial management and
the Board. The Committee should have a clear understanding with the
independent auditors that they must retain an open relationship with the
Committee, and that the ultimate accountability of the independent auditors is
to the Board and the Committee.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
Page 1
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditor or to assure compliance with laws and regulations and the Company's
business conduct guidelines.
AUTHORITY
The Committee is granted the authority to investigate any matter or activity
involving financial accounting and financial reporting, as well as the
internal controls of the Company. In that regard, the Committee will have the
authority to engage independent counsel and other advisors to render advice
and counsel in such matters. The Committee will also have the authority to
determine the amount of funding appropriate for the compensation of the
auditors and any independent counsel or advisors engaged by the audit
committee and ordinary administrative expenses in carrying out its duties. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
MEETINGS
The Committee is to meet at least four times annually (prior to the filing of
the Company's quarterly and annual reports with the SEC) and as many
additional times as the Committee deems necessary. Content of the agenda for
each meeting should be cleared by the Committee Chair. The Committee will
meet with the independent accountants at least once per quarter. A meeting
with the independent accountants following the annual audit will be held
without members of management present.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair may request that members of management and
representatives of the independent accountants be present at Committee
meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Be directly responsible for the appointment, compensation and
oversight of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing its audit report or related
work.
2. Have the sole authority to review in advance, and grant any
appropriate pre-approvals, of (a) all auditing services to be provided by the
independent auditors and (b) all non-audit services to be provided by the
independent auditors as permitted by Section 10A of the Securities Exchange
Act, and in connection therewith to approve all fees and other terms of
engagement. The Audit Committee shall also review and approve disclosures
required to be included in periodic reports filed under Section 13(a) of the
Securities Exchange Act with respect to non-audit services.
Page 2
3. Establish procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing
matters, including procedures for the confidential, anonymous submission by
employees of the issuer of concerns regarding questionable accounting or
auditing matters.
4. Review and reassess the adequacy of this charter annually and
recommend any proposed changes to the Board for approval. This should be done
in compliance with applicable Nasdaq Audit Committee Requirements.
5. Review with the Company's management and independent accountants the
Company's accounting and financial reporting controls. Obtain annually in
writing from the independent auditors their view as to the adequacy of such
controls.
6. Review with the Company's management and independent accountants
significant accounting and reporting principles, practices and procedures
applied by the Company in preparing its financial statements. Discuss with
the independent accountants their judgements about the quality, not just the
acceptability, of the Company's accounting principles used in financial
reporting.
7. Review the scope and general extent of the independent accountants'
annual audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The independent
accountants should confirm to the Committee that no limitations have been
placed on the scope or nature of their audit procedures.
8. At least annually, confirm the independence of the independent
accountants and obtain from the independent accountants, at least annually, a
formal written statement delineating all relationships between the independent
accountants and the Company as contemplated by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees.
9. Have a predetermined arrangement with the independent accountants
that they will advise the Committee through its Chair and management of the
Company of any matters identified through procedures followed for interim
quarterly financial statements, and that such notification is to be made prior
to the related press release or, if not practicable, prior to filing Forms
10-Q. Also receive a written confirmation provided by the independent
accountants at the end of each of the first three quarters of the year that
they have nothing to report to the Committee, if that is the case, or the
written enumeration of required reporting issues.
10. At the completion of the annual audit, review with management and the
independent accountants the following:
* The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to
shareholders and on Form 10-K.
* Results of the audit of the financial statements and the related
report thereon and, if applicable, a report on changes during the
year in accounting principles and their application.
Page 3
* Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during the
audit. Inquire about the cooperation received by the independent
accountants during their audit, including access to all requested
records, data and information. Inquire of the independent
accountants whether there have been any disagreements with
management which, if not satisfactorily resolved, would have
caused them to issue a nonstandard report on the Company's
financial statements.
* Other communications as required to be communicated by the
independent accountants by Statement of Auditing Standards (SAS) 61
as amended by SAS 90 relating to the conduct of the audit. Further,
receive a written communication provided by the independent
accountants concerning their judgment about the quality of the
Company's accounting principles, as outlined in SAS 61 as amended by
SAS 90, and that they concur with management's representation
concerning audit adjustments.
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual report
on Form 10-K.
11. After preparation by management and review by independent
accountants, approve the report required under SEC rules to be included in the
Company's annual proxy statement. The charter is to be published as an
appendix to the proxy statement every three years.
12. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent accountants to the Company's
needs.
13. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants may
have, particularly those characterized as "material" or "serious." Typically,
such recommendations will be presented by the independent accountants in the
form of a Letter of Comments and Recommendations to the Committee. The
Committee should review responses of management to the Letter of Comments and
Recommendations from the independent accountants and receive follow-up reports
on action taken concerning the aforementioned recommendations.
14. Review all filings with the SEC and other published documents
containing the Company's financial statements and consider whether the
information contained in these documents is consistent with the information
contained in the financial statements.
15. Review with management and the independent accountants the methods
used to establish and monitor the Company's policies with respect to
unethical or illegal activities by Company employees that may have a material
impact on the financial statements. The Committee shall also review and
assess, at least annually, the sufficiency and timeliness of the procedures
by which the Committee is apprised of sensitive information, investigations of
regulatory agencies, defalcations, embezzlement or misuse of corporate assets.
Page 4
16. Generally as part of the review of the annual financial statements,
receive an oral report(s), at least annually, from the Company's counsel
concerning legal and regulatory matters that may have a material impact on the
financial statements.
17. As the Committee may deem appropriate, obtain, weigh and consider
expert advice as to Audit Committee related rules of Nasdaq, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
18. The Committee will also review and, if deemed advisable, approve all
"related party transactions," as that term is defined in Item 404 of SEC
Regulation S-K.
Page 5
APPENDIX B
DELTA PETROLEUM CORPORATION
2004 INCENTIVE PLAN
1. Purpose of the Plan
The purpose of this Delta Petroleum Corporation 2004 Incentive Plan
("Plan") is to create shareholder value. To do so, the Plan provides
incentives to selected employees and Directors of the Company and its
Subsidiaries, and selected non-employee consultants and advisors to the
Company and its Subsidiaries, who contribute, and are expected to contribute,
materially to its success. The Plan also provides a means of rewarding
outstanding performance and enhances the interest of such persons in the
Company's success and development by providing them a proprietary interest in
the Company. Further, the Plan is designed to enhance the Company's ability to
maintain a competitive position in attracting and retaining qualified
personnel necessary for the success and development of the Company.
2. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Board of Directors" shall mean the Board of Directors of Delta
Petroleum Corporation.
(b) "Cause," when used in connection with the termination of a
Participant's employment with the Company, for purposes of the Plan, shall
mean the termination of the Participant's employment by the Company on account
of (i) the willful and continued failure by the Participant substantially to
perform his duties and obligations (other than any such failure resulting from
his incapacity due to physical or mental illness) or (ii) the willful engaging
by the Participant in an act or acts which could reasonably be expected to
cause injury to the Company. For purposes of this Section 2(b), no act, or
failure to act, on a Participant's part shall be considered "willful" unless
done, or omitted to be done, by the Participant in bad faith and without
reasonable belief that his action or omission was in the best interests of the
Company.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash pursuant
to Section 13 hereof.
(d) "Change in Control" shall mean:
(i) the acquisition at any time by a"person" or "group" (as that
term is used in Sections 13(d)and 14(d)(2) of the Exchange Act) (excluding,
for this purpose, the Company or any Subsidiary or any employee benefit plan
of the Company or any Subsidiary) of beneficial ownership (as defined in
Rule13d-3 under the Exchange Act) directly or indirectly, of securities
representing 20% or more of the combined voting power in the election of
directors of the then-outstanding securities of the Company or any successor
of the Company;
Page 1
(ii) the termination of service as directors, for any reason other
than death, disability or retirement from the Board of Directors, during any
period of two consecutive years or less, of individuals who at the beginning
of such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in
office who were directors at the beginning of the period;
(iii) approval by the shareholders of the Company of any merger or
consolidation or statutory share exchange as a result of which the Common
Shares shall be changed, converted or exchanged (other than a merger or share
exchange with a wholly-owned Subsidiary of the Company), or liquidation of the
Company, or any sale or disposition of 50% or more of the assets or earning
power of the Company;
(iv) approval by the shareholders of the Company of any merger,
consolidation or statutory share exchange to which the Company is a party as a
result of which the persons who were shareholders of the Company immediately
prior to the effective date of the merger, consolidation or statutory share
exchange shall have beneficial ownership of less than 50% of the combined
voting power in the election of directors of the surviving corporation
following the effective date of such merger, consolidation or statutory share
exchange; or
(v) a determination by the Board of Directors, in its sole and
absolute discretion, that a change in control has occurred.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the committee appointed by the Board of
Directors from time to time to administer the Plan.
(g) "Common Shares" shall mean Delta Petroleum Corporation common
shares, no par value per share.
(h) "Company" shall mean Delta Petroleum Corporation, a Colorado
corporation, and each of its Subsidiaries.
(i) "Disability" shall mean a Participant's inability to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) The "Fair Market Value" of Common Shares with respect to any day
shall be (i) the closing sales price on the immediately preceding business day
of Common Shares as reported on the principal securities exchange on which
Common Shares are then listed or admitted to trading, or (ii) if not so
reported, the average of the closing bid and ask prices on the immediately
preceding business day as reported on the National Association of Securities
Dealers Automated Quotation System, or (iii) if not so reported, as furnished
by any member of the National Association of Securities Dealers, Inc. selected
Page 2
by the Committee. In the event that the price of Common Shares shall not be so
reported, the Fair Market Value of Common Shares shall be determined by the
Committee in its absolute discretion.
(l) "Incentive Award" shall mean an Option, LSAR, Tandem SAR,
Stand-Alone SAR, share of Phantom Stock, Stock Bonus or Cash Bonus granted
pursuant to the terms of the Plan.
(m) "Incentive Stock Option" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and which is
identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(n) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued by
Delta Petroleum Corporation pursuant to the terms of Section 10(d) hereof.
(o) "LSAR" shall mean a limited stock appreciation right which is
granted pursuant to the provisions of Section 7 hereof and which relates to an
Option. Each LSAR shall be exercisable only upon the occurrence of a Change in
Control and only in the alternative to the exercise of its related Option.
(p) "Non-Employee Participant" shall mean a Participant who is not an
employee or a Director of the Company, and who serves as a consultant or
advisor to the Company, but only if such Participant is a natural person that
provides bona fide services to the Company and those services are not in
connections with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market
for the Company's securities.
(q) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified Stock Option
in the agreement by which it is evidenced.
(r) "Option" shall mean an option to purchase Common Shares of Delta
Petroleum Corporation granted pursuant to Section 6 hereof. Each Option shall
be identified as either an Incentive Stock Option or a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(s) "Participant" shall mean a person who is eligible to participate in
the Plan and to whom an Incentive Award is granted pursuant to the Plan, and,
upon his death, his successors, heirs, executors and administrators, as the
case may be.
(t) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
(u) "Phantom Stock" shall mean the right to receive in cash the Fair
Market Value of Common Shares of Delta Petroleum Corporation, which right is
granted pursuant to Section 11 hereof and subject to the terms and conditions
contained therein.
(v) "Plan" shall mean the Delta Petroleum Corporation 2004 Incentive
Plan, as it may be amended from time to time.
(w) "Restricted Stock" shall mean a Common Share which is granted
pursuant to the terms of Section 10 hereof and which is subject to the
restrictions set forth in Section 10(c) hereof for so long as such
restrictions continue to apply to such share.
Page 3
(x) "Securities Act" shall mean the Securities Act of 1933, as amended.
(y) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof which is not related to any Option.
(z) "Stock Bonus" shall mean a grant of a bonus payable in Common Shares
pursuant to Section 12 hereof.
(aa) "Subsidiary" shall mean any corporation in which at the time of
reference Delta Petroleum Corporation owns, directly or indirectly, stock
comprising more than fifty percent of the total combined voting power of all
classes of stock of such corporation.
(bb) "Tandem SAR" shall mean a stock appreciation right granted pursuant
to Section 8 hereof which is related to an Option. Each Tandem SAR shall be
exercisable only to the extent its related Option is exercisable and only in
the alternative to the exercise of its related Option.
(cc) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
(dd) "Delta Petroleum Corporation" shall mean Delta Petroleum
Corporation, a Colorado corporation, and its successors.
3. Stock Subject to the Plan
Under the Plan, the Committee may grant to Participants (i) Options, (ii)
LSARs, (iii) Tandem SARs, (iv) Stand-Alone SARs, (v) shares of Restricted
Stock, (vi) shares of Phantom Stock, (vii) Stock Bonuses and (viii) Cash
Bonuses; provided, however, that grants under the Plan to non-employee
Directors of the Company shall be made by the Board of Directors. When
referring to grants under the Plan to non-employee Directors of the Company,
any reference in this Plan to the Committee shall be deemed to refer to the
Board of Directors.
Subject to adjustment as provided in Section 14 hereof, the Committee may
grant Options, Stand-Alone SARs, shares of Restricted Stock, shares of Phantom
Stock and Stock Bonuses under the Plan with respect to a number of Common
Shares that in the aggregate does not exceed 1,650,000 shares. The grant of
an LSAR, Tandem SAR or Cash Bonus shall not reduce the number of Common Shares
with respect to which Options, Stand-Alone SARs, shares of Restricted Stock,
shares of Phantom Stock or Stock Bonuses may be granted pursuant to the Plan.
In the event that any outstanding Option or Stand-Alone SAR expires,
terminates or is canceled for any reason (other than pursuant to Paragraphs
7(b)(2) or 8(b)(3) hereof), the Common Shares subject to the unexercised
portion of such Option or Stand-Alone SAR shall again be available for grants
under the Plan. In the event that an outstanding Option is canceled pursuant
to Paragraphs 7(b)(2) or 8(b)(3) hereof by reason of the exercise of an LSAR
or a Tandem SAR, the Common Shares subject to the canceled portion of such
Option shall not again be available for grants under the Plan. In the event
that any shares of Restricted Stock or Phantom Stock, or any Common Shares
granted in a Stock Bonus are forfeited or canceled for any reason, such shares
shall again be available for grants under the Plan.
Page 4
Common Shares issued under the Plan may be either newly issued shares or
treasury shares, at the discretion of the Committee, and Delta Petroleum
Corporation hereby reserves 1,650,000 Common Shares for issuance pursuant to
the Plan.
4. Administration of the Plan
The Plan shall be administered by a Committee of the Board of Directors
consisting of two or more persons, each of whom shall be a "non-employee
director" within the meaning of Rule 16b-3(b)(3) promulgated under Section 16
of the Exchange Act. The Committee shall from time to time designate the
persons who shall be granted Incentive Awards and the amount and type of such
Incentive Awards, provided, however that any Incentive Awards granted to
non-employee Directors of the Company shall be granted by the Board and not by
the Committee. When referring to grants under the Plan to non-employee
Directors of the Company, any reference in this Plan to the Committee shall be
deemed to refer to the Board of Directors.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations
for administering the Plan as it may deem necessary. Decisions of the
Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date on
which any Option or Stand-Alone SAR granted under the Plan becomes
exercisable, (ii) accelerate the Vesting Date or Issue Date, or waive any
condition imposed pursuant to Section 10(b) hereof, with respect to any share
of Restricted Stock granted under the Plan and (iii) accelerate the Vesting
Date or waive any condition imposed pursuant to Section 11 hereof, with
respect to any share of Phantom Stock granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such Participants
surrender to the Committee for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise prices)
as the Committee specifies. Notwithstanding Section 3 herein, prior to the
surrender of such other Incentive Awards, Incentive Awards granted pursuant to
the preceding sentence of this Section 4 shall not count against the limits
set forth in such Section 3.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and Delta Petroleum Corporation shall
indemnify and hold harmless each member of the Committee and each other
director or employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any
cost or expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee) arising out of
any action, omission or determination relating to the Plan, unless, in either
case, such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
Page 5
5. Eligibility
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such persons, including employees, Officers, and Directors
of the Company and Non-Employee Participants , as the Committee shall select
from time to time.
6. Options
Subject to the provisions of the Plan, the Committee may grant Options,
which Options shall be evidenced by agreements in such form as the Committee
shall from time to time approve. Options shall comply with and be subject to
the following terms and conditions:
(a) Identification of Options
All Options granted under the Plan that are Incentive Stock Options
shall be clearly identified in the agreement evidencing such Options as
Incentive Stock Options. Any Options not so identified shall be deemed to be
Non-Qualified Stock Options.
(b) Exercise Price
The exercise price of any Non-Qualified Stock Option granted under
the Plan shall be such price as the Committee shall determine on the date on
which such Non-Qualified Stock Option is granted; provided, that such price
may not be less than the minimum price required by applicable law. The
exercise price of any Incentive Stock Option granted under the Plan shall be
not less than 100% of the Fair Market Value of Common Shares on the date on
which such Incentive Stock Option is granted.
(c) Term and Exercise of Option
(1) Each Option shall be exercisable on such date or dates, during
such period and for such number of Common Shares as shall be determined by the
Committee on the day on which such Option is granted and set forth in the
Option agreement with respect to such Option; provided, however, that no
Option shall be exercisable after the expiration of ten years from the date
such Option was granted; and, provided, further, that each Option shall be
subject to earlier termination, expiration or cancellation as provided in the
Plan.
(2) Each Option shall be exercisable in whole or in part; provided,
that no partial exercise of an Option shall be for an aggregate exercise price
of less than $1,000, unless such partial exercise is for the last remaining
unexercised portion of such Option. The partial exercise of an Option shall
not cause the expiration, termination or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreements evidencing
such Option and any related LSARs and Tandem SARs shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to Delta
Petroleum Corporation's principal office, to the attention of its Secretary,
no less than one business day in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the agreements evidencing the
Option and any related LSARs and Tandem SARs, shall specify the number of
Common Shares with respect to which the Option is being exercised and the
Page 6
effective date of the proposed exercise and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior to the
close of business on the business day immediately preceding the effective date
of the proposed exercise, in which case such agreements shall be returned to
him. Payment for Common Shares purchased upon the exercise of an Option shall
be made on the effective date of such exercise either (i) in cash, by
certified check, bank cashier's check or wire transfer or (ii) subject to the
approval of the Committee, in Common Shares owned by the Participant and
valued at their Fair Market Value on the effective date of such exercise, or
partly in Common Shares with the balance in cash, by certified check, bank
cashier's check or wire transfer. Any payment in Common Shares shall be
effected by the delivery of such shares to the Secretary of Delta Petroleum
Corporation, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and evidences as the
Secretary of Delta Petroleum Corporation shall require from time to time. In
addition, at the time of grant the Committee may provide that an Option may be
exercised in a "cashless" transaction in which the holder may surrender all or
a portion of the Option and receive the number of shares of Common Shares
equal in value to the Fair Market Value per share at the date of surrender
less the exercise price per share of the Option, multiplied by the number of
shares which may be purchased under the Option, or portion thereof, being
surrendered.
(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the broker-dealer has
received from the Participant or the Company a fully-and-duly-endorsed
agreement evidencing such Option and instructions signed by the Participant
requesting Delta Petroleum Corporation to deliver the Common Shares subject to
such Option to the broker-dealer on behalf of the Participant and specifying
the account into which such shares should be deposited, (ii) adequate
provision has been made with respect to the payment of any withholding taxes
due upon such exercise and (iii) the broker-dealer and the Participant have
otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for Common Shares purchased upon the exercise of
an Option shall be issued in the name of the Participant, or such
Participant's written designee, and delivered to the Participant or designee
as soon as practicable following the effective date on which the Option is
exercised.
(6) Except as specifically set forth in the agreement evidencing
Options granted under the Plan, Options shall be assignable and transferable
provided, however, that the Company shall not be under an obligation as
provided in Paragraph 6(c)(7) below to include the shares underlying such
transferred or assigned options in any registration statement except upon
death or pursuant to a qualified domestic relations order.
(7) The Company, at the Company's expense, shall file and maintain
a registration statement on the appropriate form with the Securities and
Exchange Commission covering shares underlying all options granted hereunder
except as set forth in Paragraph 6(c)(6) above. The expiration date of any
option expiring prior to 90 days before the effective date of a registration
statement covering said option shall be extended until a date ninety (90) days
following the effective date of said registration statement.
Page 7
(d) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of Common Shares with respect
to which "incentive stock options" (within the meaning of Section 422 of the
Code) are exercisable for the first time by a Participant during any calendar
year under the Plan and any other stock option plan of the Company (or any
"subsidiary" of Delta Petroleum Corporation as such term is defined in Section
425 of the Code) shall not exceed $100,000. Such Fair Market Value shall be
determined as of the date on which each such incentive stock option is
granted. In the event that the aggregate Fair Market Value of Common Shares
with respect to such incentive stock options exceeds $100,000, then Incentive
Stock Options granted hereunder to such Participant shall, to the extent and
in the order required by Regulations promulgated under the Code (or any other
authority having the force of Regulations), automatically be deemed to be
Non-Qualified Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged. In the absence of such
Regulations (and authority), or in the event such Regulations (or authority)
require or permit a designation of the options which shall cease to constitute
incentive stock options, Incentive Stock Options shall, to the extent of such
excess and in the order in which they were granted, automatically be deemed to
be Non-Qualified Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual if,
at the time of the proposed grant, such individual owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
Delta Petroleum Corporation or any of its "subsidiaries" (within the meaning
of Section 425 of the Code), unless (i) the exercise price of such Incentive
Stock Option is at least one hundred and ten percent of the Fair Market Value
of a Common Share at the time such Incentive Stock Option is granted and (ii)
such Incentive Stock Option is not exercisable after the expiration of five
years from the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment
(1) Except as may be specifically set forth in the agreement
evidencing an Option, in the event that the employment of a Participant with
the Company shall terminate for any reason Options granted to such
Participant, to the extent that they were exercisable at the time of such
termination, shall remain exercisable in accordance with their terms.
(2) In the event that a Non-Employee Participant ceases to provide
services to the Company, all Options granted to such Non-Employee Participant
shall remain exercisable in accordance with their terms.
(f) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option granted
under the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
7. Limited Stock Appreciation Rights
The Committee may grant in connection with any Option granted hereunder
one or more LSARs relating to a number of Common Shares equal to or less than
the number of Common Shares subject to the related Option. An LSAR may be
granted at the same time as, or subsequent to the time that, its related
Page 8
Option is granted. Each LSAR shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each LSAR granted hereunder
shall be subject to the following terms and conditions:
(a) Benefit Upon Exercise
(1) The exercise of an LSAR relating to a Non-Qualified Stock
Option with respect to any number of Common Shares shall entitle the
Participant to a cash payment, for each such share, equal to the excess of (i)
the greater of (A) the highest price per Common Share paid in the Change in
Control in connection with which such LSAR became exercisable and (B) the Fair
Market Value of a Common Share on the date of such Change in Control over (ii)
the exercise price of the related Option. Such payment shall be paid as soon
as practical, but in no event later than the expiration of five business days,
after the effective date of such exercise.
(2) The exercise of an LSAR relating to an Incentive Stock Option
with respect to any number of Common Shares shall entitle the Participant to a
cash payment, for each such share, equal to the excess of (i) the Fair Market
Value of a Common Share on the effective date of such exercise over (ii) the
exercise price of the related Option. Such payment shall be paid as soon as
practical, but in no event later than the expiration of five business days,
after the effective date of such exercise.
(b) Term and Exercise of LSARs
(1) An LSAR shall be exercisable only during the period commencing
on the first day following the occurrence of a Change in Control and
terminating on the expiration of sixty days after such date. Notwithstanding
the preceding sentence of this Section 7(b), in the event that an LSAR held by
any Participant who is or may be subject to the provisions of Section 16(b) of
the Exchange Act becomes exercisable prior to the expiration of six months
following the date on which it is granted, then the LSAR shall also be
exercisable during the period commencing on the first day immediately
following the expiration of such six month period and terminating on the
expiration of sixty days following such date. Notwithstanding anything else
herein, an LSAR relating to an Incentive Stock Option may be exercised with
respect to a Common Share only if the Fair Market Value of such share on the
effective date of such exercise exceeds the exercise price relating to such
share. Notwithstanding anything else herein, an LSAR may be exercised only if
and to the extent that the Option to which it relates is exercisable.
(2) The exercise of an LSAR with respect to a number of Common
Shares shall cause the immediate and automatic cancellation of the Option to
which it relates with respect to an equal number of shares. The exercise of an
Option, or the cancellation, termination or expiration of an Option (other
than pursuant to this Paragraph (2)), with respect to a number of Common
Shares, shall cause the cancellation of the LSAR related to it with respect to
an equal number of shares.
(3) Each LSAR shall be exercisable in whole or in part; provided,
that no partial exercise of an LSAR shall be for an aggregate exercise price
of less than $1,000, unless such partial exercise is for the last remaining
unexercised portion of such LSAR. The partial exercise of an LSAR shall not
cause the expiration, termination or cancellation of the remaining portion
thereof. Upon the partial exercise of an LSAR, the agreements evidencing the
Page 9
LSAR, the related Option and any Tandem SARs related to such Option shall be
returned to the Participant exercising such LSAR together with the payment
described in Paragraph 7(a)(1) or (2) hereof, as applicable.
(4) Except as specifically set forth in the agreements relating
thereto, each LSAR and any related Options shall be assignable and
transferable.
(5) An LSAR shall be exercised by delivering notice to Delta
Petroleum Corporation's principal office, to the attention of its Secretary,
no less than one business day in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the applicable agreements
evidencing the LSAR, the related Option and any Tandem SARs relating to such
Option, shall specify the number of Common Shares with respect to which the
LSAR is being exercised and the effective date of the proposed exercise and
shall be signed by the Participant. The Participant may withdraw such notice
at any time prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case such
agreements shall be returned to him.
8. Tandem Stock Appreciation Rights
The Committee may grant in connection with any Option granted hereunder
one or more Tandem SARs relating to a number of Common Shares equal to or less
than the number of Common Shares subject to the related Option. A Tandem SAR
may be granted at the same time as, or subsequent to the time that, its
related Option is granted. Each Tandem SAR shall be evidenced by an agreement
in such form as the Committee shall from time to time approve. Tandem SARs
shall comply with and be subject to the following terms and conditions:
(a) Benefit Upon Exercise
The exercise of a Tandem SAR with respect to any number of Common
Shares shall entitle a Participant to a cash payment, for each such share,
equal to the excess of (i) the Fair Market Value of a Common Share on the
effective date of such exercise over (ii) the exercise price of the related
Option. Such payment shall be paid as soon as practical, but in no event later
than the expiration of five business days, after the effective date of such
exercise.
(b) Term and Exercise of Tandem SAR
(1) A Tandem SAR shall be exercisable at the same time and to the
same extent (on a proportional basis, with any fractional amount being rounded
down to the immediately preceding whole number) as its related Option.
Notwithstanding the first sentence of this Paragraph 8(b)(1), (i) a Tandem SAR
shall not be exercisable at any time that an LSAR related to the Option to
which the Tandem SAR is related is exercisable and (ii) a Tandem SAR relating
to an Incentive Stock Option may be exercised with respect to a Common Share
only if the Fair Market Value of such share on the effective date of such
exercise exceeds the exercise price relating to such share.
(2) Notwithstanding the first sentence of Paragraph 8(b)(1) hereof,
the Committee may, in its absolute discretion, grant one or more Tandem SARs
which shall not become exercisable unless and until the Participant to whom
such Tandem SAR is granted is, in the determination of the Committee, subject
Page 10
to Section 16(b) of the Exchange Act and which shall cease to be exercisable
if and at the time that the Participant ceases, in the determination of the
Committee, to be subject to such Section 16(b).
(3) The exercise of a Tandem SAR with respect to a number of Common
Shares shall cause the immediate and automatic cancellation of its related
Option with respect to an equal number of shares. The exercise of an Option,
or the cancellation, termination or expiration of an Option (other than
pursuant to this Paragraph (3)), with respect to a number of Common Shares
shall cause the automatic and immediate cancellation of its related Tandem
SARs to the extent that the number of Common Shares subject to such Option
after such exercise, cancellation, termination or expiration is less than the
number of shares subject to such Tandem SARs. Such Tandem SARs shall be
canceled in the order in which they became exercisable.
(4) Each Tandem SAR shall be exercisable in whole or in part;
provided, that no partial exercise of a Tandem SAR shall be for an aggregate
exercise price of less than $1,000, unless such partial exercise is for the
last remaining unexercised portion of such Tandem SAR. The partial exercise of
a Tandem SAR shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of a Tandem SAR, the
agreements evidencing such Tandem SAR, its related Option and LSARs relating
to such Option shall be returned to the Participant exercising such Tandem SAR
together with the payment described in Section 8(a) hereof.
(5) Except as specifically set forth in the agreements relating
thereto, each Tandem SAR and the related Option shall be assignable and
transferable.
(6) A Tandem SAR shall be exercised by delivering notice to Delta
Petroleum Corporation's principal office, to the attention of its Secretary,
no less than one business day in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the applicable agreements
evidencing the Tandem SAR, its related Option and any LSARs related to such
Option, shall specify the number of Common Shares with respect to which the
Tandem SAR is being exercised and the effective date of the proposed exercise
and shall be signed by the Participant. The Participant may withdraw such
notice at any time prior to the close of business on the business day
immediately preceding the effective date of the proposed exercise, in which
case such agreements shall be returned to him.
9. Stand-Alone Stock Appreciation Rights
Subject to the provisions of the Plan, the Committee may grant
Stand-Alone SARs, which Stand-Alone SARs shall be evidenced by agreements in
such form as the Committee shall from time to time approve. Stand-Alone SARs
shall comply with and be subject to the following terms and conditions:
(a) Exercise Price
The exercise price of any Stand-Alone SAR granted under the Plan
shall be determined by the Committee at the time of the grant of such
Stand-Alone SAR.
Page 11
(b) Benefit Upon Exercise
The exercise of a Stand-Alone SAR with respect to any number of
Common Shares prior to the occurrence of a Change in Control shall entitle a
Participant to a cash payment, for each such share, equal to the excess of (i)
the Fair Market Value of a Common Share on the exercise date over (ii) the
exercise price of the Stand-Alone SAR. The exercise of a Stand-Alone SAR with
respect to any number of Common Shares upon or after the occurrence of a
Change in Control shall entitle a Participant to a cash payment, for each such
share, equal to the excess of (i) the greater of (A) the highest price per
Common Share paid in connection with such Change in Control and (B) the Fair
Market Value of a Common Share on the date of such Change in Control over (ii)
the exercise price of the Stand-Alone SAR. Such payments shall be paid as soon
as practical, but in no event later than five business days, after the
effective date of the exercise.
(c) Term and Exercise of Stand-Alone SARs
(1) Each Stand-Alone SAR shall be exercisable on such date or
dates, during such period and for such number of Common Shares as shall be
determined by the Committee and set forth in the Stand-Alone SAR agreement
with respect to such Stand-Alone SAR; provided, however, that no Stand-Alone
SAR shall be exercisable after the expiration of ten years from the date such
Stand-Alone SAR was granted; and, provided, further, that each Stand-Alone SAR
shall be subject to earlier termination, expiration or cancellation as
provided in the Plan.
(2) Each Stand-Alone SAR may be exercised in whole or in part;
provided, that no partial exercise of a Stand-Alone SAR shall be for an
aggregate exercise price of less than $1,000, unless such partial exercise is
for the last remaining unexercised portion of such Stand-Alone SAR. The
partial exercise of a Stand-Alone SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof. Upon the partial
exercise of a Stand-Alone SAR, the agreement evidencing such Stand-Alone SAR
shall be returned to the Participant exercising such Stand-Alone SAR together
with the payment described in Section 9(b) hereof.
(3) A Stand-Alone SAR shall be exercised by delivering notice to
Delta Petroleum Corporation's principal office, to the attention of its
Secretary, no less than one business day in advance of the effective date of
the proposed exercise. Such notice shall be accompanied by the applicable
agreement evidencing the Stand-Alone SAR, shall specify the number of Common
Shares with respect to which the Stand-Alone SAR is being exercised and the
effective date of the proposed exercise and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior to the
close of business on the business day immediately preceding the effective date
of the proposed exercise, in which case the agreement evidencing the
Stand-Alone SAR shall be returned to him.
(4) Except as specifically set forth in the agreements relating
thereto, each Stand-Alone SAR shall be assignable and transferable.
Page 12
(d) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the
Company shall terminate for any reason Stand-Alone SARs granted to such
Participant, to the extent that they were exercisable at the time of such
termination, shall remain exercisable in accordance with their terms.
(2) In the event that a Non-Employee Participant ceases to provide
services to the Company, all Stand-Alone SARs granted to such Non-Employee
Participant shall remain exercisable in accordance with their terms.
(e) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Stand-Alone SAR
granted under the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.
10. Restricted Stock
Subject to the provisions of the Plan, the Committee may grant shares of
Restricted Stock. Each grant of shares of Restricted Stock shall be evidenced
by an agreement in such form as the Committee shall from time to time approve.
Each grant of shares of Restricted Stock shall comply with and be subject to
the following terms and conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide such
shares into classes and assign a different Issue Date and/or Vesting Date for
each class. Except as provided in Sections 10(c) and 10(f) hereof, upon the
occurrence of the Issue Date with respect to a share of Restricted Stock, a
share of Restricted Stock shall be issued in accordance with the provisions of
Section 10(d) hereof. Provided that all conditions to the vesting of a share
of Restricted Stock imposed pursuant to Section 10(b) hereof are satisfied,
and except as provided in Sections 10(c) and 10(f) hereof, upon the occurrence
of the Vesting Date with respect to a share of Restricted Stock, such share
shall vest and the restrictions of Section 10(c) hereof shall cease to apply
to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions, not inconsistent with
the provisions hereof, to the vesting of such shares as it, in its absolute
discretion, deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or
classes of shares of Restricted Stock, that the Participant or the Company
achieve certain performance criteria, such criteria to be specified by the
Committee at the time of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of
a Participant's rights with respect to such shares, whether voluntary or
Page 13
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon
any attempt to transfer such rights, such share, and all of the rights related
thereto, shall be forfeited by the Participant and the transfer shall be of no
force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 10(c) or 10(f) hereof,
reasonably promptly after the Issue Date with respect to shares of Restricted
Stock, Delta Petroleum Corporation shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such shares
were granted, evidencing such shares; provided, that Delta Petroleum
Corporation shall not cause to be issued such a stock certificate unless it
has received a stock power duly endorsed in blank with respect to such shares.
Each such stock certificate shall bear the following legend:
"The transferability of this certificate and the shares of
stock represented hereby is subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Delta Petroleum Corporation
2004 Incentive Plan and an Agreement entered into between the
registered owner of such shares and Delta Petroleum Corporation.
A copy of the Plan and Agreement is on file in the office of
the Secretary of Delta Petroleum Corporation Such legend shall
not be removed from the certificate evidencing such shares until
such shares vest pursuant to the terms hereof."
(2) Each certificate issued pursuant to Paragraph 10(d)(1) hereof,
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be deposited by the Company with a
custodian designated by the Company. The Company shall cause such custodian to
issue to the Participant a receipt evidencing the certificates held by it
which are registered in the name of the Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the
terms hereof, the restrictions of Section 10(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests
pursuant to the terms hereof, Delta Petroleum Corporation shall cause to be
issued and delivered to the Participant to whom such shares were granted, a
certificate evidencing such share, free of the legend set forth in Paragraph
10(d)(1) hereof, together with any other property of the Participant held by
the custodian pursuant to Section 14(b) hereof.
(f) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause prior to the vesting
of shares of Restricted Stock granted to such Participant, a proportion of
such shares (up to 100%), to the extent not forfeited or canceled on or prior
to such termination pursuant to any provision hereof, shall vest on the date
of such termination. The proportion referred to in the preceding sentence
shall be determined by the Committee at the time of the grant of such shares
of Restricted Stock and may be based on the achievement of any conditions
imposed by the Committee with respect to such shares pursuant to Section
10(b). Such proportion may be equal to zero.
Page 14
(2) In the event of the termination of a Participant's employment
for Cause, all shares of Restricted Stock granted to such Participant which
have not vested as of the date of such termination shall immediately be
forfeited.
(3) In the event that a Non-Employee Participant ceases to provide
services to the Company, all shares of Restricted Stock granted to such
Non-Employee Participant shall vest in accordance with the terms of the grant.
(g) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted
Stock which have not theretofore vested (including those with respect to which
the Issue Date has not yet occurred), or been canceled or forfeited pursuant
to any provision hereof, shall immediately vest.
(h) Registration of Restricted Stock
The Company, at the Company's expense, shall file and maintain a
registration statement on the appropriate form with the Securities and
Exchange Commission covering the restricted stock granted hereunder after it
has vested.
11. Phantom Stock
Subject to the provisions of the Plan, the Committee may grant shares of
Phantom Stock. Each grant of shares of Phantom Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Phantom Stock shall comply with and be subject to the
following terms and conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such shares.
The Committee may divide such shares into classes and assign a different
Vesting Date for each class. Provided that all conditions to the vesting of a
share of Phantom Stock imposed pursuant to Section 11(c) hereof are satisfied,
and except as provided in Section 11(d) hereof, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be
entitled to receive in cash, within 30 days of the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market
Value of a Common Share of the Company on the date on which such share of
Phantom Stock vests and (ii) the aggregate amount of cash dividends paid with
respect to a Common Share of the Company during the period commencing on the
date on which the share of Phantom Stock was granted and terminating on the
date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
Page 15
discretion, deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or
classes of shares of Phantom Stock, that the Participant or the Company
achieve certain performance criteria, such criteria to be specified by the
Committee at the time of the grant of such shares.
(d) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause prior to the vesting
of shares of Phantom Stock granted to such Participant, a proportion of such
shares (up to 100%), to the extent not forfeited or canceled on or prior to
such termination pursuant to any provision hereof, shall vest on the date of
such termination. The proportion referred to in the preceding sentence shall
be determined by the Committee at the time of the grant of such shares of
Phantom Stock and may be based on the achievement of any conditions imposed by
the Committee with respect to such shares pursuant to Section 11(c). Such
proportion may be equal to zero.
(2) In the event of the termination of a Participant's employment
for Cause, all shares of Phantom Stock granted to such Participant which have
not vested as of the date of such termination shall immediately be forfeited.
(3) In the event that a Non-Employee Participant ceases to provide
services to the Company, all shares of Phantom Stock granted to such
Non-Employee Participant shall vest in accordance with the terms of the grant.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Phantom
Stock which have not theretofore vested, or been canceled or forfeited
pursuant to any provision hereof, shall immediately vest.
12. Stock Bonuses
Subject to the provisions of the Plan, the Committee may grant Stock
Bonuses in such amounts as it shall determine from time to time. A Stock Bonus
shall be paid at such time and subject to such conditions as the Committee
shall determine at the time of the grant of such Stock Bonus. Certificates for
Common Shares granted as a Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is required to be
paid.
13. Cash Bonuses
Subject to the provisions of the Plan, the Committee may grant, in
connection with any grant of Restricted Stock or Stock Bonus or at any time
thereafter, a cash bonus, payable promptly after the date on which the
Participant is required to recognize income for federal income tax purposes in
connection with such Restricted Stock or Stock Bonus, in such amounts as the
Committee shall determine from time to time; provided however, that in no
event shall the amount of a Cash Bonus exceed 50% of the Fair Market Value of
the related shares of Restricted Stock or Stock Bonus on such date. A Cash
Bonus shall be subject to such conditions as the Committee shall determine at
the time of the grant of such Cash Bonus.
Page 16
14. Adjustment Upon Changes in Common Shares
(a) Shares Available for Grants
In the event of any change in the number of Common Shares
outstanding by reason of any stock dividend or split, recapitalization,
merger, consolidation, combination or exchange of shares or similar corporate
change, the maximum aggregate number of Common Shares with respect to which
the Committee may grant Options, Stand-Alone SARs, shares of Restricted Stock,
shares of Phantom Stock and Stock Bonuses shall be appropriately adjusted by
the Committee. In the event of any change in the number of Common Shares
outstanding by reason of any other event or transaction, the Committee may,
but need not, make such adjustments in the number and class of Common Shares
with respect to which Options, Stand-Alone SARs, shares of Restricted Stock,
shares of Phantom Stock and Stock Bonuses may be granted as the Committee may
deem appropriate.
(b) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise
determines, any securities or other property (including dividends paid in
cash) received by a Participant with respect to a share of Restricted Stock,
the Issue Date with respect to which occurs prior to such event, but which has
not vested as of the date of such event, as the result of any dividend, stock
split, recapitalization, merger, consolidation, combination, exchange of
shares or otherwise, will not vest until such share of Restricted Stock vests,
and shall be promptly deposited with the custodian designated pursuant to
Paragraph 10(d)(2) hereof.
The Committee may, in its absolute discretion, adjust any grant of
shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, or
any grant of shares of Phantom Stock, to reflect any dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of Participants under the grant.
(c) Outstanding Options, LSARs, Tandem SARs and Stand-Alone
SARs--Certain Increases or Decreases in Issued Shares Without Consideration
Subject to any required action by the shareholders of Delta
Petroleum Corporation, in the event of any increase or decrease in the number
of issued Common Shares resulting from a subdivision or consolidation of
Common Shares or the payment of a stock dividend (but only on the Common
Shares), the Committee shall proportionally adjust the number of Common Shares
subject to each outstanding Option, LSAR, Tandem SAR and Stand-Alone SAR, and
the exercise price per Common Share of each such Option, LSAR, Tandem SAR and
Stand-Alone SAR.
(d) Outstanding Options, LSARs, Tandem SARs and Stand-Alone
SARs--Certain Mergers
Subject to any required action by the shareholders of Delta
Petroleum Corporation, in the event that Delta Petroleum Corporation shall be
the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of Common Shares receive
securities of another corporation), each Option, LSAR, Tandem SAR and
Stand-Alone SAR outstanding on the date of such merger or consolidation shall
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pertain to and apply to the securities which a holder of the number of Common
Shares subject to such Option, LSAR, Tandem SAR or Stand-Alone SAR would have
received in such merger or consolidation.
(e) Outstanding Options, LSARs, Tandem SARs and Stand-Alone
SARs--Certain Other Transactions
Delta Petroleum Corporation shall not, at any time while there are
issued and outstanding pursuant to this Plan any unexpired options (including
any related LSARs or Tandem SARs), Stand-Alone SARs or other rights to acquire
securities of Delta Petroleum Corporation (whether or not then exercisable),
effect a merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of Delta Petroleum Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities or other assets of Delta Petroleum Corporation or another entity,
or enter into any agreement to effect a sale of all or substantially all of
Delta Petroleum Corporation's assets (a "Corporate Change"), unless the
resulting successor or acquiring entity (the "Resulting Entity") assumes by
written instrument all of Delta Petroleum Corporation's obligations pursuant
to any options then outstanding under this Plan (including any related LSARs
or Tandem SARs), Stand-Alone SARs or other rights under this Plan to acquire
securities of Delta Petroleum Corporation (whether or not then exercisable),
which shall include, but not limited be to, an agreement in such written
instrument that any and all options then outstanding under this Plan
(including any related LSARs or Tandem SARs), Stand-Alone SARs or other rights
to acquire securities of Delta Petroleum Corporation (whether or not then
exercisable) or other rights shall be exercisable into such class, amount and
type of securities or other assets (or stock appreciation rights with respect
to, as appropriate) of the Resulting Entity as the holder would have received
had the holder exercised its options (including any related LSARs or Tandem
SARs), Stand-Alone SARs or other rights to acquire securities of Delta
Petroleum Corporation (whether or not then exercisable) issued pursuant to
this Plan immediately prior to such Corporate Change, and the Exercise Price
of such options or other rights shall be proportionately increased (if such
options or other rights shall be changed into or become exchangeable for an
option, warrant or other right to purchase a smaller number of shares of
Common Stock of the Resulting Entity) or shall be proportionately decreased
(if such options or other rights shall be changed or become exchangeable for
an option, warrant or other right to purchase a larger number of shares of
Common Stock of the Resulting Entity); provided, however, that Delta Petroleum
Corporation shall not affect any Corporate Change unless it first shall have
given thirty (30) days notice of any Corporate Change to each holder of issued
and outstanding unexpired options or other rights to acquire securities of
Delta Petroleum Corporation pursuant to this Plan at such holder's last known
address as reflected on the books and records of Delta Petroleum Corporation.
(f) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Other
Changes
In the event of any change in the capitalization of Delta Petroleum
Corporation or corporate change other than those specifically referred to in
Section 14(c), (d) or (e) hereof, the Committee shall make such adjustments in
the number and class of shares subject to Options, LSARs, Tandem SARs or
Stand-Alone SARs outstanding on the date on which such change occurs and in
the per share exercise price of each such Option, LSAR, Tandem SAR and
Stand-Alone SAR to prevent dilution or enlargement of rights.
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(g) No Other Rights
Except as expressly provided in the Plan, no Participant shall have
any rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any dividend, any increase or decrease in the number
of shares of stock of any class or any dissolution, liquidation, merger or
consolidation of Delta Petroleum Corporation or any other corporation. Except
as expressly provided in the Plan, no issuance by Delta Petroleum Corporation
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to the number of Common Shares subject to an Incentive Award
or the exercise price of any Option, LSAR, Tandem SAR or Stand-Alone SAR.
15. Rights as a Shareholder
No person shall have any rights as a shareholder with respect to any
Common Shares covered by or relating to any Incentive Award granted pursuant
to this Plan until the date of the issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 14
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
16. No Special Employment Rights; No Right to Incentive Award
Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his employment
by the Company or interfere in any way with the right of the Company, subject
to the terms of any separate employment agreement to the contrary, at any time
to terminate such employment or to increase or decrease the compensation of
the Participant from the rate in existence at the time of the grant of an
Incentive Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to
such Participant or any other Participant or other person at any time nor
preclude the Committee from making subsequent grants to such Participant or
any other Participant or other person.
17. Securities Matters
(a) Notwithstanding anything herein to the contrary, the Company shall
not be obligated to cause to be issued or delivered any certificates
evidencing Common Shares pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is
in compliance with all applicable laws, regulations of governmental authority
and the requirements of any securities exchange on which Common Shares are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing Common Shares pursuant to the terms hereof, that
the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the
Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the issuance
and delivery of Common Shares pursuant to such exercise is in compliance with
all applicable laws, regulations of governmental authority and the
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requirements of any securities exchange on which Common Shares are traded. The
Company may, in its sole discretion, defer the effectiveness of any exercise
of an Option granted hereunder in order to allow the issuance of shares of
Common Stock pursuant thereto to be made pursuant to registration or an
exemption from the registration or other methods for compliance available
under federal or state securities laws. The Company shall inform the
Participant in writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain the refund of any
amount paid with respect thereto.
(c) With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the Plan, the grant of an Incentive Award,
or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
18. Withholding Taxes
(a) Cash Remittance
Whenever Common Shares are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a
share of Restricted Stock or the payment of a Stock Bonus, the Company shall
have the right to require the Participant to remit to the Company in cash an
amount sufficient to satisfy federal, state and local withholding tax
requirements, if any, attributable to such exercise, occurrence or payment
prior to the delivery of any certificate or certificates for such shares. In
addition, upon the exercise of an LSAR, Tandem SAR or Stand-Alone SAR, the
grant of a Cash Bonus or the making of a payment with respect to a share of
Phantom Stock, the Company shall have the right to withhold from any cash
payment required to be made pursuant thereto an amount sufficient to satisfy
the federal, state and local withholding tax requirements.
(b) Stock Remittance
At the election of the Participant, subject to the approval of the
Committee, when Common Shares are to be issued upon the exercise of an Option,
the occurrence of the Issue Date or the Vesting Date with respect to a share
of Restricted Stock or the grant of a Stock Bonus, in lieu of the remittance
required by Section 18(a) hereof, the Participant may tender to the Company a
number of Common Shares determined by such Participant, the Fair Market Value
of which at the tender date the Committee determines to be sufficient to
satisfy the federal, state and local withholding tax requirements, if any,
attributable to such exercise, occurrence or grant and not greater than the
Participant's estimated total federal, state and local tax obligations
associated with such exercise, occurrence or grant.
(c) Stock Withholding
At the election of the Participant, subject to the approval of the
Committee, when Common Shares are to be issued upon the exercise of an Option,
the occurrence of the Issue Date or the Vesting Date with respect to a share
of Restricted Stock or the grant of a Stock Bonus, in lieu of the remittance
required by Section 18(a) hereof, the Company shall withhold a number of such
shares determined by such Participant, the Fair Market Value of which at the
Page 20
exercise date the Committee determines to be sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise, occurrence or grant and is not greater than the Participant's
estimated total federal, state and local tax obligations associated with such
exercise, occurrence or grant.
19. Amendment of the Plan
The Plan will have no fixed termination date, but may be terminated at
any time by the Board of Directors. Incentive Awards outstanding as of the
date of any such termination will not be affected or impaired by the
termination of the Plan. The Board of Directors may amend, alter, or
discontinue the Plan, but no amendment, alteration or discontinuation shall be
made which would (i) impair the rights of a Participant without the
Participant's consent, except such an amendment which is necessary to cause
any Incentive Award or transaction under the Plan to qualify, or to continue
to qualify, for the exemption provided by Rule 16b-3, or (ii) disqualify any
Incentive Award or transaction under the Plan from the exemption provided by
Rule 16b-3. In addition, no such amendment may be made without the approval of
the Company's shareholders to the extent such approval is required by law or
agreement.
20. No Obligation to Exercise
The grant to a Participant of an Option, LSAR, Tandem SAR or Stand-Alone
SAR shall impose no obligation upon such Participant to exercise such Option,
LSAR, Tandem SAR or Stand-Alone SAR.
21. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used
for general corporate purposes.
22. Suspension or Termination of Incentive Award
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant to comply with any of the terms and conditions of the
Plan or the agreement executed by such Participant evidencing an Incentive
Award, unless such failure is remedied by such Participant within ten days
after having been notified of such failure by the Committee, shall be grounds
for the cancellation and forfeiture of such Incentive Award, in whole or in
part, as the Committee may determine.
23. Code Section 162(m).
The Committee, in its sole discretion, may require that one or more
Incentive Awards contain provisions which provide that, in the event Section
162(m) of the Code, or any successor provision relating to excessive employee
remuneration, would operate to disallow a deduction by the Company for all or
part of any Incentive Award under the Plan, a Participant's receipt of the
portion of such Incentive Award that would not be deductible by the Company
shall be deferred until the next succeeding year or years in which the
Participant's remuneration does not exceed the limit set forth in such
provision of the Code.
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24. Effective Date of Plan
The Plan shall be effective as of September 29, 2004, subject to approval
by the Company's Shareholders at their next Annual or Special Meeting.
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