Equity Oil Company
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
Notice of Annual Meeting of Stockholders
May 10, 1995
Notice is hereby given that the Annual Meeting of Stockholders of
Equity Oil Company will be held at the Company's executive office, Suite 806, 10
West Third South, Salt Lake City, Utah, 84101, on the 10th day of May, 1995 at
2:00 p.m., to consider and act upon the following matters:
1. To elect three directors to hold office for three years and
until the Annual Meeting of Stockholders in 1998 or until
their successors are duly elected and qualified.
2. To amend the Articles of Incorporation to reduce voting
requirements below two-thirds in certain situations.
3. To amend the Articles of Incorporation to limit Directors'
liability in certain cases.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 23,
1995, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting or any adjournment thereof. The transfer
books will not be closed.
You are cordially invited to attend the meeting. In the event you will
be unable to attend, you are respectfully requested to sign, date and return the
enclosed proxy in the return envelope at your earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
PROXY STATEMENT
This Proxy Statement is furnished to Stockholders of Equity Oil Company
in connection with the solicitation of proxies by the Board of Directors of the
Company to be used in voting at the Annual Meeting of Stockholders to be held
May 10, 1995, at 2:00 p.m. at the Company's executive offices, Suite 806, 10
West Third South, Salt Lake City, Utah, or at any adjournment of said meeting.
The Company's Annual Report is enclosed in the envelope. The approximate date on
which the Proxy Statement and the form of Proxy will be first sent to
Stockholders is April 5, 1995. The shares represented by valid proxies will, if
received by the Company in time for the meeting, be voted as authorized by such
proxies. If no instructions are given, the Shareholders' shares will be voted in
favor of the Directors named thereon and for approval of Proposals 2 and 3, and
upon such other business as may properly come before the meeting and any
adjournment thereof. Each proxy is revocable at any time before it is voted.
Only holders of common stock of record at the close of business on
March 23, 1995 will be entitled to vote at the Meeting of Stockholders. On that
date, the Company had issued 12,593,631 shares of common stock, par value $1.00
which is the only class of securities of the Company. There are 12,541,600
shares of said stock which are entitled to vote.
Each shareholder of record entitled to vote shall have one vote for
each share of stock standing in the shareholders' name on the books of the
Company, except that for the election of directors, each shareholder shall have
the right to vote all such shareholders' votes for as many persons as there are
directors to be elected for whose election such shareholder has the right to
vote. Cumulative voting is not allowed under the Articles of Incorporation of
the Company. <PAGE>
Under Colorado law, if a quorum is present at the meeting, the three
nominees for election as directors who receive the greatest number of votes cast
for the election of directors at the meeting by the shares present, in person or
by proxy, and entitled to vote shall be elected directors. Proposals 2 and 3
must be approved by a vote of two-thirds of the outstanding shares entitled to
vote on the matter. Abstentions will be treated as shares that are present for
purposes of determining a quorum, but as not voted for purposes of determining
the approval of any matter submitted to the shareholders for a vote. Abstentions
from voting will have the practical effect, however, of voting against Proposals
2 and 3 since it is one less vote for approval. In the case of a broker
"non-vote" (where a broker has not received specific instructions from the
beneficial owner), those shares will be considered present for purposes of a
quorum and maybe entitled to vote in the election of directors, but may not be
entitled to vote on Proposals 2 and 3. Like abstentions, a broker non-vote may
have the practical effect of a vote against Proposals 2 and 3 since it may
constitute one less vote for approval.
EXPENSES OF SOLICITATION
The expense of soliciting proxies, including costs of preparing,
assembling and mailing of the notice, proxy, and proxy statement will be paid by
the Company. The Company has engaged D. F. King & Co., Inc., New York, to assist
in the soliciting of proxies from brokerage firms and others, and for forwarding
the soliciting materials to beneficial owners of stock. It is estimated that up
to $5,000 will be incurred by the Company in connection with the solicitation.
In addition to the use of the mails, proxies may be solicited by personal
interview or by telephone by officers and directors of the Company.
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
The Articles of Incorporation of Equity Oil Company, as amended, divide
the Board of Directors into three classes with staggered terms of three years.
Accordingly, three directors of the Company are to be elected at the upcoming
Annual Meeting, each to hold office for three (3) years or until 1998. The
proxies solicited in connection with this proxy statement cannot be voted for a
greater number than three directors. Mr. Dougan and Mr. Brandrup are presently
directors of the Company. Information concerning the director nominees to be
elected at the Annual Meeting and the continuing directors and officers is
listed below.
Names, Principal Occupations During the Past Five Years, and Selected Other
Information Concerning Nominees for Director
Served since
PAUL M. DOUGAN Age - 57 1992
Director
President and Chief Executive Officer, Equity Oil Company
President and Director, Symskaya Exploration, Inc.
Mr. Dougan acted as Corporate Secretary from 1968 until his appointment as
President in January, 1994. Mr. Dougan serves as a Director of Leucadia
National Corporation.
DOUGLAS W. BRANDRUP Age - 54 1975
Director
Senior Partner, Griggs Baldwin & Baldwin
Attorney at Law - New York City, New York
JOSEPH C. BENNETT Age - 62
Self-employed. Mining and oil and gas investments. Director, Coeur d'Alene Mines
Corporaton, Conwest Exploration Company Limited, and Paragon Petroleum Limited.
Received MS-Mineral Economics from Stanford University, 1959; BS-Mining
Engineering from Stanford University, 1954.
It is intended that the shares represented by the enclosed proxy will
be voted for the election of the above named nominees, Paul M. Dougan, Douglas
W. Brandrup, and Joseph C. Bennett. In the event that any nominee for director
should be unavailable or unable to serve, which is not anticipated, it is
intended that such shares shall be voted for such substitute nominee as may be
selected by the Board of Directors.
<PAGE>
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
Served Term
Since Expires
MIRVIN D. BORTHICK Age - 70 1979 1996
Director
Retired banker
L.E. BUZARDE, JR. Age - 62 1993 1996
Director
Chairman and Chief Executive Officer of Star Oil and Gas Inc. Mr. Buzarde has
extensive experience in domestic and international oil and gas operations.
DAVID W. ALLEN Age - 69 1972 1997
Director
Retired; formerly independent insurance agent.
WILLIAM D. FORSTER Age - 48 1994 1997
Private investment banker; Chairman and CEO, W. Forster & Co, Inc., New York.
CLAY NEWTON Age - 37 1991
Treasurer, Equity Oil Company
Director and Treasurer, Symskaya Exploration, Inc.
Mr. Newton has served as Treasurer since May, 1991. From 1987 until his
appointment as Treasurer, he served as the Company's Chief Accountant.
OTHER SIGNIFICANT EMPLOYEES
JAMES B. LARSON Age - 33
Manager - Operations
Mr. Larson, a registered petroleum engineer, has served as Manager - Operations
since 1994. He has been employed by the Company for over 10 years.
DAVID M. SEERY Age - 40
Manager - Land and Denver Exploration Office
Mr. Seery has served as Manager - Land since 1994, and Manager - Denver
Exploration Office since the beginning of 1995. Mr. Seery has been employed by
the Company for over 10 years.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Amount and
Nature of
Title of Beneficial Percent
Class Name Ownership of class
- --------------------------------------------------------------------------------
Common 1Paul M. Dougan 443,276 3.4
President, Chief Executive Officer
and Director Nominee
2Fred H. Evans 311,043 2.4
Chairman of the Board of Directors
and Director
Mirvin D. Borthick 9,542 -
Director
3Douglas W. Brandrup 264,000 2.0
Director Nominee
David W. Allen 197,300 1.5
Director
Joseph C. Bennett 1,000 -
Director Nominee
William D. Forster 12,000 -
Director
L.E. Buzarde, Jr. 7,000 -
Director
4Total Ownership of Directors 1,283,361 9.8
and Executive Officers as a Group
- --------
1 The calculation of beneficial ownership includes 214,000 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date; 76,676 shares owned by Mr. Dougan's wife and 31,206 shares held in a
Family Limited Partnership of which Mr. Dougan is the general partner. The
calculation does not include 3,470 shares for which Mr. Dougan's wife acts as
trustee and 316,719 shares owned by Mr. Dougan's married daughters over which
Mr. Dougan has no voting power and concerning which he is not the beneficial
owner.
2 The calculation of beneficial ownership includes 287,000 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date.
3 The calculation of beneficial ownership includes 212,000 shares concerning
which Mr. Brandrup disclaims any beneficial ownership, consisting of 185,500
shares owned by various trusts for which Mr. Brandrup acts as trustee and has
shared voting and investment power, and 26,500 shares owned by Mr. Brandrup's
wife and children.
4 The calculation of beneficial ownership includes 539,200 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers and persons who own more than ten (10%) percent
of the registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Officers, Directors and greater than ten (10%) percent shareholders are required
to furnish the Company with copies of all Section 16(a) forms they file.
Fred H. Evans, Chairman, failed to file on a timely basis an option grant
which became effective upon shareholder approval at the 1993 Annual Meeting of
Stockholders of the 1993 Equity Oil Company Incentive Stock Option Plan. This
omission was corrected on an amended Form 5 filed January 12, 1995.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required for the fiscal year ending December 31, 1994, all other
Section 16(a) filing requirements applicable to its Officers, Directors and
greater than ten (10%) percent beneficial owners were complied with.
COMMITTEES
The Board of Directors has an Audit, Compensation, and Executive Committee.
The Audit Committee consists of Mirvin D. Borthick, L.E. Buzarde, Jr., and
William D. Forster. The Compensation Committee consists of Douglas W. Brandrup,
David W. Allen, and William D. Forster. The Executive Committee consists of
Paul M. Dougan, Fred H. Evans, and David W.Allen. The Board does not have a
Nominating Committee.
The Audit Committee met once in 1994 to review the work of the independent
auditors. The Compensation Committee met twice in 1994 to review executive
compensation, the granting of options and to establish general wage policies.
The Board of Directors held six meetings in 1994. No director attended less than
75% of the meetings.
COMPENSATION OF DIRECTORS
Non-Employee Directors and the Chairman of the Board were each paid a
retainer fee in the amount of $4,000 on December 31, 1994. In addition, fees of
$500 were paid for each of the regular meetings attended in 1994. Each
non-employee director was granted 2,000 shares of the Company's common stock as
additional compensation, as provided for under the 1993 Incentive Stock Option
Plan.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31,
1994, 1993, and 1992, respectively, for the Company's President and Chief
Executive Officer and each of the other executive officers of the Company whose
salary exceeded $100,000 during 1994.
<TABLE>
Long Term Compensation
Annual Compensation Awards
Payouts
Other Annual Restricted Options/ All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation Stock Awards SARs(1)#)LTIP Payouts($)Compensation(2)($)
- --------------------------- ---- ---------- --------- ------------ ------------ -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul M. Dougan(3) 1994 $175,000 - - - 70,000 - $26,831
President and 1993 $145,000 - - - 68,000 - $22,387
Chief Executive Officer 1992 $125,000 - - - 20,000 - NA
Edward J. Horan(4) 1994 $150,000 - - - 55,000 - $37,301
Exploration Vice- 1993 $147,000 - - - 68,000 - $22,331
President 1992 $140,000 - - - 99,000 - NA
Fred H. Evans(5) 1994 $ 60,000 - - - 10,000 - $20,465
Chairman of the Board 1993 $200,000 - - - 78,000 - $30,177
1992 $200,000 - - - 99,000 - $297,121
<FN>
NOTES
(1) Does not include SARs as follows: (i) Mr. Dougan 25,000; (ii) Mr. Horan,
20,000; SARs are issued in tandem with non-qualified options, either of which,
but not both, may be exercised. See Options Granted table for more information.
(2) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Dougan, $26,250 - annual Company contribution to the defined
contibution plan (DCP), $581 - Company paid term life insurance premiums; (ii)
Mr. Horan, $22,500 - annual Company contribution to the DCP, $14,801 personal
use of company provided automobile; (iii) Mr. Evans $9,000 - annual Company
contribution to the DCP, $11,465 personal use of company provided automobile.
(3) Mr. Dougan served as Corporate Secretary until January 10, 1994, at which
time he assumed the office of President and Chief Executive Officer.
(4) Mr. Horan retired from the Company on December 31, 1994.
(5) Mr. Evans served as President of the Company until January 10, 1994, at
which time he assumed the office of Chairman of the Board.
</FN>
</TABLE>
<PAGE>
OPTIONS GRANTED IN 1994
The following information is furnished for the year ended December 31,
1994 for the Company's named executive officers for stock options granted in
1994.
<TABLE>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
% of Total
Options/ Options/SARs
SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------- --------------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul M. Dougan(4)....................... (1)20,000 15.4% 4.2500 1/03/2004 $ 41,239 $116,015
(2)50,000 39.7% 4.2500 1/03/2004 $103,098 $290,038
(3)25,000 46.7% 4.2500 1/03/2004 $ 51,549 $145,019
Edward J.Horan(5)....................... (1)15,000 11.5% 4.2500 1/03/2004 $ 30,930 $ 87,011
(2)40,000 31.7% 4.2500 1/03/2004 $ 82,479 $232,030
(3)20,000 37.4% 4.2500 1/03/2004 $ 41,239 $116,015
Fred H. Evans(6)........................ (1)10,000 7.7% 4.2500 1/03/2004 $ 20,620 $ 58,008
<FN>
NOTES
(1) Options granted under the Company's Incentive Stock Option Plan. Under the
term of the Plan, options are 10 year options, generally terminating 3 months
following an optionee's death or retirement.
(2) Non-qualified stock options granted under the Company's Incentive Stock
Option Plan. Under the terms of the Plan, these are ten year options, generally
expiring three years following an optionee's retirement.
(3) SARs issued in tandem with non-qualified options above, either of which,
but not both, may be exercised.
(4) Mr. Dougan served as Corporated Secretary until January 10, 1994, at which
time he assumed the office of President and Chief Executive Officer.
(5) Mr. Horan retired from the Company on December 31, 1994.
(6) Mr. Evans served as President of the Company until January 10, 1994, at
which time he assumed the office of Chairman of the Board.
</FN>
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END VALUES
Shares Number of Value of Unexercised
Acquired on Value Unexercised Options/ In-The-Money Options
Name Exercise (#) Realized ($) SARs at FY-End (#)(4) /SARs at FY-End ($)(4)
- ---- ------------ ------------ ---------------------- ----------------------
<S> <C> <C> <C> <C>
Paul M. Dougan(5).................................. - - (1)124,000 8,750
(2)90,000 12,500
(3)45,000 6,250
Edward J. Horan(6)................................. - - (1)43,000 8,750
(2)80,000 12,500
(3)40,000 6,250
(8)75,000 -
Fred H. Evans(7)................................... - - (1)162,000 8,750
(2)50,000 15,625
(3)25,000 7,813
(8)75,000 -
<FN>
NOTES
(1) Options granted under the Company's Incentive Stock Option Plan. Under the
term of the Plan, options are 10 year options, generally terminating 3 months
following an optionee's death or retirement.
(2) Non-qualified stock options granted under the Company's Incentive Stock
Option Plan. Under the terms of the Plan, these are ten year options, generally
expiring three years following an optionee's retirement.
(3) SARs issued in tandem with non-qualified options, either of which, but not
both, may be excercised.
(4) All outstanding options/SARs are exercisable.
(5) Mr. Dougan served as Corporate Secretary until January 10, 1994, at which
time he assumed the office of President and Chief Executive Officer.
(6) Mr. Horan retired from the Company on December 31, 1994.
(7) Mr. Evans served as President of the Company until January 10, 1994, at
which time he assumed the office of Chairman of the Board.
(8) Non-qualified stock options granted by the Board of Directors on January
23, 1992, expiring ten years from the date of grant, notwithstanding an
optionee's retirement.
</FN>
</TABLE>
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
TO: The Board of Directors
The Compensation Committee (the Committee) evaluates management's
performance, reviews and recommends compensation levels for Equity Oil Company's
(the Company) executive officers, administers the Company's incentive stock
option plans, and considers other related matters. The Committee consists solely
of outside directors. No employee directors or any former officer or employee
serve on the Committee or participate in its deliberations.
The Company is in the oil and gas exploration and production business,
an industry characterized by unpredictable revenues resulting from price
volatility in world oil and gas markets. Because of this unstable environment,
the Company's compensation policies are not based upon short-term, quarterly or
yearly financial results; rather, the policies focus on longer term objectives
and achievements, calculated to maintain and expand the Company's reserve base,
such as locating and exploring promising prospects, and implementing projects
designed to increase oil and gas production on existing properties.
The Company's executive compensation policies have two main objectives:
(1) to ensure that executive officers' interests are aligned with the success of
the Company by linking a portion of executive officer compensation to
stockholder value, and (2) to provide competitive compensation packages that
will attract, motivate, and retain superior executive officers.
Each officer's compensation package consists of a base salary,
participation in a contributory profit sharing plan, and incentive stock options
granted by the Company. The Committee believes that incentive stock options are
an excellent method of encouraging long term results, since they link potential
compensation to increased stockholder value. When setting salary and option
levels, the Committee reviews executive compensation data from a survey of
companies that are similar to the Company in terms of revenue levels and
industry specialization, which includes the registrants used by the Company in
its self-constructed peer group. Based on those reviews, the Committee is of the
opinion that the Company's executive compensation levels are below those of its
peers.
During the year, the Committee reviews the achievements and progress of
the Company. This ongoing review, coupled with the statistical information on
industry compensation trends, helped form the basis for the 1994 compensation
packages recommended by the Committee. The Committee also considered each
individual's contribution to the Company's ongoing and future success in setting
specific salary and option levels.
The President and Chief Executive Officer of the Company, Paul M.
Dougan, assumed that position in January of 1994. Prior to that time, he served
as Corporate Secretary and as Manager of Corporate Development, having been
employed by the Company since 1961. As Mr. Dougan was new to the position of
President and Chief Executive Officer in 1994, his compensation was not
specifically tied to the performance in the prior year of the Company. Rather,
the compensation determined for his new position was based on the type of
peer-group evaluation discussed above for similarly situated executives. The
Committee is of the opinion that Mr. Dougan's 1994 compensation package is also
below that of his peers.
Respectfully submitted,
Equity Oil Company Compensation Committee
Douglas W. Brandrup, Chairman
David W. Allen
William D. Forster
<PAGE>
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN(1)
This page is a graphical representation of the performance graph required to be
filed with this proxy statement. The graph compares the return of an investment
in the Company's Common Stock at December 31, 1989 with a similar investment in
the stocks of the Company's selected peer group, or with that of a published
industry or line-of-business index, which in this case is the Russell 2000 Small
Cap index.
The data points of the graph are as follows:
1989(1) 1990 1991 1992 1993 1994
Equity Oil Company 100 91.849 81.803 69.187 86.327 83.629
Peer Group(2) 100 82.881 64.328 71.845 73.301 68.040
Russell 2000 Small Cap 100 78.537 112.848 131.303 153.639 148.756
NOTES
(1) Assumes that the value of the investment in the Company's Common Stock and
in each index was $100 on December 31, 1989, and that all dividends were
reinvested.
(2) The peer group includes the following independent oil and gas exploration
companies: Berry Petroleum, Comstock Resources, Magellan Petroleum Corp.,
Maynard Oil Co., McFarland Energy Inc., Patrick Petroleum Co., Swift Energy Co.,
and Wiser Oil Co. The index is weighted to reflect the relative market
capitalization of the peer group companies.
<PAGE>
AMENDMENT TO THE
ARTICLES OF INCORPORATION
TO REDUCE VOTING REQUIREMENT BELOW
TWO-THIRDS IN CERTAIN SITUATIONS
Item No. 2 on Proxy Card
Stockholders are asked to vote upon an Amendment to the Articles of
Incorporation of the Company by adopting a new Article IX to the Company's
Restated Articles of Incorporation as heretofore amended. The proposed Amendment
is set forth in full in Appendix "A" and is incorporated herein by reference.
The Amendment would reduce the voting requirements on certain matters below the
present two-thirds requirement.
REASONS FOR AND GENERAL EFFECT OF THE AMENDMENT
The State of Colorado adopted the Colorado Business Corporation Act (the "Act")
which became effective July 1, 1994. This Act replaced the Colorado Corporation
Code, in its entirety, which was first enacted in 1958. There are many
substantive changes in the new Act from the old code provisions.
The Corporation Code Revision Committee, a standing committee of the Business
Law Section of the Colorado Bar Association, was responsible for drafting the
Act. The Act is based on the 1984 Revised Model Business Corporation Act as
modified (the "Model Act"). The Model Act is a product of the Committee On
Corporate Laws of the Business Law Section of the American Bar Association.
One of the changes effected in the Act concerned the voting requirement for the
adoption of amendments to the articles of incorporation. Under the old code, the
affirmative vote of at least two-thirds of the shares of each class entitled to
vote on all amendments was required (unless such vote was reduced, to not less
than a majority, in the Articles of Incorporation). Under the new Act, an
amendment must be approved by at least a majority of votes entitled to be cast
thereon, if dissenters rights are involved, and if dissenters rights are not
involved, by a greater number of votes in favor of the amendment than those
opposing it at a meeting at which a quorum of votes is present.
The reduced voting benefits under the new Act, however, do not automatically
apply to corporations established in Colorado prior to the passage of the new
Act. Equity Oil Company is one of these corporations, and as a consequence, is
still held to the two-thirds vote requirement that existed under the old code.
This two-third vote requirement will continue indefinitely until an amendment is
adopted to change the voting requirement to less than a two-third vote. If the
old vote requirement is not changed, a vote of two-thirds of the outstanding
stock of the company will be necessary to approve (a) most amendments to the
Articles of Incorporation; (b) plans of merger or share exchange; (c) the sale,
lease, exchange or other disposition of all or substantially all of the
Company's property other than in the regular course of business; (d) proposals
to dissolve; and (e) proposals to revoke a dissolution. The amendment will have
no affect on the greater than two-thirds vote requirement contained in Articles
V and VIII of the Articles of Incorporation. Article V relates to the number,
election, and terms of office of the Board of Directors. Article VIII relates to
the vote required in certain business combinations which are in opposition to a
majority vote of the Board of Directors, or which do not meet certain price or
procedural requirements.
Modern business practices require that corporations have greater flexibility in
effecting changes in their governing documents in order to accommodate corporate
opportunities and changes which occur from time to time. The Colorado
Corporation Code Revision Committee and others responsible for drafting the new
Act took this into consideration in reducing the voting requirements as did the
Legislature of Colorado and the Governor when the Act was adopted. The need for
greater flexibility is especially true in the case of Equity Oil Company since
its stock is widely held, making it more difficult and expensive to obtain a
two-thirds vote on matters requiring a shareholder vote. The Board of Directors
is of the opinion that the benefits allowed by the Act should be made available
to Equity Oil Company.
The Board of Directors has unanimously approved the Amendment and recommends to
the stockholders that it be adopted.
A vote of two-thirds of all votes entitled to be cast thereon is required for
approval of the Amendment. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THE
SHARES OF COMMON STOCK REPRESENTED BY A PROXY DELIVERED TO THE BOARD OF
DIRECTORS WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT.
<PAGE>
AMENDMENT TO THE
ARTICLES OF INCORPORATION
TO LIMIT DIRECTORS' LIABILITY IN CERTAIN CASES
Item No. 3 on Proxy Card
Stockholders are asked to vote upon an Amendment to the Articles of
Incorporation of the Company by adopting a new Article X to the Company's
Restated Articles of Incorporation as heretofore amended. The proposed Amendment
is set forth in full in Appendix "B" and is incorporated herein by reference.
The Amendment would eliminate a director's liability for monetary damages for a
breach of the director's fiduciary duty of care. Colorado law does not allow,
and accordingly the Amendment does not allow, for the elimination or limitation
of a director's liability to a corporation or its shareholders for monetary
damages for: (i) any breach of the director's duty of loyalty to the corporation
or to its shareholders; (ii) acts or omissions not in good faith; (iii) acts or
omissions which involve intentional misconduct; (iv) a knowing violation of law;
(v) acts specified in Section 7-108-403 of the Colorado Business Corporation Act
which prohibits unlawful distributions (payments of unlawful dividends, unlawful
stock purchases or unlawful guarantees, etc.); or (vi) transactions from which a
director directly or indirectly derives an improper personal benefit.
The Board of Directors has unanimously approved the Amendment and recommends
that the stockholders vote to adopt it.
REASONS FOR THE AMENDMENT
Developments in recent years have placed directors at a greater risk than ever
before as a result of litigation which has eroded the business judgment rule
which has traditionally insulated directors from liability for business
judgments made in the course of managing the affairs of corporations. As a
result of this erosion, directors and officers liability insurance has become
increasingly expensive to maintain. Colorado, as well as other states, has
viewed these developments as a threat to the quality and stability of corporate
governance because many directors have become unwilling to serve without
insurance protection, and those who do serve may be inhibited by the
unavailability of insurance from making business decisions which may be in the
best interests of the corporation. In order to meet these problems, Colorado has
enacted legislation to allow additional protection to directors and which
permits corporations and their stockholders to adopt amendments to remove
director's exposure to liability for certain breaches of a director's fiduciary
duty, either in a suit by or on behalf of the corporation or in an action by
stockholders of the corporation. While the Company presently maintains director
and officer liability insurance, certain of the Company's directors have
expressed concern about continuing to serve as directors in the absence of the
protection provided by the proposed Amendment (although none of the Company's
directors have indicated an intention to resign should the proposed Amendment
not be approved.) The Amendment being proposed to the stockholders is designed
to limit the directors' liability to the extent permitted by the Act and any
statutory amendments hereafter adopted which expand the coverage of the Act.
DESCRIPTION AND EFFECT OF THE AMENDMENT
<PAGE>
The Board of Directors proposes that the stockholders adopt the Amendment in
order to take full advantage of the provisions of Colorado law limiting director
liability. The law applies only to directors actions as directors, and therefore
it does not limit the liability of a director for actions taken in a capacity
other than as a director, such as in the capacity of an officer or a majority
shareholder. The Amendment, in conjunction with the statutory provision,
eliminates a director's liability to stockholders or the Company for money
damages in certain cases arising out of a director's breach of fiduciary duty of
care. The effect of the Amendment would insulate a director from personal
liability even if such director acted without due care (was grossly negligent)
or conversely, if such director failed to act with due care in reaching a
decision regarding the corporation. The duty of care refers to the fiduciary
duty of directors to be sufficiently diligent and careful in considering a
transaction or taking or refusing to take some corporate action. The Amendment
would not eliminate the duty of care; it would only eliminate monetary damage
awards occasioned by a breach of that duty. Thus, even if the Amendment is
adopted, a breach of the duty of care would remain a valid basis for a suit
seeking to stop a proposed transaction from occurring.
As stated above, the act does not allow or permit the elimination of liability
in the following situations: (i) any breach of the director's duty of loyalty to
the corporation or to its shareholders; (ii) acts or omissions not in good
faith; (iii) acts or omissions which involve intentional misconduct; (iv) a
knowing violation of law; (v) acts specified in Section 7-108-403 of the
Colorado Business Corporation Act which prohibits unlawful distributions
(payments of unlawful dividends, unlawful stock purchases or unlawful
guarantees, etc.); or (vi) transactions from which a director directly or
indirectly derives an improper personal benefit. Thus, liability for monetary
damages still exists under the Amendment if liability is based on any if these
six grounds. In addition, the Amendment does not limit directors' liability
under federal securities laws. The Amendment would further provide that any
repeal or modification of the Amendment by the stockholders of the Company would
be prospective only, and would not adversely affect any limitation on the
personal liability of a director existing at the time of such repeal or
modification.
The Amendment would limit the directors' liability only for future conduct and
would not limit liability for conduct which predates adoption of the Amendment.
The Company is not aware of any pending or threatened claims which would be
affected by the Amendment.
To date, there has not been any significant judicial interpretations of the
scope or validity of amendments adopted pursuant to the above provision of the
Colorado Code. Courts could rule, under various legal theories, that certain
liabilities which the Code purports to eliminate remain, notwithstanding an
amendment pursuant to the above statutory provision. The Amendment's coverage
would extend only so far as is legally permitted. If the courts or the Colorado
legislature narrow or expand the coverage of the Act, the Amendment would
likewise be narrowed or expanded without further stockholder action.
The Board of Directors believes that the Amendment would be in the best interest
of the stockholders as well as the Company. The Amendment would help maintain
the Company's ability to attract and retain qualified individuals to serve as
directors of the Company by protecting directors (and potential directors) for
their good faith decisions. Such protection may be available through directors
and officers liability insurance, but without such Amendment, the costs of such
insurance may become prohibitive. On the other hand, the Amendment limits the
remedies available to a stockholder dissatisfied with a Board decision which is
protected by the Amendment. A stockholder's only remedy in such a circumstance
is to sue to stop the completion of the Board's action. In many situations, this
remedy may not be effective. Stockholders, for example, may not be aware of a
transaction or an event until it is too late to prevent it. In these cases, the
stockholders and the Company could be injured by a careless Board decision and
yet have no effective remedy.
The Board of Directors believes that the diligence exercised by directors stems
primarily from their desire to act in the best interests of the Company, and not
from a fear of monetary damage awards. Consequently, the Board believes that the
level of scrutiny and care exercised by directors will not be lessened by the
adoption of the Amendment. Nonetheless, the directors do have a personal
interest in seeing the Amendment approved.
The Board of Directors has unanimously approved the Amendment and recommends to
the stockholders that it be adopted.
A vote of two-thirds of all votes entitled to be cast thereon is required for
approval of the Amendment. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THE
SHARES OF COMMON STOCK REPRESENTED BY A PROXY DELIVERED TO THE BOARD OF
DIRECTORS WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Information concerning beneficial owners of more than five percent of
registrant's voting securities is as follows:
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
Common 1J. Lynn Dougan 860,000 6.9
10 W. Broadway, Suite 310
Salt Lake City, UT 84101
2Dimensional Fund 639,925 5.1
Advisors, Inc.
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
1 The calculation of beneficial ownership includes 315,000 shares owned
by the Galena Group, a limited partnership of which Mr. Dougan is the general
partner and has sole voting and investment power. Mr. Dougan is the brother of
Paul M. Dougan, President of the Company.
2 According to a Schedule 13-G dated January 30, 1995 by Dimensional
Fund Advisors, Inc.
<PAGE>
AUDITORS
The Company's financial statements for the year ended December 31, 1994 were
examined by the independent certified public accounting firm of Coopers &
Lybrand L.L.P. The Board of Directors has again selected their firm to serve as
the auditors for the Company for 1995. A representative of Coopers & Lybrand
L.L.P. is expected to be present at the stockholders' meeting to make any
statement they may desire or respond to such questions as may be appropriate.
DATE FOR SHAREHOLDER PROPOSALS
FOR THE 1996 ANNUAL MEETING
If shareholders desire to submit proposals to be presented at the Company's 1996
Annual Meeting, the same should be sent to Equity Oil Company at its principal
executive office: P.O. Box 959, Salt Lake City, Utah 84110-0959, no later than
December 1, 1995; otherwise, the proposal or proposals shall not be included in
the Company's proxy statement or form of proxy for the 1996 Annual Meeting.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF A BENEFICIAL OWNER OF ITS SECURITIES, ISSUER WILL SEND
WITHOUT CHARGE A COPY OF ISSUER'S ANNUAL REPORT ON FORM 10-K, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR ISSUER'S MOST RECENT FISCAL YEAR,
INCLUDING APPLICABLE FINANCIAL STATEMENTS AND SCHEDULES. WRITTEN REQUESTS SHOULD
BE DIRECTED TO CLAY NEWTON, SECRETARY, EQUITY OIL COMPANY, P.O. BOX 959, SALT
LAKE CITY, UTAH 84110-0959.
DISCRETIONARY AUTHORITY
The Board of Directors is not aware of any matter which may properly be
presented for action at the meeting other than the matters set forth herein.
Should any other matter requiring a vote of the stockholders arise, the proxies
in the enclosed form confer upon the person or persons entitled to vote the
shares represented by such proxies' discretionary authority to vote the same in
respect of any such other matter in accordance with their best judgement in the
interest of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
<PAGE>
APPENDIX "A"
ARTICLE IX
On each of the following matters, if shareholder action on such matter is
required by the laws of Colorado (as the same exist or may hereafter be amended
and if a greater vote is not in effect with respect to such matter as permitted
by such laws or the Articles of Incorporation) the required vote to approve such
matter shall be a majority of all the votes entitled to be cast on such matter:
(1) an amendment to the Articles of Incorporation; (2) a merger or plan of share
exchange; (3) a transaction involving a sale, lease, exchange or other
disposition of all, or substantially all, of the property of the corporation,
with or without its goodwill, otherwise than in the usual and regular course of
business; and (4) a proposal to dissolve the corporation or to revoke such
dissolution. Notwithstanding the foregoing, if a lower vote of the shareholders
is permitted by the laws of Colorado (as the same now exist or may hereafter be
amended or changed) on any such matter, such lower voting requirement shall
apply. If any shares are entitled by law to vote on any matter as a separate
voting group with respect to such matter, the foregoing voting requirements
shall apply to each such voting group with respect to such matter.
APPENDIX "B"
ARTICLE X
To the full extent permitted by the laws of Colorado, as the same exist or may
hereafter be amended, a director of the corporation shall not be personally
liable to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director. Any repeal or modification of this Article by the
shareholders of the corporation shall be prospective only and shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
<PAGE>
APPENDIX "C"
FORM OF PROXY
Equity Oil Company
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
Notice of Annual Meeting of Stockholders
May 10, 1995
Notice is hereby given that the Annual Meeting of Stockholders of
Equity Oil Company will be held at the Company's executive office, Suite 806, 10
West Third South, Salt Lake City, Utah, 84101, on the 10th day of May, 1995 at
2:00 p.m., to consider and act upon the following matters:
1. To elect three directors to hold office for three years and
until the Annual Meeting of Stockholders in 1998 or until
their successors are duly elected and qualified.
2. To amend the Articles of Incorporation to reduce voting
requirements below two-thirds in certain situations.
3. To amend the Articles of Incorporation to limit Directors'
liability in certain cases.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 23,
1995, as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting or any adjournment
thereof. The transfer books will not be closed.
You are cordially invited to attend the meeting. In the event you will
be unable to attend, you are respectfully requested to sign, date and return the
enclosed proxy in the return envelope at your earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
<PAGE>
1. To elect three directors to hold office for three years and
until the Annual Meeting of Stockholders in 1998 or until
their successors are duly elected and qualified.
NOMINEES: Paul M. Dougan, Douglas W. Brandrup,
Joseph C. Bennett
(INSTRUCTION: to withhold authority to vote for any
individual nominee, write that nominee's name in the space
proved below.
2. To amend the Articles of Incorporation to reduce voting
requirements below two-thirds in certain situations.
3. To amend the Articles of Incorporation to limit Directors'
liability in certain cases.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EQUITY OIL COMPANY
The undersigned, revoking all prior proxies, hereby appoints Paul M. Dougan,
President, and Clay Newton, Secretary, and any one or both of them with full
power of substitution, as proxy or proxies of the undersigned, to vote all
shares of common stock of EQUITY OIL COMPANY of the undersigned as if the
undersigned were personally present and voting at the Company's Annual Meeting,
May 10, 1995, and at all adjournments thereof.
