Equity Oil Company
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
Notice of Annual Meeting of Stockholders
May 10, 2000
Please join us for the 2000 Annual Meeting of Shareholders of Equity
Oil Company. The Annual Meeting will be held on Wednesday, May 10, 2000 at 2:00
P.M. at our executive offices in Salt Lake City, Utah.
The purposes of the Annual Meeting are to:
(1) Elect three directors.
(2) Approve our 2000 Stock Option Plan.
(3) Conduct any other business that may properly come before the
Meeting.
You must be a shareholder of record at the close of business on March
22, 2000, to vote at the Annual Meeting. Regardless of whether you will attend
the meeting, please vote by signing, dating and returning the enclosed proxy
card. Voting by mail will not prevent you from voting in person at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
PROXY STATEMENT
This Proxy Statement is being mailed beginning April 1, 2000, in
connection with the solicitation of proxies by the Board of Directors of Equity
Oil Company, a Colorado corporation, for use at the Annual Meeting of
Shareholders. The Meeting will be held in our executive offices at 10 West 300
South, Suite 806 in Salt Lake City, Utah, 84101. The meeting will begin at 2:00
pm Mountain Standard Time.
Your proxy is solicited by the Board of Directors. The Company pays the
cost of soliciting your proxy and reimburses brokerage houses and others for
forwarding proxy material to you.
VOTING INFORMATION
If you owned shares at the close of business on March 22, 2000, you are
entitled to vote. You are entitled to one vote for each share you owned on that
date on each matter presented at the Meeting. As of March 1, 2000 there were
12,643,440 shares outstanding.
The holders of the majority of the outstanding stock must be present in
person or represented by proxy to hold the Meeting. Directors are elected by a
plurality of the affirmative votes cast by the stockholders present at the
meeting (in person or by proxy). The 2000 Stock Option Plan and other matters
which may properly come before the meeting must be approved by a majority of the
shares of common stock voting for or against the proposal at the meeting. Votes
withheld from nominees for director, abstentions and broker non-votes count
toward a quorum. Abstentions and "non-votes" are treated as votes against
proposals presented to stockholders other than elections of directors.
You can vote in person at the Annual Meeting or you can vote by proxy,
which gives the proxy holder the right to vote your shares on your behalf.
Unless you instruct otherwise, the proxy holders will vote for each of the three
director nominees, for Proposal No. 2, and for each of the other proposals to be
considered at the meeting at their discretion. You may revoke your proxy before
your proxy holder votes your shares by filing a written revocation with our
Secretary before the Meeting, signing a proxy bearing a later date, or by voting
in person at the Meeting.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of Directors has eight members, and is divided into three
classes with staggered terms of three years. Three directors will be elected at
the upcoming Annual Meeting, each to hold office for three (3) years, or until
2003. The following candidates, each of whom are currently members of the Board,
are nominated for election by the Board. They have held the positions shown for
at least five years unless otherwise noted. They were selected on the basis of
outstanding achievement in their careers, broad experience, wisdom, integrity,
understanding of the business environment, willingness to devote adequate time
to Board duties, and ability to make independent, analytical inquiries. If a
nominee is unavailable to serve, which is not anticipated, the proxy holders may
vote for another nominee proposed by the Board.
Served as
Names, Principal Occupations and Selected Other Director
Information Concerning Nominees for Director Since
-------------------------------------------- -----
WILLIAM P. HARTL Age - 65 1997
Director, Equity Oil Company
Principal, The Dilenschneider Group
Former Vice President, Investor Relations, Ashland, Inc.
Past President, Petroleum Investor Relations Association
Past Chairman, National Investor Relations Institute
Director, The Communications Strategy Group, Inc.
WILLIAM D. FORSTER Age - 53 1994
Director, Equity Oil Company
Chairman and CEO, W. Forster & Co., Inc.
Chairman and CEO, Stonington Corporation
Director, Cheniere Energy
RANDOLPH G. ABOOD Age - 49 1997
Director, Equity Oil Company
Manager and member of The Ninigret Group, L.C.
Tax attorney, Satterlee Stephens Burke & Burke 1976 to 1996.
Director, Royster-Clark, Inc.
2
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PROPOSAL NO. 2
EQUITY OIL COMPANY 2000 STOCK OPTION PLAN
On February 9, 2000, the Board of Directors adopted the Equity Oil
Company 2000 Stock Plan (the "Plan") and, subject to stockholder approval,
reserved for issuance thereunder 1,200,000 shares of Common Stock. The Plan is
intended to replace our 1993 Incentive Stock Option Plan, which will be
terminated upon approval of the new Plan. Currently, there are 8,500 shares
available for grant, and 1,552,000 shares outstanding under our previous plans.
The outstanding options have an average exercise price of $3.20 per share. The
closing price of our stock on February 28, 2000 was $1.44 per share. We do not
reprice options.
Under our previous stock option plan, we were unable to grant options
to our Directors. The 2000 Stock Option Plan provides a formula whereby each
director will receive an annual nonstatutory option to purchase 5,000 shares of
stock. These options are granted on the day of the Company's Annual Meeting, at
the closing price that day. Had the new plan been in effect during 1999, each
director would have received a 10 year option to purchase 5,000 shares of stock
at a price of $1.38 per share. Aside from option grants that will be made to
Directors upon approval of the Plan, we do not plan to issue any options until
2001 under the Plan.
The Plan will be administered by the Board, or a committee appointed by
the Board. The Plan provides a means by which employees, directors and
consultants of the Company may be given the opportunity to purchase stock in the
Company.
The Board of Directors believes that it is in the best interests of our
stockholders for the stockholders to approve the Plan. The Board believes that
stock options assist in retaining, motivating and rewarding employees,
executives, and directors by giving them an opportunity to obtain long-term
equity participation in the Company. In addition, stock options are an important
contributor to aligning the incentives of our employees with the interests of
our stockholders. The Board also believes stock options are essential to
attracting new employees. Competition for qualified employees is extremely
intense. The Board of Directors believes that in order to remain competitive
with other companies with regard to our long-term incentive plans, we must
continue to provide employees with the opportunity to obtain equity in the
Company and that an inability to offer equity incentives to new and current
employees would put us at a severe competitive disadvantage with respect to
attracting and retaining qualified personnel.
For a description of the principal features of the Plan, see "Appendix
A - Description of the Equity Oil Company 2000 Stock Plan."
Required Vote. Approval of the Plan requires the affirmative vote of a
majority of the votes cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS VOTING "FOR" THE ADOPTION OF THE
2000 STOCK PLAN.
3
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CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are either serving as directors or executive
officers. They have held the positions shown for at least five years unless
otherwise noted. Term expiration dates are shown for those members of the Board
of Directors.
<TABLE>
<CAPTION>
Served Term
Since Expires
<S> <C> <C>
PAUL M. DOUGAN Age - 62 1992 2001
Director
President and Chief Executive Officer, Equity Oil Company.
President and Director, Symskaya Exploration, Inc.
Director, Leucadia National Corporation.
DOUGLAS W. BRANDRUP Age - 59 1975 2001
Director
Chairman of the Board of Directors.
Senior Partner, Griggs Baldwin & Baldwin.
Attorney at Law - New York City, New York.
JOSEPH C. BENNETT Age - 67 1995 2001
Director
Self-employed. Mining and oil and gas investments.
Director, Coeur d'Alene Mines Corporation.
PHILIP J. "JACK" BERNHISEL Age - 52 1996 2002
Director
Owner, European Marble & Granite Company. Former Senior Vice President - Law
and Finance for Kennecott Corporation, 1986 - 1993, and Corporate Controller for The
Standard Oil Company. Attorney and Certified Public Accountant.
W. DURAND EPPLER Age - 46 1997 2002
Director
President, Newmont Indonesia Limited.
Former Vice-President, Business Development and Planning, Newmont Gold Company.
Former Managing Director of Chemical Securities, Inc., Metals and Mining Group.
CLAY NEWTON Age - 42 1991
Corporate Secretary and Chief Financial Officer, Equity Oil Company.
Director and Treasurer, Symskaya Exploration, Inc.
JAMES B. LARSON Age - 38 Vice President - Operations Mr. Larson, a 1997
registered petroleum engineer, was appointed to the office of Vice President
Operations on November 15, 1996. He has been employed by the Company for over 10
years.
</TABLE>
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Amount and
Nature of
Title of Beneficial Percent of
Class Name Ownership Class
- ----- ---- --------- -----
Common 1Paul M. Dougan 744,476 5.6
President, Chief Executive Officer
and Director
Douglas W. Brandrup 140,000 1.1
Chairman of the Board of Directors
and Director
Joseph C. Bennett 16,000 .1
Director
William P. Hartl 5,000 -
Director Nominee
Philip J. "Jack" Bernhisel 18,000 .1
Director
William D. Forster 22,000 .2
Director Nominee
Randolph G. Abood 24,800 .2
Director Nominee
W. Durand Eppler 4,500 -
Director
2James B. Larson 85,500 .6
Vice President - Operations
3Clay Newton 89,700 .7
Corporate Secretary and
Chief Financial Officer
4Total Ownership of Directors 1,149,976 8.6
and Executive Officers as a Group
- --------
1The calculation of beneficial ownership includes 490,500 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date; 66,676 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 253,990 shares owned by Mr. Dougan's married daughters and their
families over which Mr. Dougan has no voting power and concerning which he is
not the beneficial owner.
2The calculation of beneficial ownership includes 80,900 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date.
3The calculation of beneficial ownership includes 79,700 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date.
4The calculation of beneficial ownership includes 651,100 shares subject to
outstanding options that were exercisable at the table date or within 60 days of
such date.
5
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Equity's
executive officers, directors and persons who own more than 10% of the Company's
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission ("SEC"). A copy of each report is furnished to Equity.
SEC regulations require Equity to identify anyone who filed a required
report late during the most recent fiscal year. Based solely on review of
reports furnished to the Company and written representations that no other
reports were required during the year ended December 31, 1999, all Section 16(a)
filing requirements were met.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has an Audit, Compensation, and Nominating
Committee. The Audit Committee reviews our internal and external reporting, the
scope of the independent audit and any comments by the independent auditors
regarding internal controls and accounting procedures, and further considers
management's response to any such comments. William D. Forster chairs the
committee. Other committee members are P.J. "Jack" Bernhisel, Randolph G. Abood,
W. Durand Eppler, and William P. Hartl. The Audit Committee met once in 1999 to
review the work of the independent auditors. The Committee also meets
telephonically prior to the release of each quarter's earnings.
The Compensation Committee evaluates management's performance, reviews and
establishes compensation levels for our Executive Officers, administers our cash
bonus and incentive stock option plans, and considers other related matters
concerning management motivation and compensation. The Committee consists solely
of outside Directors. Joseph C. Bennett chairs the committee. Other committee
members are Douglas W. Brandrup, P.J. "Jack" Bernhisel, William D. Forster,
Randolph G. Abood, William P. Hartl, and W. Durand Eppler. The Committee met
once in 1999.
The Nominating Committee interviews, nominates and recommends individuals
for membership on our Board of Directors. The entire Board of Directors acts as
a Nominating Committee. By February 1 of each year, candidates are nominated for
directorships to be filled. Candidates may be suggested by Board members or
stockholders. There is no specific procedure to be followed by security holders
in submitting recommendations to the Board. In selecting a candidate,
consideration is given to the skills and characteristics required of Board
members in the context of the current makeup of the Board and our business.
The Board of Directors held one special and four regular meetings in 1999.
No Director attended less than 75% of the meetings.
COMPENSATION OF DIRECTORS
Non-Employee Directors receive an annual retainer fee in the amount of
$4,000. The Chairman of the Board receives additional fees of $2,000 per month.
Fees of $500 were paid for each of the regular meetings attended in 1999.
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.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31, 1999,
1998 and 1997 respectively, for the Company's President and Chief Executive
Officer and each of the other executive officers of the Company whose salary and
bonus exceeded $100,000 during 1999.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards
------------------- ------
Other Annual Restricted Options/ All other
Name and Principal Position Year Salary ($) Bonus ($)(2) Compensation Stock Awards SAR's (3) Compensation($)(1)
- --------------------------- ---- ---------- --------- ------------ ------------ --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul M. Dougan, 1999 242,100 24,210 NA NA 127,000 2,552
President and 1998 242,100 0 NA NA 54,000 22,508
Chief Executive Officer 1997 235,000 47,000 NA NA 35,000 38,039
Clay Newton 1999 108,200 10,820 NA NA 37,500 8,318
Corporate Secretary, 1998 108,200 0 NA NA 16,000 8,469
Treasurer, and 1997 105,000 21,000 NA NA 9,000 17,382
Chief Financial Officer
James B. Larson 1999 108,200 10,820 NA NA 37,500 8,243
Vice-President of Operations 1998 108,200 0 NA NA 16,000 8,344
1997 105,000 21,000 NA NA 11,000 17,159
</TABLE>
NOTES
(1) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Dougan, $2,552 - value of Company paid term life insurance
premiums; (ii) Mr. Newton, $8,115 - annual Company contribution to the Company's
Defined Contribution Plan, (DCP) $203 - value of Company paid term life
insurance premiums. (iii) Mr. Larson, $8,115 - annual Company contribution to
the DCP, $128 - value of Company paid term life insurance. As a cost saving
measure for the Company, Mr. Dougan elected not to participate in the DCP for
1999.
(2) Bonus amounts shown are those earned for the year indicated. 75% of 1997
bonuses were paid in cash, with the remainder paid in Company stock as follows:
Mr. Dougan, 4,700 shares, Mr. Newton and Mr. Larson, 2,100 shares.
(3) Option amounts shown are those granted during the year indicated. Options
granted during 1999 were granted on April 1, 1999.
7
<PAGE>
OPTIONS GRANTED IN 1999
The following information is furnished for the year ended December 31, 1999 for
the Company's named executive Officers for stock options granted in 1999.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------- ------------------------
% of Total
Options/SAR's
Options/ Granted to Exercise or
SAR's Granted Employees in Base Price Expiration
(#) (1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
--------------- --------------- ------------ ------------ ---------- -----------
Name
<S> <C> <C> <C> <C> <C> <C>
Paul M.Dougan............... 127,000 39.3% $1.0625 4/01/2009 $ 89,853 $370,581
Clay Newton.................. 37,500 11.6% $1.0625 4/01/2009 $ 26,531 $109,424
James B. Larson............. 37,500 11.6% $1.0625 4/01/2009 $ 26,531 $109,424
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options/ In-The-Money Options
Shares SAR's at FY-End /SAR's at FY-End
Acquired on Value (#) Exercisable/ ($) Exercisable/
Exercise (#) Realized ($) Unexercisable Unexercisable
-------------- ------------ -------------------- -------------------
Name
<S> <C> <C> <C> <C>
Paul M. Dougan............................ NA NA 375,500/127,000 -/-
Clay Newton................................ NA NA 70,800/62,700 -/-
James B. Larson............................ NA NA 71,600/63,900 -/-
</TABLE>
NOTES
(1) Options granted under the Company's Incentive Stock Option Plan. Under the
terms of the Plan, options are 10 year options with vesting periods ranging from
1 to 6 years, generally terminating 3 months following an optionee's death or
retirement. Options granted during 1999 were granted on April 1, 1999.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy and Objectives
The Compensation Committee is comprised of directors who are not
employees or former employees of Equity Oil Company. Our responsibilities as
committee members include the approval and administration of the compensation
and benefit programs for Equity's named executive officers whose compensation is
shown in this proxy statement.
Equity 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, our
compensation policies are not based upon short term financial results; rather,
they focus on longer term objectives and achievements that expand our asset
base. These objectives include acquiring producing reserves at attractive costs,
locating and exploring promising prospects, and implementing projects designed
to increase reserves and production on existing properties.
Our philosophy is to directly align the interests of executive
management and other key employees with those of our shareholders. The major
components of this philosophy are:
o Creating compensation plans which enable us to attract and retain
officers and key employees important to the Company's success, and to
provide them a compensation package reflecting both Equity's and their
performance, measured by success in achieving strategic, operating and
financial objectives.
o Providing meaningful cash and equity-based incentives for executives
and other key employees to ensure they are motivated over the short and
long term to respond to our challenges and opportunities as owners,
rather than simply as employees.
o Rewarding executives and key employees for superior performance when
our shareholders receive an attractive return on their investment over
the longer term.
Our objective is to set executive and other key employee base salaries
at or below the average base salaries of our peer companies based upon industry
surveys. These surveys include the companies that make up the industry index
used in the accompanying performance chart. In addition to base salaries, we
provide incentives through a combination of a cash bonus program, an
equity-based stock option program, and a profit sharing retirement plan.
Under the cash bonus program, executives and other key employees can
earn additional compensation up to 50% of their base salary. In determining the
size of the bonus, the key factors we consider are: (i) the year-end stock price
exceeding a 3-year rolling average of year-end stock prices, (ii) reserve
replacement exceeding production by a meaningful measure and (iii) finding
costs. Along with these factors, we subjectively consider the degree of success
in meeting strategic, operating and financial objectives such as oil and gas
production levels, earnings per share, operating cash flow, and developing
exploration and development prospects, among other considerations. These latter
measures, while not specifically weighted, are all critical to building
shareholder value, which is our ultimate goal.
The stock option program provides a method of encouraging long term
results beneficial to our shareholders since the potential value of each stock
option is tied to increased shareholder value. The options are always awarded at
present market value, and vest in 1 to 6 years. All stock options have a
duration of ten years before expiration. We do not reprice stock options.
9
<PAGE>
Company Performance and Chief Executive Officer Compensation
We determine compensation for Paul M. Dougan, President and Chief
Executive Officer, in the same manner as we do for other officers and key
employees of the Company. While there is no specific relationship between
corporate performance and base salary, Mr. Dougan's incentive compensation is
largely dependent upon the overall performance of the Company.
During 1998, oil prices reached 12 year lows, and continued to be
severely depressed during the early part of 1999. These adverse market
conditions negatively impacted our revenues, cash flows, and capital budgets. In
setting Mr. Dougan's base salary, we considered his contribution in responding
to these market conditions by reducing overhead costs, reducing the Company's
outstanding debt, rationalizing drilling programs, and evaluating alternatives
necessary to ensure Equity's long-term financial viability. In view of the
uncertain market environment, Mr. Dougan received no salary increase in 1999.
According to the performance criteria of the cash bonus program, which includes
stock price appreciation, reserve replacement success, and finding cost
performance, Mr. Dougan earned a 10% bonus for 1999.
Respectfully submitted,
Equity Oil Company Compensation Committee
Joseph C. Bennett, Chairman Douglas W. Brandrup
P.J. "Jack" Bernhisel W. Durand Eppler
William D. Forster William P. Hartl
Randolph G. Abood
10
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following entities and/or individuals own more than five percent of
our common stock:
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
- ----- ---------------- --------- --------
Common Croft - Leominster, Inc. 955,900 7.6
207 East Redwood Street
Suite 802
Baltimore, MD 21202
1J. Lynn Dougan 860,000 6.8
215 South State Street
Salt Lake City, UT 84101
2Dimensional Fund 760,525 6.0
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 February 11, 2000 by Dimensional
Fund Advisors, Inc. Dimensional Fund Advisors, Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of 760,525
shares of Equity Oil Company stock as of December 31, 1999. Dimensional, an
investment advisor registered under Section 203 of the Investment Advisors Act
of 1940, furnishes investment advise to four investment companies registered
under the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts and
separate accounts. These investment companies trusts and accounts are the
"Funds". In its role as investment advisor or manager, Dimensional possesses
both voting and/or investment power over the securities of the Issuer that are
owned by the Funds. All securities reported are owned by the Funds. Dimensional
disclaims beneficial ownership of such securities.
11
<PAGE>
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
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, 1994 with a similar
investment in the stocks of the Company's selected peer group, a published
industry or line-of-business index, and a broad equity market index, which in
this case is the Russell 2000 Small Cap index.
The data points of the graph are as follows:
1994(1) 1995 1996 1997 1998 1999
Equity Oil Company 100 151.61 79.03 79.03 25.00 29.03
Russell 2000 Small Cap 100 126.21 144.84 174.56 168.54 201.61
S&P Oil & Gas Small Cap 100 123.58 194.10 177.16 113.15 147.57
Notes:
(1) Assumes that the value of the investment in the Company's common stock, and
in each index, was $100 on December 31, 1994, and that all dividends were
reinvested. (2) As a published industry index, the Company uses the Standard &
Poors Oil & Gas (Exploration & Production) Small Cap Index.
12
<PAGE>
EXPENSES OF SOLICITATION
We will pay the expense of soliciting proxies, including costs of
preparing, assembling and mailing of the notice, proxy, and proxy statement. We
have 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. We estimate that up to $7,500 will be
incurred in connection with the solicitation. In addition to the use of the
mails, our Officers and Directors may solicit proxies by personal interview or
by telephone.
AUDITORS
Our financial statements for the year ended December 31, 1999 were
examined by the independent certified public accounting firm of
PricewaterhouseCoopers LLP. Our Board of Directors has again selected their firm
to serve as the auditors for the Company for 2000. A representative of
PricewaterhouseCoopers LLP 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 STOCKHOLDER PROPOSALS
FOR THE 2001 ANNUAL MEETING
Stockholder proposals intended to be presented at our 2001 annual
meeting must be received at our principal office, P.O. Box 959, Salt Lake City,
Utah 84110-0959 no later than December 1, 2000 and must comply with the rules of
the SEC for inclusion in our form of proxy relating to that meeting.
Director nominee proposals must be submitted by February 1, 2001 for
consideration by the Nominating Committee.
ADDITIONAL INFORMATION
If you would like a copy of our most recent annual report on Form 10-K,
which we have filed with the Securities and Exchange Commission, please write to
Clay Newton, Secretary, Equity Oil Company, P.O. Box 959, Salt Lake City, Utah
84110-0959. We will send to it you at no charge.
OTHER MATTERS
The Board does not intend to present any items of business other than
those stated in the Notice of Annual Meeting of Shareholders. If other matters
are properly brought before the meeting, the persons named in the accompanying
proxy will vote the shares represented by it in accordance with their best
judgment. Discretionary authority to vote on other matters is included in the
proxy.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
13
<PAGE>
APPENDIX A
DESCRIPTION OF THE EQUITY OIL COMPANY 2000 STOCK PLAN
GENERAL. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees, directors and
consultants of the Company and to promote the success of the Company's business.
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonstatutory stock options.
ADMINISTRATION. The Plan may generally be administered by the Board or
a Committee appointed by the Board (as applicable, the "Administrator"). The
Administrator may make any determinations deemed necessary or advisable for the
Plan.
ELIGIBILITY. Nonstatutory stock options may be granted under the Plan
to employees, directors and consultants of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom options may be granted, the
time or times at which such options shall be granted, and the exercise price and
number of shares subject to each such grant.
NUMBER OF SHARES. The number of shares of Common Stock reserved for
issuance under the plan is 1,200,000 shares.
DIRECTORS' OPTIONS. All outside directors are granted a Nonstatutory
Option to purchase 10,000 Shares on the date on which such person first becomes
a director, whether through election by the stockholders or appointment by the
Board of Directors to fill a vacancy. On the date of the Company's Annual
Meeting each year, each non-employee director who remains in office is granted
an additional option to purchase 5,000 shares of common stock . The exercise
price is equal to the closing price of the stock that day, and the options have
a term of ten years from the date of grant.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise
price of options at the time the options are granted. The exercise price of an
incentive stock option and a nonstatutory stock option may not be less than 100%
of the fair market value of the Common Stock on the date such option is granted.
The fair market value of the Common Stock is generally the closing sale price
for the Common Stock (or the closing bid if no sales were reported) on the last
market trading day prior to the date the option is granted.
(b) Exercise of Option; Form of Consideration. The
Administrator determines when options become exercisable, and may in its
discretion, accelerate the vesting of any outstanding option. The means of
payment for shares issued upon exercise of an option is specified in each option
agreement. The Plan permits payment to be made by cash, check, promissory note,
other shares of Common Stock of the Company (with some restrictions), cashless
exercises, any other form of consideration permitted by applicable law, or any
combination thereof.
(c) Term of Option. The term of an incentive stock option may
be no more than ten (10) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) Termination of Employment, Directorship or Consultancy. If
an optionee's employment, directorship or consulting relationship terminates for
any reason (excluding death or disability), then the optionee generally may
exercise the option within 3 months of such termination to the extent that the
option is vested on the date of termination, (but in no event later than the
expiration of the term of such option as set forth in the option agreement). If
an optionee's employment, directorship or consulting relationship terminates due
to the optionee's disability, the optionee generally may exercise the option, to
the extent the option was vested on the date of termination, within six months
from the date of such termination. In the event of the optionee's death, the
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optionee's estate generally may exercise the option, to the extent the option
was vested on the date of termination, within twelve months from the date of
death.
(e) Nontransferability of Options: Unless otherwise determined
by the Administrator, options granted under the Plan are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionee's lifetime only by the optionee.
(f) Other Provisions: The stock option agreement may contain
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option outstanding under the Plan, and the exercise price of any such
outstanding option.
In the event of a liquidation or dissolution, any unexercised options
will terminate. The Administrator may, in its sole discretion, provide that each
optionee shall have the right to exercise all or any part of the option,
including shares as to which the option would not otherwise be exercisable.
In connection with any merger, consolidation, acquisition of assets or
like occurrence involving the Company, each outstanding option shall be assumed
or an equivalent option substituted by the successor corporation. If the
successor corporation refuses to assume the options or to substitute
substantially equivalent options, the Administrator shall have the discretion to
allow the optionee to exercise the option as to all the optioned stock,
including shares not otherwise vested or exercisable. In such event, the
Administrator shall notify the optionee that the option is fully exercisable for
fifteen (15) days from the date of such notice and that the option terminates
upon expiration of such period.
CHANGE OF CONTROL. In the event of a change of control, any options
outstanding on the date of such change in control that are not yet exercisable
shall become fully exercisable. In the event that vesting acceleration or
amounts or benefits payable to an optionee are subject to the golden parachute
excise tax rules, the optionee's accelerated vesting may be reduced to the
extent necessary to avoid the golden parachute excise tax if such reduction
would provide the optionee with a greater benefit. A change of control is
defined as (i) the acquisition of at least 50% of the Company by a "person" (as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934);
(ii) certain changes in the composition of the Board of Directors of the
Company, (iii) a merger or consolidation where the Company's stockholders do not
own at least 50% of the voting power after the transaction or (iv) the sale or
disposition of substantially all of the Company's assets.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter,
suspend or terminate the Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any amendment
to the Plan to the extent necessary and desirable to comply with applicable law.
No such action by the Board or shareholders may alter or impair any option
previously granted under the Plan without the written consent of the optionee.
Unless terminated earlier, the Plan shall terminate ten years from the date of
its initial adoption, or, if later, the date any amendment to increase the
number of shares reserved under the Plan is adopted by the Board of the Company
and approved by the shareholders.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income. If these
holding periods are not satisfied, the optionee recognizes ordinary income at
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the time of disposition equal to the difference between the exercise price and
the lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. Unless limited by Section 162(m) of
the Code, the Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.
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EXHIBIT "B"
FORM OF PROXY
Equity Oil Company
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
Notice of Annual Meeting of Stockholders
May 10, 2000
Please join us for the 2000 Annual Meeting of Shareholders of Equity
Oil Company. The Annual Meeting will be held on Wednesday, May 10, 2000 at 2:00
P.M. at our executive offices in Salt Lake City, Utah.
The purposes of the Annual Meeting are to:
(1) Elect three directors.
(2) Approve our 2000 Stock Option Plan.
(3) Conduct any other business that may properly come before the
Meeting.
You must be a shareholder of record at the close of business on March
22, 2000, to vote at the Annual Meeting. Regardless of whether you will attend
the meeting, please vote by signing, dating and returning the enclosed proxy
card. Voting by mail will not prevent you from voting in person at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CLAY NEWTON, Secretary
1. To elect the following nominees as directors to hold office
for three years and until the Annual Meeting of Stockholders
in 2003 or until their successors are duly elected and
qualified.
NOMINEES: Randolph G. Abood, William D. Forster, William P.
Hartl
Note: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name. Unless
authority to vote for all the foregoing nominees is withheld,
this proxy will be deemed to confer authority to vote for
every nominee whose name is not stricken. In the event any
nominee should be unable to serve, or for good cause will not
serve, it is intended that this proxy shall be voted for such
substitute nominee as may be selected by the Board of
Directors.
2. To approve the Equity Oil Company 2000 Stock Option Plan.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Please sign below exactly as name appears. When shares are
held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
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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, 2000, and at all adjournments thereof.
