PROXY STATEMENT
CROFF OIL COMPANY
1995ENTERPRISES
621 Seventeenth Street, Suite 830
Denver, Colorado 80293
(303) 383-1555
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 28, 1996November 9, 2001
11:00 A.M. (MST)
To Our Shareholders:
Notice is hereby given of the Annual Meeting of Shareholders (the "Annual
Meeting") of Croff Enterprises, Inc. (the " Company") to all of the shareholders
of the Company. The Annual Meeting will be held in the conference room of the
Company's facilities at 621 Seventeenth Street, Suite 830, Denver, Colorado on
November 9, 2001 at 11:00 a.m. for the following purposes:
The election of the entire five member Board of Directors of the Company,
to serve an indefinite term until their respective successors are elected and
qualified;
Ratification of the appointment of Causey, Demgen & Moore, Inc.,
independent accountants, as the Company's independent accountants for the
ensuing year;
Consideration and action upon such other business as may properly come
before this meeting or any adjournment thereof.
The enclosed Proxy Statement includes information relating to these
proposals.
All shareholders of record of the Company's common stock at the close of
business on September 24, 2001 are entitled to notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof. At least a majority
of the outstanding shares of common stock of the Company present in person or
by proxy is required for a quorum.
By Order of the Board of Directors
/s/ Gerald L. Jensen
Gerald L. Jensen
Chairman of the Board
October 15, 2001
Denver, Colorado
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN THE
COMPANY'S ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY BY MAIL IN THE POSTAGE-PAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY, IF YOU
WISH, AND VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THE PROXY STATEMENT.
================================================================================
PROXY STATEMENT
CROFF ENTERPRISES, INC.
2001 ANNUAL MEETING OF SHAREHOLDERS
November 9, 2001
General Information & Incorporation by Reference:
THIS PROXY STATEMENT IS BEING MAILED TO ALL SHAREHOLDERS OF RECORD IN
CONNECTION WITH THE SOLICITATION OF THEIR VOTE BY THE BOARD OF DIRECTORS OF
CROFF OIL COMPANY (the Company)ENTERPRISES, INC. ("the Company" or "Croff") with regard to the Annual
Meeting to be held on February 28, 1996November 9, 2001 at 10:11:00 a.m. at 1433621 Seventeenth
Street, Suite 220,830, Denver, Colorado 80202,80293, Telephone: (303) 297-3383.383-1555. This
Proxy Statement should be reviewed in connection with the enclosed copy of
the Annual Report filed on SEC Form 10-K dated December 31, 1994,2000 and the most recentcurrent
10-Q unaudited reportReport for the quarterperiod ending SeptemberJune 30, 1995.2001.
VARIOUS ITEMS OF IMPORTANT INFORMATION AND ACCOUNTINGFINANCIAL STATEMENTS FOR THE
COMPANY RELATED TO THIS PROXY STATEMENT ARE SET-OUT IN THE ENCLOSED ANNUAL
REPORT ON FORM 10-K OR THEAND MOST RECENTCURRENT 10-Q QUARTERLY REPORT ON FORM 10-Q.REPORT. SUCH DETAILED
INFORMATION MAY BE RELEVANT IN REVIEWING THIS PROXY STATEMENT, BUT IS NOT
NECESSARILY REPEATED IN THIS DOCUMENT. ACCORDINGLY, EACH SHAREHOLDER
SHOULD REFER TO THE FORMSFORM 10-K &AND 10-Q BEFORE COMPLETING THEIR PROXY BALLOT.
Proxies voted in accordance with the accompanying ballot form, which are
properly executed and received by the Secretary to the Company prior to the
Annual Meeting, will be voted.
Revocability of Proxy
A shareholder returning the enclosed proxy ballot has the power to revoke
it at any time before it is exercised and may do so by written notice to the
Secretary of the Company at the address set forth above, effective upon receipt
of such written notice, or by voting in person at the Annual Meeting.
Attendance at the Annual Meeting, in and of itself, will not constitute
revocationRevocation of a proxy.
Solicitation and Voting SecuritiesProcedures
The record date for the determination of shareholders entitled to vote at
the Annual Meeting is the close of business on December 31, 1995.September 24, 2001. There were
issued, outstanding and entitled to vote on such date approximately 516,515526,315
shares of the 20,000,000 authorized common shares. The Company has only one
class of Common Shares, each of which is entitled to one vote. The Company does
not have cumulative voting. Accordingly, each shareholder maymust vote all of his
shares on each separate ballot proposal.proposal or nominee, or abstain from voting on
That item. The Company will bear all costs of this proxy solicitation.
The Company has two classes ("A" & "B") of non-voting preferred shares.
No "A" shares have been issued. Each holder of common stock, as of 1994, was
issued one share of class "B" preferred stock for each common share owned.
Preferred B Shares are not entitled to vote in this election.
Shares entitled to vote will be determined based upon the official
shareholder record of December 31, 1996.September 24, 2001. Actual votes cast will be determined
by the physical counting of votes in person or proxy by the inspectorInspector of
electionsElections to be appointed prior to the meeting by the Board of Directors. Any
dispute as to votes or entitlement to vote will be decided by majority vote of
the Board of Directors. Abstentions and broker non-votes will not be counted
for either quorum or ballot purposes.
Quorum
As to each item to be voted upon in this Proxy, a numerical majority of the
issued and outstanding shares must be present or voted by Proxy at the meeting
(258,258 shares,(shares, or as otherwise determined by the inspectorInspector of electionsElections at the time of
meeting). Each proposal to be voted upon will only be adopted by a majority
vote of shares voted at the meeting provided a quorum is present. That is, each
item will be adopted by an affirmative vote of not less than 129,129263,158 shares, or
a greater majority of those shares present as otherwise determined by the
inspectorInspector of elections.Elections.
There are no matters to be voted upon as described by this Proxy upon which
management will proceed absent majority shareholder approval as described above.
Abstentions
Abstentions will be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
Broker Non-Votes
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be
counted for purposes of determining the number of Votes Cast with respect to
the particular proposal on which the broker has expressly not voted.
Accordingly, broker non-votes will not affect the outcome of the voting on a
proposal that requires a majority of Votes Cast.
Stock Ownership of Certain Beneficial Owners and Management
The Company knows of no person or group, except the following, which, as of
the date of this Proxy Statement, beneficially owns and has the right to vote
more than 5% of the Company's Common Stock:
Names and Address of Shares Beneficially Owned Percent of Class
Beneficial OwnerNAMES AND ADDRESS SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
1. Jensen Development Company (1) 132,130 25.10%
143322.93%
621 17th Street, Suite 220830
Denver, Colorado 8020280293
2. Gerald L. Jensen (2) 71,215 13.03%81,215 14.09%
3. Julian D. Jensen (2)&(3) 46,532 8.68%8.04%
Jensen RevocableFamily Trust
4. Directors as a Group (2) 285,277 49.50%49.5%
(1) Jensen Development Company is wholly owned by Gerald L. Jensen.
(2) Includes warrants to purchase 10,000 shares of the Company's common
stock and an equal number of Preferred "B" shares by each director at
$1.00 per common share, expiring December 31, 1998.31,2002. Mr. Gerald
Jensen's warrant is for 20,000 shares. NoneOnly 10,000 of the warrants
have been exercised.exercised by Mr. Gerald L. Jensen.
(3) Mr. Julian D. Jensen owns 5,000 shares directly and holds a warrant for
10,000 shares (see Note 2, above); 21,43231,532 shares are held by him as the
Trustee of the Jensen Family Trust and 10,000 as the Trustee of the
Jensen Revocable Trust. Mr. Julian D. Jensen has an
approximate 25%43% beneficial interest in these Truststhis Trust and Mr. Gerald L.
Jensen has an approximate 33%38% beneficial interest.
MATTERS SUBJECT TO SHAREHOLDER VOTE
Proposal I.
Election of Directors
The Croff Board consists of Gerald L. Jensen, Dilworth A. Nebeker, Richard
H. Mandel, Jr., Edwin W. Peiker, Jr., and Julian D. Jensen. Each director will
serve until the next annual meeting of shareholders, or until his successor is
duly elected and qualified. The following information is provided with respect
to each current officer and director of the Company who are current nominees
for re-election.
GERALD L. JENSEN, 55,61, PRESIDENT AND DIRECTOR.
President of Croff Oil Company on a part-time basis since October, 1985.
Prior to this date, Mr. Jensen was Chairman of Petro-Silver,in 1999 and 2000 participated in founding Online Launch, Inc., a
publicstart-up business-to-business incubator company, for over five years.which is now inactive. Mr.
Jensen continues as the Chairman of Provisor Capital, Inc., a medical
financing company financed by Online Launch, Inc. Mr. Jensen was a director
of Pyro Energy Corp., a public company engaged primarily in coal production
from 1978 until the company was sold in 1989. Mr. Jensen is also an owner
of private real estate, development,finance, and oil and gas companies.
RICHARD H. MANDEL, JR., 66,70, DIRECTOR.
Since 1982, Mr. Mandel has been President and a Board Member of American
Western Group, Inc., an oil and gas producing company in Denver, Colorado.
He is President and also a Board Member of Richard H. Mandel, Ltd., an oil
and gas production company in Denver, Colorado. From 1977 to 1984, he was
President of Universal Drilling Co., Denver, Colorado. Since May 1988, he
has been a Board Member of Richmond Exploration Company. Since July 1994,1990,
he has been a Board Member of Wichita River Oil Company, listed on the American Stock
Exchange.Pacific Petroleum, LTD, an OTC Nevada Company.
DILWORTH A. NEBEKER, 54,60, DIRECTOR.
Mr. Nebeker served as President of Croff from September 2, 1983 to June 24,
1985, and has been a director of Croff since December, 1981. HeFor the last ten
years he has been an investment advisor and a lawyer in private practice for the past seven years.practice. Prior
thereto, he was a lawyer employed by Tosco Corporation, a public corporation,
from 1973 to 1978. He was a lawyer with the Securities and Exchange Commission
from 1967 to 1973.
EDWIN W. PEIKER, JR., 63,65, DIRECTOR AND SECRETARY.
Mr. Peiker was President of Royal Gold, Inc. from 1988 through 1991, and
continues to be a director. Since 1986, Mr. Peiker has been a Vice President
and director of Royal Gold, Inc., a public company engaged in gold exploration
and mining activities. Prior thereto he was involved in private investments
in oil and gas exploration and production. Mr. Peiker was employed in
responsible positions with AMAX, Inc., a public corporation, from 1963 to 1983.
AMAX is primarily engaged in mine evaluation and resource analysis.
JULIAN D. JENSEN, 47,53, DIRECTOR.
Mr. Julian Jensen is the brother of the Company's president and has served
as legal counsel to the Company for the past seventwelve years. Mr. Jensen has
practiced law, primarily in the areas of corporate and securities law, in Salt
Lake City, Utah since 1975. Mr. Jensen is currently associated with the firm of
Jensen, Duffin, Carman, Dibb & Jackson, which acts as legal counsel for the
Company.
SUMMARY INFORMATION AS TO DIRECTORS
Number of
Shares Percentage of
Director (Beneficial Issued and
NAME Since Compensation and Legal) Outstanding
Gerald
Percentage of
Director Number of Shares Issued and
NAME Since Compensation (Beneficial & Legal) Outstanding
GERALD L. JENSEN 1985 Salary as 203,345 38.13%
Jensen (1) President: 213,345 37.01%
$54,000 (See Principal (See (See
$48,000 - No Principal Principal
Benefits - Shareholder Shareholder
No Director Compensation Shareholder Chart, Shareholder Chart,
- See Below* above) (1) above)
DILWORTH NEBEKER 1981 Normal Director Stipend 1,300 (2) .25%
Only (See Below)**
RICHARD MANDEL 1985 Normal Director Stipend 10,100 (2) 1.75%
Only (See Below)**
EDWIN PEIKER, JR. 1985 Normal Director Stipend 14,000 (2) 2.43%
Only (See Below)**
JULIAN D. JENSEN 1990 Normal Director Stipend 46,532 8.04%
Only (See Below)** (See Principal
Shareholder Chart, Chart,
Compensation
above) above)
(See Below)
Dilworth 1981 Normal 11,300 2.11%
Nebeker (2) Director
Stipend Only
(See Below)
Richard 1985 Normal 10,100 1.88%
Mandel (2) Director
Sipend Only
(See Below)
Edwin 1985 Normal 14,000 2.61%
Peiker, Jr (2) Director
Stipend Only
(See Below)
Julian D. 1990 Normal 46,532 8.68%
Jensen (2) & (3)
Director (See
Stipend Only Principal
(See Below) Shareholder
Chart, above)
* Mr. Gerald Jensen also receives an IRA contribution from the Company of
$1,620 (3% of salary) per year.
** Directors are paid $350 for a half day meeting and $500 for a full day
meeting.
(1) Includes shares held by Jensen Development Corporation (132,130)
aswhich is wholly owned by Gerald L. Jensen.
(2) Includes warrant expiring December 31, 19982002 to acquire 10,000
shares by each Director at $1.00/shares; except Gerald L. Jensen,
who holds a remaining warrant for 20,00010,000 shares. Mr. Gerald
Jensen exercised 10,000 warrants for an equal number of shares
in 1999. No other warrant has been exercised to date. Warrants may
be extended by majority vote of
the Board.
(3) Includes shares held in Jensen Family Trust (21,432) and Jensen
Revocable Trust (10,100)(31,532) in which
Julian D. Jensen is the solemanaging Trustee and an approximate 25%43%
beneficial owner. Mr. Gerald L. Jensen holds an approximate 33%38%
beneficial interest in these Trusts.this Trust.
Board and Committee Meetings
During the fiscal year ended December 31,2000 (the "Last Fiscal Year"),
the Board of Directors held three (3) meetings. The Board has held 3 meetings
in calendar year 2001 to date. The Board of Directors does not have separate
sections or committees. All audits and compensation issues, as well as other
matters, are addressed as a committee of the whole.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Such persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the
Company and representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with during
the Last Fiscal Year.
Executive Compensation
Certain additional required information concerning remuneration, other
compensation and ownership of securities by the Directors and Officers is
set-out in the enclosed 10-K Report and incorporated by this reference.
See particularly pg. 21.
Proposed Director Remuneration
During the current fiscal year, the Company intends to compensate outside
directors at the rate of $250$350 for a half-day meeting and $350$500 for a full day
meeting, a rate which was instituted in October, 1985.meeting. No changes are currently contemplated in officer salaries.salaries or directors
compensation.
Certain Relationships and Related Transactions
Certain significant relationships and related transactions are set-
outsetout in
the enclosed 10-K Report and incorporated by this reference.
See
particularly pg. 24.
Management's Stock Rights and Options
A discussion of management smanagement's stock rights and options are referenced above
and further discussed at page 22 ofin the enclosed and incorporated 10-K Report.
II.
Creation and Issuance of Class B Preferred StockManagement's Recommendations
The present Board recommends your vote for the existing slate of Directors,
of your corporation, over a period of time,
has discussed solutions to the problem of achieving shareholder value and
liquidity considering the size, nature and structure of the business of Croff
Oil Company. Specifically, the Board of Directors believes that the present
oil and gas interests, consisting chiefly of small royalty interests in
numerous non-operating holdings, creates unique problems when these assets
are vested in a public company which is too small to have an active trading
market. In summary, the Board is concerned about the following issues:
1 While revenues and income from Croff's oil and natural gas
interests have been generally stable, they are insufficient for significant
growth and expansion of the Company. Management does not expect that the
present Company can substantially grow in value or size with existing income
from its present oil and gas assets.
2 At present, there is no active trading market for Croff
stock; nor is there any foreseeable probability that an active trading marketbut will develop. Based upon preliminary inquiries, there seems to be very
little interestprovide in the brokerage community for any underwriting to raise
additional capital for the Company, as presently constituted, in order to
expand its present oil and gas operations.
In considering various alternative solutions to the foregoing
problems, the Board has considered and approved a proposal for shareholder
ratification whereby the oil and gas assets of the Company would be pledged
to secure a new Class B of preferred stock. This preferred stock would be
distributed to shareholders on a one share for one share basis (1:1) to the
existing shareholders. The oil and gas assets would remain in the Company,
but the benefit of these assets would be exclusively represented by the
preferred Class B shares held by each shareholder instead of the common
shares, as more particularly described below. There will be 520,000
Preferred Class B shares authorized.
The purpose of this proposal is to protect, so far as possible, the
existing perpetual mineral interests and other oil and gas assets of the
Company for the benefit of existing shareholders, while management seeks to
grow the Company through more risky business ventures with potentially
greater growth potentials.
It is proposed, for the reasons explained below, that each of the
present shareholders in Croff Oil Company will receive one (1) new share of
preferred Class B stock in the Company (to be renamed Croff Enterprises,
Inc.) for each common share currently owned.
To avoid confusion, and to reflect the future business activities of
the old Croff, it is proposed that Croff Oil Company become known as Croff
Enterprises, Inc., ("CEI"). The Board believes that this name will more
accurately reflect the intent of the Board of Directors to search out
diversified business opportunities, domestically or internationally, for the
company, and that such business activities may or may not be related to its
historical oil and gas operations or interests. The Board intends to
continue to employ the trade name Croff Oil Company for existing oil and
gas operations where appropriate.
If the within proposal to create the special Class B preferred
shares is adopted, management of Croff will then enter into a Pledge
Assignment whereby the company s beneficial interest in all oil and gas or
other mineral assets, including products and revenues, (oil and gas assets)
will be irrevocably and exclusively assigned to the Class B preferred
shareholders (the current Croff shareholders), subject only to the terms of
the Assignment, as generally outlined below.
In essential terms, the assignment of the beneficial interest will
mean that all income or other distributions from the oil and gas assets will
only be paid or distributed to the Class B shareholders, pro rata to your
sharehold interest. It would further mean that the Class B shareholders
would have the exclusive right to claim their proportional interest in the
oil and gas assets, or proceeds therefrom, in the event of the liquidation
and final distribution or other sale or transfer of the company s assets.
While the company will retain legal title and ownership of the oil
and gas assets for administrative, liability and management reasons, it is
intended the beneficial interest (beneficial interest is defined for this
Proxy as that aspect or attribute of any asset or interest having monetary
value after all normal costs of production or operations are paid) will not
be subject to claims by any person or entity other than the Class B
shareholders.
It should be understood Croff will reserve management control over
the oil and gas assets, to include, the right to buy and sell oil and gas
leases or other interests or products, pay all normal and customary costs of
production and operations from revenues, and to enter into farmouts, pooling
agreements or operating contracts with the oil and gas assets as is customary
or typical in the oil and gas industry. However, all such transactions will
be subject to the preservation of the Class B shareholder s security in the
beneficial interest of such assets, or proceeds therefrom, unless released
by the Class B shareholders pursuant to majority vote.
It is intended that any net income (net income being defined for this
Proxy as income remaining from revenues of oil and gas production after
payment of normal costs of production and operations) will be used either:
(i) to acquire other oil and gas interest, (ii) to buy back preferred Class
B shares if such a program is subsequently adopted by the Board and the
shareholder elects to participate, (iii) or to pay dividend distributions to
Class B shareholders from the net income derived from the oil and gas assets.
The company has no present plans to pay dividends.
The foregoing purports to be a general description of the Pledge
Assignment to be entered by Croff in favor of the Class B shareholders if the
proposed reorganization, as described herein, is adopted by the required
number of shareholders. Any shareholder wishing to examine the proposed
Pledge Assignment or Amended Articles may obtain a copy of such documents by
contacting the company offices at the address indicated at the beginning of
this Proxy Solicitation and a copy will by promptly mailed or faxed to you.
IT IS REPRESENTED THAT WHILE MANAGEMENT HAS ATTEMPTED TO DRAFT THE
PLEDGE ASSIGNMENT TO PROVIDE MAXIMUM PRIORITY AND PROTECTION TO THE CLASS B
SHAREHOLDERS IN RELATIONSHIP TO THIRD PARTY CREDITOR CLAIMS; NO WARRANTY OR
ASSURANCE, HOWEVER, CAN BE MADE THAT THE COMPANY WILL, IN ALL INSTANCES, BE
SUCCESSFUL IN ASSERTING THE PRIORITY OF THE CLASS B SHAREHOLDERS IN THE OIL
AND GAS ASSETS AS TO ANY FUTURE THIRD PARTY CLAIMANTS.
The company does represent the oil and gas assets are not presently
subject to any current third party claims, liens or charges, nor does Croff
presently intend to create any future subordinate liens or encumbrances in
the oil and gas assets.
As a net result of approval of the reorganization, each Croff
shareholder will hold one (1) share of preferred Class B stock in the new
CEI for each share of common stock which you presently hold. You would
continue to own your common stock in Croff, which would be designated common
stock of CEI. The existing Board of Croff Oil Company will continue as the
Board of the renamed Company (Croff Enterprises, Inc.).
None of you, as prospective preferred Class B shareholders of CEI,
will have any additional voting interest in or control over CEI. The
preferred shares will have voting rights only in special situations, such as
any sale, pledge, mortgage or exchange of the oil and gas assets.
EACH PRESENT SHAREHOLDER OF THE COMPANY SHOULD NOTE THAT, AT PRESENT,
MANAGEMENT, OR PARTIES AFFILIATED WITH MANAGEMENT, HOLD A NEAR MAJORITY OF
VOTING SHARES (43.60%) AND WILL MOST LIKELY CONTINUE TO EXERCISE AN EFFECTIVE
CONTROL POSITION IN THE COMPANY IN THE EVENT OF THE CLOSE OF THE PROPOSED
REORGANIZATION. FURTHER, IT IS ANTICIPATED THAT CEI, TO ACHIEVE ITS
PURPOSES, WILL BE REQUIRED TO RAISE ADDITIONAL CAPITAL WHICH WOULD FURTHER
REDUCE THE VOTING INTEREST OF ALL OF ITS PRESENT SHAREHOLDERS.
CEI will not only continue to operate in the oil and natural gas
business, but intends to act as an investor or principal in new business
ventures or endeavors either in the United States or on an international
basis. It should be emphasized that there are no present business plans,
proposals, contracts or agreements defining any potential business activities
in which CEI may engage in the future. It is the desire of the Board that
CEI may engage in various aspects of international start-up and development
businesses, or acquire existing domestic businesses desiring to be part of
a public company. Future business activities may or may not include
companies in the oil and natural gas business.
CEI has no present capital commitments or proposals to engage in its
intended business enterprises and can give no assurance that it will be
successful in efforts to raise sufficient start-up capital through private
funding to engage in new business activities.
CEI will continue to operate the existing oil and gas and other
mineral interests of the Company as described in the periodic reports (10K
& 10Q). The Board of Directors will create amended Articles of Incorporation
for CEI which, together with the pledge documents, will provide that each of
you as preferred Class B shareholders will have a preferred and priority
interest in and to the oil and gas assets, and an exclusive right to receive
any net income distribution from the oil and gas assets of CEI, as may be
approved by its Board. However, even these provisions within the Articles
and pledge documents will not create a priority in such assets in derogation
of legitimate third party creditor rights and claims against CEI. The
preferred Class B shareholders, however, will have claim to the assets or
income of the oil and gas assets in the event of liquidation, merger,
acquisition or spin-off. These assets are reserved for the preferred
shareholders.
No provision exists, nor is there any proposal, to change the present
compensation to management of CEI as set-out above under the section on
"Executive Compensations" in the event of approval of the proposed
reorganization.
It is further intended and proposed that the Board of Directors of
CEI may utilize a portion of its cash flow to repurchase preferred Class B
shares as requested by preferred shareholders. The exact details of any
stock repurchase program are not presently available and will not be
formulated in detail, if at all, prior to the recommendation to shareholders
to adopt the proposals set-out above. It is generally intended that any
repurchase would be based upon an annual notice and that payments for shares
would be completed on a cash basis. Any present offer to purchase the
preferred Class B shares would be priced, initially, at a base of Eighty
Cent ($0.80) per share. This price per share was determined by the Board
utilizing the current approximate net worth of the oil and gas assets of the
Company, $314,620, as derived from the most recent unaudited financials
(September 1995 10-Q) and assigning another $100,000 to such net worth figure
to represent an estimated fair market value of the oil and gas assets for the
Company. This computation was then rounded to $0.80 per share to create the
base valuation.
Each year thereafter, the Board would set a repurchase price based
on the Board s best estimate of the increase in value of the oil and gas
assets of the Company, which would be added onto or subtracted from the
existing base valuation of $413,212. This valuation divided by the proposed
516,515 preferred Class B shares to be issued to each current company
shareholder would yield a new repurchase evaluation each year. The net asset
value is anticipated to change over time, such that present valuations are
no assurance of future valuations.
The Board will most likely adopt this repurchase program in an effort
to create an alternative potential selling opportunity for the preferred
Class B shares, with the understanding that no viable market or liquidity
has existed during the last ten (10) years for the Croff common shares, and
is unlikely to exist for the preferred Class B shares. The Board also may
consider implementation of a dividend program for preferred Class B shares,
as it may subsequently determine, although such a dividend program is not
presently foreseeable. All cash flow from the oil and gas assets not
utilized to provide for a buyback program for the preferred shares, or a
dividend (if the Board elects to prepurchase stock or pay a dividend) will
be reinvested in the oil and natural gas business with the intent to increase
cash flow and the net asset value of the preferred shares.
Management believes this reorganization should substantially insulate
the historical oil and gas interests of the Company, so far as possible, from
potential risk and business factors associated with CEI engaging in what
should be considered high risk ventures, such as participation in
international start-up companies or other types of venture capital funding
which may be authorized by the Board of Directors.
The Company in order to reach a size necessary to sustain a trading
market, must increase it capitalization. There is not sufficient
capitalization, at present, to actively engage in other business activities
unless CEI is successful in exchanging its common shares, or the newly
proposed Class A preferred shares, for income producing companies or
assets, or the Company engages in subsequent private placement financing,
public offerings, or borrowing programs to raise development capital. No
assurance can be given that such future financing or business endeavors will
be successful. If successful, such capital raising endeavors will most
likely result in substantial dilution, both in voting control and ownership
interest in CEI to each of you as current shareholders.
It is also the position of management, in consultation with their
legal counsel, that the distribution of preferred shares in CEI to existing
Croff shareholders does not constitute the sale of a security subjecting the
Company to registration requirements due to the fact that no consideration
would be requested or paid by existing shareholders for the stock dividend
in CEI. Moreover, it is believed each shareholder will have substantially
the same information which would be available to shareholders pursuant to a
registration through the information contained in the accompanying 10-K and
10-Q Reports and this Proxy.
Management does not believe the proposed reorganization, if adopted,
will result in any material tax consequences to shareholders as the total
value of shares held by all shareholders immediately subsequent to adoption
of the reorganization would be unchanged from their present valuation. Each
shareholder should, however, confer with their individual tax advisors to
determine their own tax status and any individual tax consequences.
Following the distribution of the preferred Class B shares of Croff
Oil Company, each common shareholder will have the same cost or tax basis in
the two shares, common and preferred, as he or she previously had in each
common share. Based on the estimate of the illiquid nature of the preferred
and common shares and the continued illiquidity of the preferred, it is
estimated that sixty percent (60%) of the shareholder s basis or cost of the
stock should be allocated to the preferred and forty percent (40%) of the
basis should be allocated to the common stock.
If the foregoing proposals are adopted at the annual meeting, you
will continue to hold your common shares of Croff Oil Company, which will be
renamed Croff Enterprises, Inc. You will receive your new preferred Class
B shares in CEI directly in a mailing from the Company to shareholders of
record within a few months from the authorization. Each of you should
understand that the Company does not intend to undergo the cost of
registration of the distribution of the preferred Class B shares and
regards such distribution as a private placement transaction to existing
shareholders, not requiring registration. As a result, the preferred Class
B shares which you receive will not be free trading shares and will
probably have to be held for a substantial period of time, currently two (2)
years under SEC Rule 144, before any potential public resales of such
securities would be available. Further, there is no anticipation that a
public market will ever develop for trading in the preferred Class B
shares. Management anticipates that limited liquidity in the preferred Class
B shares will be obtained only through the proposed corporate repurchase
program as generally described above.
Authorization of Class A Preferred Shares
Management proposes to concurrently submit for shareholder approval,
a resolution to create a second class of preferred stock designated as
Preferred Class A stock.
It is proposed that Five Million (5,000,000) shares of Class A
preferred stock be authorized for possible future capitalization and funding
purposes of the Company. Management will reserve the right under the
Articles to designate the preferred Class A stock as voting or non-voting
at the time of issuance. There is presently no plan or intent to issue these
shares. Class A preferred shares, when and if issued, will only be issued
for cash or assets. Each shareholder should understand, in making a
determination of howBallot Form space to vote on the authorization of this new class of
shares, that if the shares are issued as voting shares in the future the
effect would be to dilute the voting control of present shareholders. The
Class A preferred shares will be subordinate to the Class B preferred
shares in any claim or entitlement to the oil and gas properties of the
Company and any income interest derived from those assets, but will have
priority over the Class B shares as to allfor other assets of the Company.
It is noted, however, that the oil and gas properties and interest constitute
almost all current material assets of the company. The remaining assets
would consist primarily of miscellaneous small liquid accounts, modest
accounts receivables, and some business property. In relation to the common
shares, the Class A share will have a dividend priority over common shares.
Except as to the oil properties and income derived therefrom, Class A
shares will be excluded in the same manner as the common shares from voting
upon any of the special pledge and ownership rights of Class B preferred
shareholders in the oil and gas interests of the Company.
Should any shareholder have any questions regarding these proposals,
which are not adequately answered by the general descriptions above, please
feel free to direct any questions you may have to management for the Company
at the address and telephone number indicated at the beginning of this Proxy
Statement. Moreover, while management believes that the foregoing accurately
summarizes the proposed transactions, each shareholder wishing to receive a
copy of the proposed Amended Articles of Incorporation and the pledge
documents will be entitled to receive the same upon written request to the
Company.
Mr. Gerald L. Jensen, as the present Chief Executive Officer, will
continue as President and CEO of Croff Enterprises, Inc.
Management's View of Advantages and Disadvantages
of the Proposed Transaction
Each prospective investor, in determining how to cast their vote
concerning the foregoing authorization of the Amended Articles of
Incorporation and issuance of the preferred stock, should consider the
following factors, including potential risk factors, as identified by
management. While management has attempted to identify certain
considerations, both advantageous and disadvantageous, to be considered by
each prospective shareholder before voting on the proposal, each shareholder
should understand that management has generally evaluated these potential
factors and believes, for the reasons set-out above, that the approval of the
proposals is in the best interest of the Company and its shareholders.
Nonetheless, each shareholder should carefully evaluate each of the following
factors before making an informed decision as to how to vote:
3 There is no assurance that CEI, which may very well operate
as some type of venture capital company or which may attempt to buy
an existing business, will be able to raise any capital for such
purposes or be successful in those developmental efforts. In all
events, venture capital financing, either domestic or foreign, must
be considered an extremely high risk investment.
4 Current Management of the Company, and as prospective
management for CEI, has no prior experience in the development or
management of a domestic or international business unrelated to oil,
gas, coal production or real estate.
5 There is no assurance that CEI will be able to purchase
existing businesses primarily for stock or will be able to raise
sufficient capital to operate in a new line of business.
6 It is the intention of management to use the common stock of
CEI to acquire new business assets which will substantially dilute
the existing common stock.
7 Shareholders in CEI should understand that management will
be required to divide its time, efforts and expertise between two (2)
lines of business and that there is a possibility that the quality
and extent of management involvement may suffer because of this
division of labor and efforts.
8 There is no reasonable expectation that a public market will
ever develop for the preferred stock, and no assurance can be made
that a public market will be developed for the common stock of CEI
even if it is successful in certain developmental projects.
While each of the foregoing constitute real and significant risk
considerations, the current management believes that these risk factors are
substantially mitigated by the fact that historical assets of Croff are being
substantially protected while management seeks to develop a new business.
In management's opinion, the preferred stock dividend may be considered a
gratuitous benefit to shareholders without substantial increased risk to the
historical assets or business.
Another asset in Croff Oil Company, the tax loss carryforward, will
most likely be lost, to a significant extent, if the Company continues in its
present mode. Management has reached this conclusion based upon the fact
that CEI currently has modest earnings and projects and, absent some
significant change in business activities or purposes, income should remain
modest for the foreseeable future. If management is correct in these
projections, it is likely the tax loss carry forward will expire before it
can be utilized to offset most taxable income. If, through the proposed
change of business activities, the reorganized CEI were to obtain future
enhanced profits, then the tax loss carryforward could be used to partially
offset such profits and is, thereby, a contingent asset. It must be
emphasized, however, there is no assurance that future business activities
of CEI will create any profit and no warranty or guaranty of profitability
can be made even if shareholders approve the reorganization. Management is
also of the opinion, in consultation with its current auditors, that its tax
loss carry forward cannot generally be sold or otherwise transferred for
consideration to an unrelated business entity. Accordingly, management
encourages each shareholder to vote in favor of the proposed creation of
Class A and Class B preferred shares.
III.nominees.
Proposal II.
Ratification of Appointment of Independent Accountants
The Board of Directors has appointed Causey, Demgen & Moore as independent
certified public accountants for the Company to examine the financial statements
of the Company for the fiscal year ending December 31, 1995.2000. The appointment
ofOf Causey, Demgen & Moore is subject to ratification of the shareholders and a
resolution for such ratification will be offered at the Annual Meeting as is
contained in the enclosed proxy ballot. Causey, Demgen & Moore have been acting
as independent accountants for the Company for seveneleven years and, both by virtue
of its familiarity with the Company's affairs, its lower cost, and its ability,
is considered by the Board as best qualified to continue its performance of
these functions. The present Board of Directors recommends adoption of the
resolution retaining the foregoing accounting firm as independent auditors for
the Company. The foregoing accountants willmay have a representative present at
the Annual Meeting and have agreed to respond directly to any shareholder
accounting questions sent to their office at 1801 California, Suite 4650,
Denver, Colorado 80202.
The present Board urges your vote in favor of the ratification of the
current auditors.
Other Matters
The Annual Meeting is called for the purposes set forth in the notice
thereof. The Board of Directors intendsdoes not intend to be present, butand has not been
informed that any other person intends to present. The Board is not aware
ofpresent, any matters for action at
the Annual Meeting other than those specifically referred to in the Notice of
Meeting and this Proxy Statement. If any other matters are properly brought
before the Annual Meeting, it is the intention of the proxyholdersproxy holders to vote on
such matters in accordance with their judgment.
Stockholder Proposals
There were no stockholders proposals submitted for consideration at the 1995this
Annual Meeting. Stockholder proposals intended to be considered at the next
Annual Meeting of Stockholders must be received by The Company no later than
MarchDecember 31, 1996.2001. Such proposals may be included in the next year's proxy statement
if they comply with certain rules and regulations promulgated by the Securities
and Exchange Commission.
Transaction of Other Business
At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
Any stockholder may present a matter from the floor for consideration at
a meeting so long as the procedures established for such meeting and the
Bylaws are followed:
Other Information
Financial Reports & Other Important Documents
The financial reports for the Company's operations ending December 31,
1994 as attached to2000, (10-K) and a summary of the quarterly results through June 30, 2001 is
attached. The 10-K and the most recent 10-Q for the quarter
ending September 30, 1995, areis considered an integral part of this Proxy Statement
and areis incorporated by this reference. See also, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" at
pp. 16-19 ofin the
enclosed 10-K Report which is also incorporated by this reference.
Dated: January 31, 1996.October 15, 2001
BY ORDER OF THE BOARD OF DIRECTORS
________________________________________
Gerald L. Jensen, President
CROFF OIL COMPANY, INC.
1433 Seventeenth Street, Suite 220
Denver, Colorado 80202
Telephone: (303) 297-3383
NOTICE OF 1995 ANNUAL MEETING OF SHARHOLDERS
The Annual Meeting of Shareholders of Croff Oil Company (hereinafter
"the Company" or "Croff") will be held on February 28, 1996, at the Company's
offices at 1433 Seventeenth Street, Suite 220, Denver, Colorado 80202, at
10:00 a.m. (MDT). The meeting will be held for the following purposes:
(1) Election of five directors to the Board of Directors for the
Company. All of such present Director/Nominees, (Mr. Gerald Jensen, Mr.
Richard H. Mandel, Jr., Mr. Edwin W. Peiker, Jr., Mr. Dilworth A. Nebeker and
Mr. Julian D. Jensen) currently hold office and have been nominated for re-
election by management. Shareholders may also vote upon such other
nominations as may be made.
(2) To ratify the appointment of Causey, Demgen & Moore as
independent certified public accountants of the Company for the fiscal year
of 1995.
(3) To approve creation of Five Million (5,000,000) Class A
Preferred Shares as described in the Proxy Materials.
(4) Approve creation of 520,000 Special Class B Preferred
Shares to be issued to existing shareholders as described in Proxy Materials,
and the Pledge of Oil and Gas Assets to these Shares.
(5) To change the name of the Company toDIRECTORS:
================================================================================
CROFF ENTERPRISES INC.
(6) To transact such other business as may be incident to or
properly come before the Annual Meeting, or any adjournments thereof.
The transfer books will not be closed, but only shareholders of
record at the close of business on December 31, 1995 will be entitled to
notice of and to vote at the Annual Meeting.
You are requested to vote, date and sign the enclosed Proxy and
return it at your earliest convenience. The Management of the Company would
request that you sign and return your Proxy even if you plan on attending
the Annual Meeting to ensure that a Quorum can be counted in advance. You
will be entitled to revoke your Proxy and vote in person at the Annual
Meeting should you so elect. If you plan to attend the Annual Meeting, would
you please so indicate of the place provided on the Proxy.
We hope to see you at the meeting and each of you are cordially
invited to attend.
By Order of the Board of Directors
Gerald L. Jensen
Chairman of the Board
Dated: January 31, 1996
CROFF OIL COMPANY PROXY FORM AND BALLOT
ANNUAL MEETING, February 28, 1996NOVEMBER 9, 2001
Please complete, sign and provide any additional information on this Proxy
Statement and return it to the Company by mailing it back prior to February
24, 1996November 9,
2001 in the enclosed envelope.
___________________________________________________________________________
For Against Abstain ProposalFOR AGAINST ABSTAIN PROPOSAL
- ----- ------- ------- -------------------------------------------------------
Election of all current management nominees to the
Board of Directors. If voting against election of all,
indicate below your individual vote.
YOU MAY VOTE FOR ALL CURRENT NOMINEES ABOVE; OR
YOU MAY VOTE INDIVIDUALLY AS TO EACH PROPOSED
DIRECTOR BELOW
For Against Abstain
Mr. Gerald L. Jensen, Dir. and Pres.
- ----- ------- -------
Mr. Richard H. Mandel, Jr., Director
- ----- ------- -------
Mr. Edwin Peiker, Director & Sec.
- ----- ------- -------
Mr. Dilworth A. Nebeker, Director
- ----- ------- -------
Mr. Julian D. Jensen, Director
- ----- ------- -------
OTHER MATTERS
Election to retain Causey, Demgen & Moore as
- ----- ------- ------- independent CPA'sCPAs for the Company.
Creation of 5,000,000 Class A Preferred
Shares
Creation and issuance of 520,000 Special
Class B Preferred Shares and Pledge of
Oil and Gas Assets to these Shares
Grant to current management the right to vote your
- ----- ------- ------- proxy in accordance with their judgment on other
matters as may properly come before the meeting.
OTHER SHAREHOLDER PROPOSALS AND/OR NOMINATIONS
(Unless otherwise indicated, your proxy will be voted in favor of any nomination
or proposal indicated below.)
___________________________________________________________________________- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
(Attach sheets as necessary)
_____CheckCheck here if you plan
______________________________- ----- to attend the meeting. ---------------------------
SIGNATURE
Date: _________________________
Print Shareholder Name(s) exactly
as they appear on your Certificate: ______________________________
______________________________
Complete If Known:
- ------------------------------------ Certificate #:___________________
-------------
- ------------------------------------ No. ofOf Shares:_________________
-------------
- ------------------------------------ Date:
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