CRESTED CORP.
[CRESTED LOGO]
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 5, 1997
TO THE SHAREHOLDERS OF CRESTED CORP:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Crested
Corp., a Colorado corporation (the "Company" or "Crested"), will be held at the
Company's executive offices, 877 North 8th West, Riverton, Wyoming 82501 on
Friday, December 5, 1997 at 10:00 a.m., local time, or at any adjournments
thereof, for the purpose of acting upon:
1. The election of five directors to serve until the next annual meeting
of shareholders, and until their successors have been duly elected or
appointed and qualified; and
2. Such other business as may properly come before such meeting.
Only shareholders of record at the close of business on Friday, October
10, 1997 will be entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The Company's transfer books will not be closed for the
Meeting.
A list of shareholders entitled to vote at the Meeting will be available
for inspection by any record shareholder at the Company's principal executive
offices in Riverton, Wyoming. The inspection period will begin no later than ten
days before the Meeting.
By Order of the Board of Directors
/s/ Daniel P. Svilar
DANIEL P. SVILAR, Secretary
Please date, sign and return your Proxy so that your shares may be voted
as you wish, and to assure quorum. The prompt return of your signed Proxy,
regardless of the number of shares you hold, will aid the Company in reducing
the expense of additional Proxy solicitation. The giving of such Proxy does not
affect your right to vote in person should you attend the Meeting.
YOUR VOTE IS IMPORTANT
Dated: November 7, 1997
<PAGE>
CRESTED CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 5, 1997
The enclosed Proxy is solicited by the Board of Directors (the "Board")
of Crested Corp. (the "Company" or "Crested") for use at the Annual Meeting of
Shareholders to be held at 10:00 a.m. local time on Friday, December 5, 1997. It
is expected that the Notice of Meeting, Proxy Statement and Proxy will be mailed
to record shareholders on or about November 7, 1997.
REVOCABILITY OF PROXY
The Proxy may be revoked at any time, to the extent it has not been
exercised, by: (i) written revocation; (ii) executing a later-dated Proxy and
delivering it to the Company; (iii) requesting (in writing) a return of the
Proxy; or (iv) the shareholder voting in person at the Meeting.
VOTING OF PROXY
If the enclosed Proxy is executed and returned, it will be voted as
indicated by the shareholder on the proposals. Unless otherwise instructed to
the contrary in the Proxy, the appointees named in the Proxy will:
1. VOTE FOR the five management nominees to the Board; and
2. VOTE in accordance with their best judgment on any other matters that
may properly come before the Meeting.
As of the date of the Notice of Meeting and Proxy Statement, management of the
Company has no knowledge of any other matters that may be brought before the
Meeting.
SOLICITATION
The costs of preparing, assembling and mailing the Notice of Meeting,
Proxy Statement, Proxy (collectively the "Proxy Materials"), as well as
solicitation of the Proxies and miscellaneous costs with respect to the same,
will be paid by the Company. The solicitation is to be made by use of the mails.
The Company may also use the services of its directors, officers, and employees
of the Company's parent U.S. Energy Corp. ("USE") to solicit Proxies, personally
or by telephone and telegraph, but at no additional salary or compensation. The
Board does not intend to use specially engaged employees or paid solicitors,
although it reserves the right to do so.
The Company intends to request banks, brokerage houses and other such
custodians, nominees and fiduciaries to forward copies of the Proxy Materials to
those persons for whom they hold shares and request authority for the execution
of the Proxies. The Company will reimburse the nominee holders for reasonable
out-of-pocket expenses incurred by them in so doing.
VOTING SECURITIES
Only holders of record of shares of the Company's $.001 par value common
stock (the "Common Stock") at the close of business on Friday, October 10, 1997,
will be entitled to vote at the Meeting. On the record date, there were 10,
302,694 shares of Common Stock outstanding and entitled to vote. The Company has
no other class of voting securities outstanding. Each share is entitled to one
vote on all matters. A majority of the issued and outstanding shares of Common
Stock, represented in person or by Proxy, constitutes a quorum at any
shareholders' meeting.
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following is a list of all record holders who, as of October 10,
1997 beneficially owned more than five percent of the outstanding shares of
Common Stock, as reported in filings with the Securities and Exchange Commission
("SEC"), or as otherwise known to the Company. Except as otherwise noted, each
holder exercises the sole voting and dispositive powers over the shares listed
opposite the holder's name. It should be noted that voting and dispositive
powers over certain shares are shared by two or more of the listed holders. Such
securities are reported opposite each holder having a shared interest therein.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------------------
VOTING RIGHTS DISPOSITIVE RIGHTS TOTAL PERCENT
NAME AND ADDRESS ----------------------- ---------------------- BENEFICIAL OF
OF BENEFICIAL OWNER SOLE SHARED SOLE SHARED OWNERSHIP CLASS(1)
- ------------------- ---- ------ ---- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. Energy Corp.(2) 5,300,297 -0- 5,300,297 -0- 5,300,297 51.4%
877 North 8th West
Riverton, WY 82501
John L. Larsen(3) -0- 5,814,182 -0- 5,879,182 5,879,182 57.1%
201 Hill Street
Riverton, WY 82501
Harold F. Herron(4) 10,817 5,564,182 10,817 5,564,182 5,574,999 54.1%
3425 Riverside Road
Riverton, WY 82501
Daniel P. Svilar(5) 215,000 250,000 215,000 350,000 530,000 5.1%
580 S. Indiana Street
Hudson, WY 82515
Don C. Anderson(6) -0- 5,300,297 -0- 5,300,297 5,300,297 51.4%
P. O. Box 1556
Mesquite, NV 89024
Nick Bebout(6) -0- 5,300,297 -0- 5,300,297 5,300,297 51.4%
P. O. Box 112
Riverton, WY 82501
David W. Brenman(6) -0- 5,300,297 -0- 5,300,297 5,300,297 51.4%
19 West 76th Street
New York, NY 10023
H. Russell Fraser(6) -0- 5,300,297 -0- 5,300,297 5,300,297 51.4%
W Diamond X Ranch
3453 Southfork Road
Cody, WY 82414
- --------
<FN>
(1) Percent of class is computed by dividing the number of shares
beneficially owned plus any options held by the reporting person, by the number
of shares outstanding plus the shares underlying options held by that person.
(2) Consists of 5,300,297 shares directly held by USE over which sole
voting and dispositive powers are exercised.
2
<PAGE>
(3) Consists of 5,300,297 Crested shares held by USE, 100,000 shares and
150,000 shares underlying options held by SGMC, 60,000 shares and 150,000 shares
underlying options held by Plateau Resources Limited ("Plateau"), 53,885 shares
held by Ruby with respect to which shared voting and dispositive powers are
exercised as a director with the other directors of those companies and 65 ,000
shares held by employees which are subject to forfeiture, over which Mr. Larsen
exercises shared dispositive powers with the remaining Crested directors.
(4) Includes 6,932 directly held shares and 3,885 shares held by
Northwest Gold, Inc. ("NWG") over which Mr. Herron exercises sole voting and
investment powers. Mr. Herron is the sole director of NWG. Also includes the
Crested shares held by USE and Ruby, and the shares and shares underlying
options held by Plateau, with respect to which shared voting and dispositive
powers are exercised as a USE, Plateau and Ruby director with the other
directors of those companies.
(5) Mr. Svilar exercises sole voting and dispositive over 175,000
directly held shares and 40,000 shares which are held in joint tenancy with a
deceased family member. Also includes 100,000 shares and 150,000 shares
underlying options held by SGMC with the other directors of SGMC and 65,000
shares held by employees subject to forfeiture, over which Mr. Svilar exercises
shared dispositive powers with the remaining Crested directors.
(6)Consist of 5,300,297 Crested shares held by USE over which the holder
shares voting and dispositive powers with the other directors of USE.
</FN>
</TABLE>
ELECTION OF DIRECTORS
Directors are currently elected for terms expiring at the next annual
meeting of the shareholders and until their successors are elected and
qualified. In the event the number of directors is increased to six or more, the
Company's Articles provide that the directors are then to be divided into three
groups or classes, and elected to staggered terms of three years expiring at the
third succeeding annual meeting. The directors nominated for re-election at the
1996 Annual Meeting are as follows:
OTHER
POSITIONS DIRECTOR
NAME AGE WITH THE COMPANY SINCE
- ---- --- ---------------- -----
John L. Larsen 66 Chairman of the Board, 1974
CEO, Vice President
(a)(b)(c)
Max T. Evans 73 President and Chief 1970
Operations Officer (a)(c)
Daniel P. Svilar 68 Secretary(a) 1980
Michael D. Zwickl 50 Assistant Secretary (b) 1984
Kathleen R. Martin 43 (b) 1989
(a) Member of the executive committee.
(b) Member of the audit committee.
(c) Trustee of the USE Employee Stock Ownership Plan (the "ESOP").
Executive officers of the Company are elected by the Board at annual
directors' meetings, which follow each Annual Shareholders' Meeting, to serve
until the officer's successor has been duly elected and qualified, or until
death, resignation or removal by the Board.
3
<PAGE>
BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OF DIRECTORS AND NOMINEES.
JOHN L. LARSEN has been principally employed as an officer and director
of the Company and USE for more than the past five years. He is a director of
USE's subsidiary, Ruby. USE and Ruby have registered equity securities under the
Securities Exchange Act of 1934 (the "Exchange Act"). Mr. Larsen is chief
executive officer and chairman of the board of directors of Plateau Resources
Limited and of Sutter Gold Mining Company ("SGMC") and he is a director of
Yellow Stone Fuels Corp.
MAX T. EVANS has been principally employed as an officer and chief
geologist of the Company and USE for more than the past five years. He is a
director of USE. Mr. Evans received B.S. and M.S. degrees in geology from
Brigham Young University.
DANIEL P. SVILAR has been principally employed as General Counsel of the
Company and USE, Secretary for the Company, and Assistant Secretary of USE for
more than the past five years. He is also an officer and director of SGMC. Mr.
Svilar received a B.S. degree in mechanical engineering from New Mexico State
University in 1952, and a J.D. degree from the University of Wyoming in 1958.
MICHAEL D. ZWICKL has been engaged in the private practice of law at
Casper, Wyoming for more than the past five years. Mr. Zwickl received a
B.S.M.E. degree from the University of Wyoming in 1969. He received a J.D.
degree from the University of Wyoming in 1975 and was admitted to the practice
of law in Wyoming during that year. Mr. Zwickl is director and president of
NUPEC Resources, Inc. which has registered equity securities under the Exchange
Act.
KATHLEEN R. MARTIN has been a licensed real estate broker and part owner
of Wind River Realty Co., a real estate brokerage firm in Riverton, Wyoming, for
more than the past five years.
SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of October 10, 1997, the shares of
Common Stock, and the $.01 par value common stock of the Company's parent, USE,
held by each director and nominee, and by all officers and directors as a group.
Unless otherwise noted, the listed record holder exercises sole voting and
dispositive powers over the shares reported as beneficially owned, excluding the
shares subject to forfeiture and those held in ESOP accounts established for the
employee's benefit. Dispositive powers over the forfeitable shares is shared by
the Company's Board of Directors, while the ESOP Trustees exercise dispositive
powers over all ESOP shares. It should be noted that voting and dispositive
powers for certain shares are shared by two or more of the listed holders. Such
shares are reported opposite each holder having a shared interest therein, but
are only included once in the shareholdings of the group presented in the table.
4
<PAGE>
<TABLE>
<CAPTION>
COMPANY COMMON STOCK USE COMMON STOCK
-------------------------------- ------------------------------
Amount And Percent Amount And Percent
Nature Of Of Nature Of Of
Beneficial Ownership Class(1) Beneficial Ownership Class(1)
-------------------- -------- -------------------- --------
<S> <C> <C> <C> <C>
John L. Larsen 5,879,182(2) 57.1% 1,985,036(8) 27.6%
Max T. Evans 414,236(3) 4.0% 1,244,259(9) 17.8%
Daniel P. Svilar 530,000(2) 5.1% 860,972(10) 12.3%
Michael D. Zwickl 123,160(4) 1.2% 578,198(11) 8.4%
Kathleen R. Martin 113,850(5) 1.1% 512,359(12) 7.5%
R. Scott Lorimer 265,000(6) 2.5% 237,266(13) 3.4%
All officers and
directors as a
group (six persons) 6,340,428(7) 61.5% 2,373,857(14) 32.3%
- -------------
<FN>
(1) Percent of class is computed by dividing the number of shares
beneficially owned plus any options held by the reporting person or group, by
the number of shares outstanding plus the shares underlying options held by that
person or group.
(2) See the footnotes for this person to the table presented under the
heading "Principal Holders of Voting Securities."
(3) Consists of 139,236 directly held shares over which Mr. Evans
exercises sole voting and dispositive powers, and 60,000 shares and 150,000
shares underlying options held by Plateau, with respect to which shared voting
and dispositive powers are exercised as a director with the other directors of
Plateau and 65,000 shares held by employees subject to forfeiture, over which
Mr. Evans exercises shared dispositive powers with the remaining Crested
directors.
(4) Consists of 50,960 directly held shares over which Mr. Zwickl
exercises sole voting and dispositive powers, and 65,000 shares held by
employees which are subject to forfeiture, over which Mr. Zwickl exercises
shared dispositive power with the remaining directors of Crested.
(5) Consists of 48,850 directly held shares over which Mrs. Martin
exercises sole voting and dispositive powers and 65,000 shares held by employees
which are subject to forfeiture, over which Mrs. Martin exercises shared
dispositive power with the remaining directors of Crested.
(6) Consists of 15,00 shares subject to forfeiture over which Mr.
Lorimer exercises sole voting power and 100,000 shares and 150,000 shares
underlying options held by SGMC, over which Mr. Lorimer exercises shared voting
and dispositive powers with the other directors of SGMC.
(7) Includes 469,046 shares over which various members of the group
exercise sole voting powers, 454,046 shares over which they exercise sole
dispositive powers, and 5,814,182 shares over which various members of the group
exercise shared voting powers, including 300,000 shares underlying options held
by SGMC and Plateau (150,000 shares each) and 5,879,182 shares over which
various members exercise shared dispositive rights including 65,000 shares held
by employees which are subject to forfeiture.
5
<PAGE>
(8) Consists of 242,536 directly owned shares, 106,000 shares held in
joint tenancy with his wife, 200,100 shares underlying options and 26,641 shares
held in the U.S. Energy Corp. Employee Stock Ownership Plan ("ESOP") account
established for his benefit, over which Mr. Larsen exercises sole voting powers.
The directly owned shares include 27,500 shares gifted to his wife, that have
remained in Mr. Larsen's name. Also includes shares over which shared voting
rights are exercised consisting of 155,811 shares held by the ESOP, which have
not been allocated to accounts established for specific beneficiaries and shares
held by corporations of which Mr. Larsen is a director consisting of 512,359
shares held by Crested, 125,556 shares held directly by Plateau, 75,000 shares
underlying options held by Plateau, 100,000 shares held by SGMC, 75,000 shares
underlying options held by SGMC, and 12,612 shares held by Ruby. Mr. Larsen
shares voting and dispositive rights over such shares with the other directors
of those corporations. Mr. Larsen shares voting powers over the unallocated ESOP
shares and dispositive powers over all ESOP shares in his capacity as an ESOP
Trustee with the other ESOP Trustees. Shares over which sole dispositive rights
are exercised consist of directly owned shares, joint tenancy shares and
options, less the 27,500 shares gifted, but not transferred, to his wife. Shares
for which shared dispositive powers are held consist of the 404,597 shares held
by the ESOP, 101,850 shares held by employees who are not officers or directors
of the Company and a non-employee director ("Forfeitable Shares") which are
subject to forfeiture, the shares held by Crested, Plateau, SGMC and Ruby, and
the Plateau and SGMC option shares. The shares listed under "Total Beneficial
Ownership" also include 29,426 shares beneficially held by Mr. Larsen which are
subject to forfeiture. The Company's non-employee directors exercise shared
voting and dispositive powers over such shares. The shares shown as beneficially
owned by Mr. Larsen do not include 42,350 shares owned directly by his wife, who
exercises the sole investment and voting powers over those shares.
(9) Shares over which Mr. Evans exercises sole voting powers consist of
2,901 directly owned shares, 36,389 shares held in joint tenancy with his wife,
11,971 shares held in an Individual Retirement Account ("IRA") for his benefit
and 57,200 shares underlying options. Shares for which Mr. Evans holds sole
dispositive powers are comprised of his directly held shares, joint tenancy
shares, IRA shares and the shares underlying his options. Shares over which Mr.
Evans exercises shared voting rights consist of the shares held by Crested,
Plateau, the unallocated ESOP shares and the Plateau options. He exercises
shared dispositive rights over the shares held by Crested, Plateau, the ESOP,
and the Plateau options. Mr. Evans shares voting and dispositive powers over the
shares held by Crested and Plateau with the remaining directors of those
companies. The shares listed under "Total Beneficial Ownership" also include
18,286 shares beneficially held by Mr. Evans which are subject to forfeiture.
The Company's non-employee directors exercise shared voting and dispositive
powers over such shares.
(10) Mr. Svilar exercises sole voting powers over 22,084 directly owned
shares, 12,700 shares held in joint tenancy with his wife, 11,000 shares held
jointly with a deceased family member, 1,000 shares held as custodian for his
minor child under the Wyoming Uniform Transfers to Minors Act (the Minor's
shares), 66,000 shares underlying options and 22,200 shares held in the ESOP
account established for his benefit. He holds sole dispositive power over his
directly held shares, joint tenancy shares, Minor's shares and the shares
underlying his options. The shares over which he exercises shared voting and
dispositive rights consist of the 512,359 shares held by Crested and the 100,000
shares and 75,000 shares underlying options held by SGMC. Mr. Svilar exercises
shared voting and dispositive powers as a director of Crested and SGMC with the
other directors of those companies. He also exercises shared voting and
investment powers of 11,700 shares held by a nonaffiliated company of which Mr.
Svilar is a partner. The shares listed under "Total Beneficial Ownership" also
include 25,850 shares beneficially held by Mr. Svilar which are subject to
forfeiture. The Company's non-employee directors exercise shared voting and
dispositive powers over such shares.
(11) Consists of 8,770 directly held shares, 3,444 shares held in an IRA
established for his benefit and 53,625 shares held by two (2) limited
partnerships, over which Mr. Zwickl exercises sole voting and dispositive powers
He is the sole officer and director of the corporate general partner of those
partnerships. Also includes the 512,359 shares held by Crested. As a director of
Crested, Mr. Zwickl exercises shared voting and dispositive powers with the
other Crested directors.
(12) Consists of the USE shares held by the Company over which Mrs.
Martin shares voting and dispositive powers with the other Company directors.
The listed shares do not include 220 shares held directly by Mrs. Martin's
husband, who exercises sole voting and dispositive powers over those shares.
6
<PAGE>
(13) Mr. Lorimer exercises sole voting powers over 2 directly held
shares, 17,444 shares held in the ESOP account established for his benefit, and
29,700 shares underlying options. Mr. Lorimer exercises sole dispositive powers
over his directly held shares and the shares underlying his options. He shares
voting and dispositive powers over 100,000 shares and 75,000 shares underlying
options held by SGMC as a director of SGMC. The shares listed under "Total
Beneficial Ownership" also include 17,233 shares beneficially held by Mr.
Lorimer which are subject to forfeiture. The Company's non-employee directors
exercise shared voting and dispositive powers over such shares.
(14) Members of the group exercise sole voting rights with respect to
932,786 shares, including 353,000 shares underlying options. Various group
members exercise sole dispositive powers over 865,427 shares. They exercise
shared voting powers over 1,068,038 shares, and share dispositive rights over
1,418,674 shares, including 150,000 shares underlying options held by SGMC and
Plateau (75,000 shares each).
</FN>
</TABLE>
Each director of the Company beneficially holds 5,000,000 shares of Four
Nines Gold, Inc. ("FNG") stock held by the Company, and 5,000,000 shares held by
USECC Joint Venture ("USECC") over which they exercise shared voting and
dispositive powers as Company directors. Those shares represent 2% of the
outstanding shares of FNG. John L. Larsen beneficially holds 272,500,000 shares
of the common stock of FNG, representing 54.4% of its outstanding shares. Mr.
Larsen's FNG shares include 7,500,000 directly-owned shares, 255,000,000 shares
held by USE, 5,000,000 shares held by the Company and the 5,000,000 shares held
by USECC, over which he shares voting and dispositive powers with the remaining
directors of USE and the Company, respectively. Daniel P. Svilar beneficially
owns 14,000,000 shares of the common stock of FNG, representing 2.8% of that
class. Mr. Svilar's FNG holdings include 4,000,000 shares held directly in joint
tenancy with other family members, the 5,000,000 shares held by the Company and
the 5,000,000 shares held by USECC. Harold F. Herron holds 265,000,000 shares of
the common stock of FNG, representing 52.9%, respectively, of those classes. Mr.
Herron's FNG shares include 5,000,000 directly-owned shares, the shares held by
USE and USECC. Mr. Evans' wife holds 3,000,000 shares of the common stock of
FNG, providing him with beneficial ownership of 268,000,000 shares of FNG's
common stock, or 53.5% of the shares of that class. He exercises shared voting
and dispositive rights over the FNG shares held by the Company, USE and USECC,
in his capacity as director of the Company and USE. None of the other directors
or officers of the Company beneficially hold any other shares of stock of FNG.
All executive officers and directors of the Company as a group (six persons)
beneficially hold 284,500,000 shares of the stock of FNG, representing 56.8% of
the outstanding shares of that company.
The Company has conducted a review of Forms 3, 4 and 5 (as amended) and
certain written representations of persons filing reports with the SEC under
Section 16(a) of the Exchange Act. Based solely upon a review of those reports
and written representations, Mr. Zwickl and Mrs. Martin each had one late
filing. The Company believes no other director, executive officer, beneficial
owner of more than ten percent of the Common Stock or other person who was
otherwise subject to Section 16, failed to file such reports on a timely basis
for the year ended May 31, 1997.
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided pursuant to Item 401 of Reg. S-B,
regarding the only executive officer of the Company who is not also a director.
ROBERT SCOTT LORIMER, age 46, has been Treasurer, Chief Financial
Officer, Controller and Chief Accounting Officer for USE and Crested for more
than the past five years. Mr. Lorimer is a director and officer of Sutter Gold
Mining Company and an officer of Yellow Stone Fuels Corp. He serves at the will
of the Boards of Directors. There are no understandings between Mr. Lorimer and
any other person, pursuant to which he was named an officer, and he has no
family relationship with any of the other executive officers or directors of USE
or Crested. During the past five years, he has not been involved in any Reg. S-B
Item 401(d) listed proceeding.
7
<PAGE>
EXECUTIVE COMPENSATION
The Company and USE, under a Management Agreement dated August 1, 1981,
share certain expenses for the general and administrative costs of the
companies. The shared expenses include the compensation of the officers and
directors of the Company and USE (excluding directors' fees). These compensation
costs have been paid through the USECC Joint Venture ("USECC"). It is estimated
that substantially all of the work efforts of officers and directors of the
Company and USE are devoted to the business of both the Company and USE. One
half of the expense associated with stock grants under the USE 1996 Stock Award
Program will be paid by Crested.
See below.
All USECC personnel are employees of USE in order to utilize USE's ESOP
as an employee benefit mechanism. USE charges USECC for the direct and indirect
costs of its employees for time spent on USECC matters, and USECC charges
one-half of that amount to each of the Company and USE.
The following table sets forth the compensation paid to the USE Chief
Executive Officer, and those of the four most highly compensated USE executive
officers who were paid more than $100,000 cash in any of the three fiscal years
ended May 31, 1997. The table includes compensation paid such persons by Crested
for 1995, 1996 and 1997, and Brunton for 1995 and 1996 for such persons'
services to such subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------------ ---------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
Other
Name Annual Restricted All Other
And Compen- Stock Ltip Compen-
Principal sation Award(s) Options/ Payouts Sation
Position Year Salary($) Bonus($) ($) ($) Sars(#) ($) ($)(4)
- -------- ---- --------- -------- --- --- ------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John L. Larsen 1997 $131,200 $4,000 -- $ 98,158(1) -0- -- $13,500
CEO, Vice 1996 148,600 -0- -- -- -0- -- 15,566
President 1995 144,023 2,751 -- 9,000(2) -0- -- 13,361
USE CEO and
President
Daniel P. Svilar 1997 $109,700 $3,400 -- $ 81,454(1) -0- -- $11,300
Asst. Secretary 1996 124,153 -0- -- -- -0- -- 14,009
1995 112,615 2,076 -- 8,100(2) -0- -- 11,008
Harold F. Herron 1997 $ 31,900 $ 990 -- $120,858(3) -0- -- $ 3,300
USE Vice 1996 113,600 -0- -- -- -0- -- 4,037
President 1995 117,238 2,033 -- -- -0- -- 6,626
R. Scott Lorimer 1997 $100,395 $3,100 -- $ 81,454(1) -0- -- $10,300
Treasurer 1996 110,100 -0- -- -- -0- -- 13,749
1995 112,403 2,098 -- 5,681(2) -0- -- 10,989
<FN>
(1) Includes bonus shares of USE common stock equal to 40% of original
bonus shares issued FY 1990, multiplied by $10.875 in 1997, the closing bid
price on issue dates. Also includes shares issued for under 1996 Stock Award
Program multiplied by $10.875, the closing bid price on issue date. These shares
are subject to forfeiture on termination of employment, except for retirement,
death or disability.
8
<PAGE>
(2) Includes bonus shares of USE common stock equal to 20% of original
bonus shares issued FY 1990, multiplied by $3.75 in 1995. These shares are
subject to forfeiture on termination of employment, except for retirement, death
or disability.
(3) Includes bonus shares of USE common stock equal to 100% of original
bonus shares issued FY 1990, multiplied by $10.875, the closing bid price on
issue date. Also includes shares issued under the 1996 Stock Award Program
multiplied by $10.875, the closing bid price on the issue date. These shares are
subject to forfeiture on termination of employment, except for retirement, death
or disability.
(4) Dollar values for contributions to the USE ESOP and 401K matching
contributions.
</FN>
</TABLE>
EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
To provide an incentive to Mr. Larsen to develop the Green Mountain
Mining Venture ("GMMV") into a producing mine as soon as possible, in fiscal
1993 the USE Board adopted a long-term incentive arrangement under which Mr.
Larsen is to be paid a non-recurring $1,000,000 cash bonus by USE, provided that
the Nuexco Exchange Value of uranium oxide concentrates has been maintained at
$25.00 per pound for six consecutive months, and provided further that USE has
received cumulative cash distributions of at least $10,000,000 from GMMV as a
producing property. It is not expected that this cash bonus will become payable
in fiscal 1996.
USE has adopted a plan to pay the estates of Messrs. Larsen, Evans and
Svilar amounts equivalent to the salaries they are receiving at the time of
their death, for a period of one year after death, and reduced amounts for up to
five years thereafter. The amounts to be paid in such subsequent years have not
yet been established, but would be established by the Boards of USE and the
Company.
Mr. Svilar has an employment agreement with USE and the Company, which
provides for an annual salary in excess of $100,000, with the condition that Mr.
Svilar pay an unspecified amount of expenses incurred by him on behalf of USE
and its affiliates. In the event Mr. Svilar's employment is involuntarily
terminated, he is to receive an amount equal to the salary he was being paid at
termination, for a two year period. If he should voluntarily terminate his
employment, the Company and USE will pay him that salary for nine months
thereafter. The foregoing is in addition to Mr. Svilar's Executive Severance and
Non-Compete Agreement with USE (see below).
In fiscal 1992, USE signed Executive Severance and Non-Compete
Agreements with Messrs. Larsen, Evans, Svilar and Lorimer, providing for USE's
payment to such person upon termination of his employment with USE, occurring
within three years after a change in control of USE, of an amount equal to (i)
severance pay in an amount equal to three times the average annual compensation
over the prior five taxable years ending before change in control, (ii) legal
fees and expenses incurred by such persons as a result of termination, and (iii)
the difference between market value of securities issuable on exercise of vested
options to purchase securities in USE, and the options' exercise price. These
Agreements also provide that for the three years following termination, the
terminated individual will not compete with USE in most of the western United
States in regards to exploration and development activities for uranium,
molybdenum, silver or gold. For such non-compete covenant, such person will be
paid monthly over a three year period an agreed amount for the value of such
covenants (depending on the individual, ranging from $66,667 up to $86,667
annually). These Agreements are intended to benefit the USE shareholders by
enabling such persons to negotiate with a hostile takeover offeror and assist
the Board concerning the fairness of a takeover, without the distraction of
possible tenure insecurity following a change in control. As of this Proxy
Statement date, the Company is unaware of any proposed hostile takeover.
The Company and USE provide all of their employees with certain
insurance coverage, including life and health insurance. The health insurance
plan does not discriminate in favor of employees who are executive officers of
the Company. Life insurance of $50,000 is provided to each member of upper
management (which includes all persons in the compensation table), $25,000 of
such coverage is provided to middle-management employees, and $15,000 of
coverage is provided to other employees.
9
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN. An ESOP has been adopted to encourage
ownership of USE's common stock among its eligible employees, and to provide
retirement income to them. Because the eligible employees of the Company also
are employees of USE, they benefit from the ESOP and other USE compensation
plans, as described below. The ESOP is a combination stock bonus plan and money
purchase pension plan. It is expected that the ESOP will continue to invest
primarily in USE common stock. Messrs. Larsen, Evans and Herron are trustees of
the ESOP.
USE's contributions to the stock bonus plan portion of the ESOP are
discretionary and are limited to a maximum of 15% of covered employees'
compensation for each year ending May 31. Contributions to the money purchase
portion of the ESOP are mandatory and fixed at ten percent of the compensation
of covered employees for each such year. The contributions required under the
money purchase pension plan are not dependent upon profits or accumulated
earnings of USE, and may be made in cash or shares of USE common stock.
USE made a contribution of 24,069 shares to the ESOP for fiscal 1997,
all of which were contributed under the money purchase pension plan. At the time
the shares were contributed, the market price was approximately $8.87 per share,
for a total contribution with a market value of $213,492 (which has been funded
by USE). The Company and USE are each responsible for one-half of that amount
(ie., $106,746) and the Company currently owes its one-half to USE.
Employees are eligible to participate in the ESOP on the first day of
the plan year (June 1) following completion of one year of service in which at
least 1,000 hours are credited. Each employee's participation in the ESOP
continues until the ESOP's anniversary date coinciding with or next following
termination of service by reason of retirement, disability or death. In these
cases, the participant will share in the allocation of USE's contributions for
the ESOP year in which the retirement, death, or disability occurs, and will
have a fully-vested interest in allocations to the participant's account.
An employee's participation in the ESOP does not cease upon termination
of employment. If the employment of a participant in the ESOP is terminated for
reasons other than disability, death, or retirement (unless the employee
receives a lump sum distribution upon the termination of employment),
participation continues following the termination, until five consecutive
one-year breaks in service have been incurred. An employee is deemed to have a
one-year break in service during any year in which 500 or fewer hours of service
are completed.
Employee interests in the ESOP are earned pursuant to a seven year
vesting schedule. Upon completion of three years of service for USE, the
employee is vested as to 20% of the employee's account in the ESOP, and
thereafter at the rate of 20% per year. Any portion of an employee's ESOP
account which is not vested is forfeited upon termination of employment for any
reason, other than retirement, disability, or death.
The 24,069 shares issued to the ESOP for fiscal 1997 included 1,524
shares allocated to John L. Larsen's account, 886 shares allocated to Max T.
Evans' account, 371 shares allocated to Harold F. Herron's account, 1,274 shares
allocated to Daniel P. Svilar's account, and 1,166 shares allocated to R. Scott
Lorimer's account, for a total of 5,221 shares allocated to accounts for all
executive officers as a group (five persons). Shares forfeited by terminated
employees who were not fully vested were reallocated to plan participants and
included 323, 188, 78, 271 and 247 shares to the accounts of Messrs. Larsen,
Evans, Herron, Svilar and Lorimer, respectively. The accounts of the executive
officers are fully vested, as they have all been employed by the Company and
USECC for more than the past seven years. Allocations of shares for fiscal 1998
have not been made with respect to any participant in the ESOP.
The maximum loan outstanding during fiscal 1997 under a loan arrangement
between USE and the ESOP, was $1,014,300 at May 31, 1997 for loans made in
fiscal 1992 and 1991. Interest owed by the ESOP was not booked by USE. The
Company pays one-half of the amounts contributed to the ESOP by USE. Because the
loans are expected to be repaid by contributions to the ESOP, the Company may be
considered to indirectly owe one-half of the loan amounts to USE. The loan was
reduced by $183,785 plus interest of $168,574.84 through the contribution of
shares by the ESOP to the ESOP in 1996. There was no similar reduction, however,
for fiscal 1997.
10
<PAGE>
STOCK OPTION PLAN. USE has an incentive stock option plan, reserving an
aggregate of 975,000 shares of USE common stock for issuance upon exercise of
options granted thereunder. Awards under the plan are made by a committee of two
or more persons selected by the Board of USE (presently Messrs. Herron, Bebout,
Fraser and Brenman). The committee establishes the exercise periods and prices
for options granted under the plan. The USE Board ultimately ratifies the
actions of the committee.
Options expire no later than ten years from the date of grant, and upon
termination of employment, except in case of death, disability or retirement.
Subject to the ten year maximum period, upon the death, retirement or permanent
and total disability of an optionee, options are exercisable for either three
months (in case of retirement or disability) or one year (in case of death)
after such event. In fiscal 1994, conditions relating to periods of USE service
before vesting of stock purchased on exercise of the non-qualified options were
removed.
For fiscal 1996, options to purchase 360,000 shares of Common Stock were
granted to USE employees (none were granted to officers or directors), at an
exercise price of $4.00 per share (the closing bid price on grant date in
December 1996). In fiscal 1997, options to purchase 106,100 shares (previously
issued to employees in 1990 and 1996) were exercised. None of the exercised
options had been held by officers or directors.
The following table shows unexercised options, how much thereof were
exercisable, and the dollar values for in-the-money options, at fiscal 1997 year
end.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Value of
Number Of Unexercised
Unexercised In-the-Money
ptions/Sars at Options/Sars at
Shares Fy-end (#) Fy-end($)
Acquired Value Exercisable/ Exercisable
Name On Exercise (#) Realized($) Unexercisable Unexercisable
- ---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
John L. Larsen, -0- -0- 100,000 $687,000(1)
CEO, President exercisable exercisable and
unexercised
100,100 $597,597(2)
exercisable exercisable and
unexercised
Max T. Evans, -0- -0- 57,200 $341,484(2)
Secretary exercisable exercisable and
unexercised
Harold F. Herron, -0- -0- 11,000 $65,670(2)
Vice President exercisable exercisable and
unexercised
Daniel P. Svilar -0- -0- 66,000 $394,020(2)
Assistant Secretary exercisable exercisable and
unexercised
R. Scott Lorimer -0- -0- 29,700 $177,309(2)
Treasurer exercisable exercisable and
unexercised
<FN>
(1) Equal to $8.87 closing bid on last trading day in FY 1997, less $2.00 per share option exercise price,
multiplied by all shares exercisable.
(2) Equal to $8.87 closing bid on last trading day in FY 1997, less $2.90 per share option exercise price,
multiplied by all shares exercisable.
</FN>
</TABLE>
11
<PAGE>
RESTRICTED STOCK PLANS. The Company and USE have issued stock bonuses to
various executive officers and directors of the Company and others. These shares
are subject to forfeiture to the issuer by the grantee if employment terminates
otherwise than for death, retirement or disability. If the required service is
completed, the risk of forfeiture lapses and the shares become the unrestricted
property of the holder. Messrs. Larsen, Evans, Herron, Svilar, Lorimer and all
executive officers who are participants of this restricted stock plan, as a
group (five persons), received 25,200, 12,750, 18,900, 18,360, 15,120, and
90,330 shares of Common Stock, respectively, through fiscal 1997. Shares issued
through fiscal 1997 also include 20,000 for Don C. Anderson, a USE director. The
shares issued in 1997 represent a 40% bonus (20% for 1996 and 20% for 1997) on
this plan's original shares. The expenses relating to these stock issuances are
shared equally by the Company and USE. Additional shares were issued in 1997
under the USE 1996 Stock Award Program. See below.
In addition, in fiscal 1991 the Company issued 7,500 shares of Crested
common stock to Mr. Lorimer, as a bonus for services. Additional annual bonuses
of 20% of such original shares will be issued through fiscal 1997 subject to the
same forfeiture conditions as the USE bonus shares. Mr. Lorimer has received an
additional 7,500 Crested shares under this plan through fiscal 1997.
1996 STOCK AWARD PROGRAM. The Board of Directors and the shareholders of
USE have approved an annual incentive compensation arrangement for the issuance
of up to 67,000 shares of Common Stock each year (from 1997 through 2002) to the
five executive officers of the Company and USE, in amounts to be determined each
year based on the earnings of USE for the prior fiscal year ended May 31.
Shares will be issued annually, provided that each officer to whom the
shares are to be issued is employed by the Company and USE as of the issue date
of the grant year, and provided further that USE has been profitable in the
preceding fiscal year. The officers will receive up to an aggregate total of
67,000 shares per year for the years 1997 through 2002, although if in prior
years, starting in 1997, fewer than 67,000 USE shares are awarded in any one or
more years, the unissued balance of the 67,000 share maximum will be available
for issue in subsequent years. One-half of the compensation expense under the
Program is the responsibility of Crested. The Board of Directors of USE
determines the date each year (starting in 1997) when shares are to be issued.
The number of shares to be awarded each year out of such 67,000 shares
aggregate limit is determined by the USE Compensation Committee, and will be
based on certain criteria including USE's earnings per share of Common Stock for
the prior fiscal year. The total shares issued shall be divided among the
officers based on the following percentages: John L. Larsen 29.85%, Daniel P.
Svilar 22.39%, Max T. Evans 17.91%, Harold F. Herron 14.93% and R. Scott Lorimer
14.93%. Other factors bearing on the prior year's profitability may be taken
into consideration by the USE Compensation Committee. In addition, the actual
issuance of the number of shares recommended by the USE Compensation Committee
to be awarded to the officers presently is required to be submitted for approval
by shareholders of USE at the Annual Meeting held subsequent to the end of the
fiscal year.
In fiscal 1996, the USE Compensation Committee determined the Program
award for fiscal 1996 to be 14,158 shares of Common Stock, as follows: John L.
Larsen (4,226 shares), Harold F. Herron 2,113 shares), R. Scott Lorimer (2,113
shares), Daniel P. Svilar (3,170 shares), and Max T. Evans (2,536 shares). This
award was approved by the USE shareholders at the 1996 Annual Meeting. Such
shares have been issued to the officers as of the date of this Proxy Statement.
The 1996 Stock Award Program is proposed to be changed. See below.
USE shareholders will be asked to approve the Restated 1996 Stock Award
Program to (i) extend its term for an additional five years (through 2007),
without increasing the total number of shares presently issuable under the Plan;
(ii) increase the incentive for eligible officers to remain with the Company an
USE by making shares issued under the Program forfeitable until retirement,
death or disability; and (iii) eliminate the present requirement of annual
shareholder approval of amounts of shares to be awarded to the eligible
officers.
12
<PAGE>
The USE Board of Directors has approved the foregoing changes to the
Program, which has been renamed the "Restated 1996 Stock Award Program" and will
take effect upon approval by the USE shareholders at the 1997 Annual Meeting of
Shareholders.
DIRECTORS' FEES AND OTHER DIRECTORS' COMPENSATION
The Company pays non-employee directors a fee of $150 per meeting
attended. All directors are reimbursed for expenses incurred with attending
meetings.
The Company does not have any other arrangements pursuant to which any
director of the Company was compensated during the year ended May 31, 1997. In
fiscal 1992, USE adopted its 1992 Stock Compensation Plan for Non-Employee
Directors, however, the non-employee directors of the Company do not participate
in this USE plan.
COMMITTEES AND MEETING ATTENDANCE
During the fiscal year ended May 31, 1997, there were six meetings of
the Board and one Executive Committee meeting. Each member of the Board attended
at least 75% of the aggregate meetings of the Board and the committees on which
that director serves. From time to time, the Board and the Executive Committee
act by unanimous written consent pursuant to Colorado law. Such actions are
counted as meetings for purposes of disclosure under this paragraph.
The Board has established an Executive Committee consisting of Messrs.
Larsen, Evans and Svilar. The purpose of the Executive Committee is to act in
place of the Board between meetings of the Board. Under Colorado law and the
Company's Articles of Incorporation, the Executive Committee has the power to
take action on most matters, but cannot approve a plan of merger, sale of assets
otherwise than in the ordinary course of business, or approve or recommend
proposals requiring shareholder approval, or declare dividends or distributions,
fill vacancies to the Board, amend the Bylaws, authorize the issuance of shares
or take certain other actions. The Executive Committee had one formal meeting in
fiscal 1996. The Executive Committee meets informally on an as-needed basis, but
records of the meetings are not always kept.
An Audit Committee has also been established by the Board. The Audit
Committee had one formal meeting and have met informally at various times during
the year ended May 31, 1997. The Audit Committee reviews the Company's financial
statements and accounting controls, and contacts the independent public
accountants as necessary to ensure that adequate accounting controls are in
place and that proper records are being kept. The Audit Committee also reviews
the audit fees of the independent public accountants.
A Management Cost Apportionment Committee was established by USE and the
Company in 1982, for the purpose of reviewing the apportionment of costs between
USE and the Company. John L Larsen, Scott Lorimer and Max Evans are members of
this Committee. The Committee had no meetings during fiscal 1997.
The Board did not appoint nominating or compensation committees during
fiscal year ended May 31, 1997.
CERTAIN OTHER TRANSACTIONS
TRANSACTIONS WITH SHEEP MOUNTAIN PARTNERS ("SMP"). In fiscal 1989, the
Company and USE through USECC sold a one-half interest in the Sheep Mountain
properties to Cycle Resource Investment Corporation ("CRIC"), a wholly-owned
subsidiary of Nukem, Inc., and thereafter USECC and CRIC contributed their 50%
interests in the properties to a new Colorado partnership, SMP, which was
organized to further develop and mine the uranium claims, market uranium and
acquire additional uranium sales contracts. Due to disputes (in arbitration
proceedings at Proxy Statement date) with CRIC and Nukem, necessary mine
maintenance has been funded by USECC alone. During fiscal 1997, the Company and
Crested received $4,000,000 from the SMP escrow accounts as part of their
monetary damages awarded by the Arbitration Panel. This $4,000,000 was first
applied to the account receivable for mine standby costs as required under
recovery cost accounting rules. At May 31, 1997 a $8,600,000 monetary award
remains unpaid as well as certain equity damages.
TRANSACTIONS WITH YELLOW STONE FUELS CORP. Yellow Stone Fuels Corp.,
hereafter ("YSFC") was organized on February 17, 1997 in Ontario, Canada. As of
February 17, 1997, YSFC acquired all the outstanding shares of Common Stock of
Yellow Stone Fuels, Inc. (a Wyoming corporation which was organized on June
3,1996), in exchange for YSFC issuing the same number of shares of YSFC Stock to
the former shareholders of
13
<PAGE>
Yellow Stone Fuels, Inc. ("YFI"). YSFC and its wholly-owned subsidiary Yellow
Stone Fuels, Inc. will hereafter be referred to collectively as YSFC.
In order to concentrate the efforts of USECC on conventional uranium
mining using the Shootaring and Sweetwater Mills, USECC decided to take a
minority position in Yellow Stone Fuels, Inc. and not be directly involved in
properties believed suitable for the production of uranium through the in-situ
leach ("ISL") mining process. USECC will have first call on any uranium ore
bodies YSFC discovers which are amenable to conventional mining and milling and
YSFC will have a call on ore bodies discovered by USECC amenable to the ISL
process. In the ISL process, groundwater fortified with oxidizing agents is
pumped into the ore body, causing the uranium contained into the ore to
dissolve. The resulting solution is pumped to the surface where it is further
processed to a dried form of uranium which is shipped to conversion facilities
for eventual sale. Generally, the ISL process is more cost effective and
environmentally benign compared to conventional underground mining techniques.
In addition, less time may be required to bring an ISL mine into operation than
to permit and build a conventional mine.
As of May 31, 1997, YSFC had 10,545,000 shares of Common Stock issued
and outstanding, including 3,000,000 shares (28.5%) issued to USE and Crested.
Most of the funds used by YSFC have been provided by USECC under a $400,000 loan
facility. As part consideration for the loan, USE and Crested entered into a
Voting Trust Agreement having an initial term of 24 months or until the $400,000
loan facility is paid, with two principal shareholders of YSFC, whereby USE and
Crested will have voting control of more than 50% of the outstanding shares of
YSFC. The majority of the remaining outstanding YSFC shares are owned by family
members of John L. Larsen, Chairman of USE and Crested.
YSFC has staked and/or leases or holds unpatented mining claims, state
leases, and patented mining claims covering approximately 10,200 acres in
Wyoming and New Mexico.
YSFC will require additional funding to maintain its property
acquisition program, conduct the geological and engineering studies on
properties to evaluate their suitability to in-situ recovery methods, and to
build and operate in-situ recovery facilities on suitable properties. YSFC is
currently seeking additional funding, but there is no assurance that such
funding will be obtained. If YSFC obtains equity funding, the current
shareholders' ownership interest would be reduced, however the $400,000 loan
facility from USE and Crested is convertible to YSFC common stock, so that USE's
and Crested's equity ownership levels could be maintained.
In fiscal 1997, USE and USECC entered into several agreements with YSFC,
including a Milling Agreement through Plateau Resources. The Shootaring Canyon
mill facilities will be available to YSFC to transport uranium concentrate
slurry and loaded resin to the mill and process it into uranium concentrate
("yellowcake"), for which Plateau will be paid its direct costs plus 10%. Other
agreements include a Drill Rig Lease Agreement for YSFC to have access to USE
drilling rigs at the prevailing market rates; an Outsourcing and Lease Agreement
for assistance from USECC accounting and technical personnel on a cost plus 10%
basis and a sublease for 1,000 square feet of office space for $1,000 per month;
and a Ratification of Understanding by which USECC will offer to YSFC (with a
reserved royalty in amounts to be agreed on later but not exceeding 10% of
uranium concentrates produced) any uranium properties amenable to in-situ
production which USECC acquires or has the right to acquire. In return, YSFC
will offer to USECC ( with a reserve royalty in amounts to be agreed on later)
uranium properties amenable to conventional mining methods which YSFC acquires
or has the right to acquire. USECC also will make its library of geological
information and related materials available to YSFC. YSFC also has a Storage
Agreement with GMMV by which YSFC stores used low-level contaminated mining
equipment purchased from a third party at GMMV's Sweetwater Mill; YSFC is
responsible for any bonding and handling obligations for the stored equipment,
and pays GMMV nominal rent for the storage.
TRANSACTIONS WITH SUTTER GOLD MINING COMPANY. In fiscal 1991, USE
acquired an interest in the Lincoln Project (including the underground Lincoln
Mine and the 2,800 foot Stringbean Alley decline) in the Mother Lode Mining
District of Amador County, California, held by a mining joint venture known as
the Sutter Gold Venture ("SGV"). The entire interest of SGV is now owned by
USECC Gold L.L.C., a Wyoming limited liability company, which is a subsidiary of
Sutter Gold Mining Company, a Wyoming corporation ("SGMC").
In fiscal 1997, SGMC completed private financings totalling a net of
$6,511,200 ($1,106,700 through a private placement conducted in the United
States by RAF Financial Corporation, and $5,404,500 through a private placement
conducted in Toronto, Ontario, Canada by C.M. Oliver & Company Limited). The
proceeds from these financings (after deduction of commissions and offering
costs) are being applied to pre-production mine development, mill design, and
property holding and acquisition cost. SGMC anticipates production mining will
commence in mid-
14
<PAGE>
calendar 1998 and that by that time, construction of a 500 ton per day gold mill
will have been completed. Additional financing will be sought in 1998 to
complete mill construction and start production mining.
After completion of the two private financings, and taking into account
a restructuring of the ownership of USE and Crested in SGMC (and additional
issue of 75,000 shares to settle a dispute with Amador United, see below), USE
and Crested each own the following securities of SGMC:
(a) 30.7% and 3.2% of the outstanding shares of Common Stock which would
be reduced to 23.5% and 2.5%, respectively, in the event outstanding warrants
held by the Canadian investors to purchase 1,454,800 more shares of Common Stock
are exercised at Cdn$6.00 per share 18 months from the date of closing of the
offering in Canada and the outstanding warrants held by C.M. Oliver to purchase
145,480 more shares of Common Stock are exercised at Cdn$5.50 per share, before
May 13, 1999. The preceding percentages of SGMC Common Stock do not reflect
345,200 warrants that may be sold in the Offering or shares that may be acquired
by USE and Crested pursuant to the USECC $10,000,000 Contingent Stock Purchase
Warrant (described below) issued as consideration for certain of the voluntary
reductions in the ownership of SGMC shares by USE and Crested, in connection
with the private offering in Canada. One reorganization of the capital structure
was required by RAF Financial Corporation in connection with its private
placement of SGMC shares, and the other was required by C.M.
Oliver & Company Limited in the Canadian private placement.
(b) A $10,000,000 Contingent Stock Purchase Warrant (the "USECC
Warrant") was issued to USE and Crested in connection with the restructuring of
SGMC. The USECC Warrant is owned 88.9% by USE and 11.1% by Crested. The USECC
Warrant provides that for each ounce of gold over 300,000 ounces added to the
proven and probable category of SGMC's reserves (up to a maximum of 400,000
additional ounces), using a cut-off grade of 0.10 ounces of gold per ton (at
minimum vein thickness of 4 feet), USE and Crested will be entitled to acquire
additional shares of Common Stock from SGMC (without paying additional
consideration). The number of additional shares issuable for each new ounce of
gold reserves will be determined by dividing US$25 by the greater of $5.00 or
the weighted average closing price of the Common Stock for the 20 trading days
before exercise of the USECC Warrant. The USECC Warrant is to be exercised
semi-annually. However, as an alternative to exercise of the USECC Warrant, SGMC
has the right to pay USE and Crested US$25 in cash for each new ounce of gold
(payable out of a maximum of 60% of net cash-flow from SGMC's mining
operations). Additions to reserves will be determined by an independent
geologist agreed upon by the parties.
In fiscal 1997, SGMC issued 75,000 shares of Common Stock to Amador
United Gold Mines to settle certain disputes between such company and SGMC, USE
and Crested. In addition, SGMC bought about one-third of the outstanding shares
of Keystone Mining Company owned by The Salvation Army. The Keystone Mining
Company owns property in the Lincoln Project leased to SGMC.
Effective June 1, 1996, SGMC entered into a Management Agreement (dated
as of May 22, 1996) with USE under which USECC provides administrative staff and
services to SGMC. USECC is reimbursed for actual costs incurred, plus an extra
10% during the exploration and development phases; 2% during the construction
phase; and 2.5% during the mining phase (such 2.5% charge to be replaced with a
fixed sum which with parties will negotiate at the end of two years starting
when the mining phase begins). The Management Agreement replaces a prior
agreement by which USE provided administrative services to SGMC.
TRANSACTIONS WITH DIRECTORS. Two of the USE directors, Messrs. Larsen
and Herron and one of Crested's directors, Mr. Evans, are trustees of the ESOP.
Messrs. Larsen is also a director of the Company. In their capacity as trustees,
they have an obligation to act in the best interests of the ESOP participants.
This duty may conflict with their obligations as directors of USE and the
Company in times of adverse market conditions for the common stock of USE and
the Company, or in the event of a tender offer or other significant transaction.
In general, the ESOP trustees exercise dispositive powers over shares
held by the ESOP, and exercise voting powers with respect to ESOP shares that
have not been allocated to a participant's account. In addition, the Department
of Labor has taken the position that in certain circumstances ESOP trustees may
not rely solely upon voting or dispositive decisions expressed by plan
participants, and must investigate whether those expressions represent the
desires of the participants, and are in their best interests.
OTHER INFORMATION. USE has adopted a stock repurchase plan under which
it may purchase up to 275,000 shares of its Common Stock. These shares would be
purchased in part to provide a source of shares for issuance upon the exercise
of various outstanding options.
15
<PAGE>
Harold F. Herron, son-in-law of John L. Larsen, has been living in and
caring for a house owned by USE until such time as the property was sold. In
fiscal 1995, Mr. Herron purchased the house for $260,000, the appraised value of
the property, and was reimbursed by the Company for leasehold improvements
totaling $22,800. USE accepted a promissory note in the amount of $112,170 with
interest compounded annually at 7% due on September 6, 1999 as a result of this
transaction. This note is secured by 30,000 shares of USE common stock owned by
Mr. Herron.
Three of John L. Larsen's sons and a son-in-law are employed by USE (as
manager of USECC's commercial operations, uranium fuels marketing director, as
chief pilot and landman, respectively). Mr. Larsen's son-in-law Harold F. Herron
is an officer and director of USE, and president and a director of Brunton.
Collectively, the five individuals received $265,500 in cash compensation (paid
by USE and Crested) for those services during the fiscal year ended May 31,
1997, which amount includes $81,250 cash compensation paid Mr. Herron
(principally in his capacity as president of Brunton, and also for his service
as a USE vice president, see Executive Compensation above). The foregoing
compensation expense was shared by the Company and USE, in accordance with the
compensation arrangements for all employees. Mr. Herron continues as president
and a director of Brunton.
The Company and USE provide management and administrative services for
affiliates under the terms of various management agreements. Revenues from
services by the Company and USE from unconsolidated affiliates were $397,700 in
fiscal 1997 and $92,900 in fiscal 1996. USE provides all employee services
required by the Company. In exchange the Company is obligated to USE for its
share of the costs for providing such employees.
CERTAIN INDEBTEDNESS
TRANSACTIONS INVOLVING USECC. The Company and USE conduct the bulk of
their activities through their equally-owned joint venture, USECC. From time to
time the Company and USE advance funds to or make payments on behalf of USECC in
furtherance of their joint activities. These advances and payments create
intercompany debt between the Company and USE. The party extending funds is
subsequently reimbursed by the other venturer. USE had a note receivable of
$6,023,400 from the Company at May 31, 1997 ($6,199,700 during fiscal 1996).
DEBT ASSOCIATED WITH USE'S ESOP. During the year ended May 31, 1997, USE
made a contribution of 24,069 shares of USE common stock to the ESOP. Because
the Company engages USE's employees to discharge substantially all of its
functions, these contributions benefitted the Company. As a result, the Company
owes USE $106,800 for one-half of the USE's contribution to the ESOP. Regular
and substantial contributions by USE to the ESOP are required to maintain the
ESOP in effect. In fiscal 1996, USE contributed 10,089 shares of USE common
stock to the ESOP, for one-half of which the Company owes USE $43,650.
LOANS TO FOUR DIRECTORS. As of May 31, 1997 four directors of USE owed
the Company and USE $487,000 as follows (each loan is secured with shares of
common stock of USE owned by the individual): Harold F. Herron $11,000 (1,000
shares); John L. Larsen $413,600 (124,000 shares), Max T. Evans $37,400 (7,500
shares) and David W. Brenman $25,000 (4,000 shares). The outstanding loan
amounts represent various loans made to the individuals over a period of several
years. The loans mature December 31, 1997 and bear interest at 10% per year. For
information on an additional loan to Mr. Herron, see below. At May 31, 1997,
John L. Larsen and members of his immediate family were indebted to the Company
and USE for $745,300 secured by 160,000 shares of USE's Common Stock. Such
indebtedness of the Larsen family would be paid by USE withholding an equal
amount out of the $1 million cash bonus payable to Mr. Larsen when the GMMV
properties have been placed into production and certain related conditions have
been met. See "Executive Compensation Plans and Engagement Agreements." The
preceding amounts do not include the loan to Mr. Herron, see below.
In fiscal 1995, the USE made a five year non-recourse loan in the amount
of $112,170 to Harold F. Herron. The loan is secured by 30,000 shares of USE's
Common Stock, bears interest at a rate of 7% and is payable at maturity. The USE
board approved the loan to obtain a higher interest rate of return on the funds
compared to commercial rates, and to avoid having the USE stock prices depressed
from Mr. Herron selling his shares to meet personal obligations. See
Transactions with Directors above.
16
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board has selected Arthur Andersen & Co. as independent public
accountant for the year ending May 31, 1998. A representative of Arthur Andersen
& Co. may be present at the Meeting and if present, will be available to respond
to appropriate questions. The representative of Arthur Andersen & Co., will be
provided with an opportunity to make a statement at the Meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the 1997 Annual Report to Shareholders, including financial
statements, has been forwarded to all record shareholders entitled to vote at
the Meeting. If any recipient of this Proxy Statement has not received a copy of
that Annual Report, please notify Daniel P. Svilar, 877 North 8th West,
Riverton, WY 82501, telephone (307) 856-9271, and the Company will send a copy.
SHAREHOLDERS' PROPOSALS
The next Annual Meeting of Shareholders is expected to be held in
November of 1998. Shareholder proposals to be presented at the next Annual
Meeting of Shareholders must be received in writing by the Company at its
offices in Riverton, Wyoming, addressed to the President, no later than June 9,
1998.
OTHER MATTERS
The Board does not know of any other matters which may properly come
before the Meeting. However, if any other matters properly come before the
Meeting, it is the intention of the appointees named in the enclosed form of
Proxy to vote said Proxy in accordance with their best judgment on such matters.
Your cooperation in giving these matters your immediate attention, and
in returning your Proxy promptly, will be appreciated.
By Order of the Board of Directors
CRESTED CORP.
/s/ Daniel P. Svilar
DANIEL P. SVILAR, Secretary
Dated: November 7, 1997.
17
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PROXY CRESTED CORP. PROXY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of Crested
Corp. (the "Company") in the amount noted below, hereby constitutes and appoints
Messrs. John L. Larsen and Daniel P. Svilar, or either of them with full power
of substitution, as attorneys and proxies, to appear, attend and vote all of the
shares of stock standing in the name of the undersigned at the Annual Meeting of
the Company's shareholders to be held at the Company's executive offices, 877
North 8th West, Riverton, Wyoming 82501, on Friday, December 5, 1997 at 10:00
a.m., local time, or at any adjournments thereof upon the following:
(INSTRUCTION: Mark only one box as to each item.)
1. Election of Directors:
__ FOR the nominees listed below __ AGAINST the nominees listed below
__ ABSTAIN
John L. Larsen Max T. Evans Daniel P. Svilar
Michael D. Zwickl Kathleen R. Martin
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, DRAW A LINE THROUGH THE
NAME OF THAT NOMINEE.)
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
<PAGE>
CRESTED CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH RESPECT TO THE ABOVE PROPOSALS.
WHERE NO VOTE IS SPECIFIED, THE PROXYHOLDER WILL CAST VOTES FOR THE ELECTION OF
MANAGEMENT'S NOMINEES AND, IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY
COME BEFORE THE MEETING.
SIGN YOUR NAME EXACTLY AS IT APPEARS ON THE MAILING LABEL BELOW. IT IS
IMPORTANT TO RETURN THIS PROXY PROPERLY SIGNED IN ORDER TO EXERCISE YOUR RIGHT
TO VOTE, IF YOU DO NOT ATTEND IN PERSON. WHEN SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, CORPORATE OFFICER, ETC., INDICATE FULL TITLE
AS SUCH.
__________________________________
(SIGN ON THIS LINE - JOINT HOLDERS
MAY SIGN APPROPRIATELY)
___________ __________________
(DATE) (NUMBER OF SHARES)
PLEASE NOTE: PLEASE SIGN, DATE AND
PLACE THIS PROXY IN THE ENCLOSED
SELF-ADDRESSED, POSTAGE PREPAID
ENVELOPE AND DEPOSIT IT IN THE
MAIL AS SOON AS POSSIBLE. PLEASE
CHECK IF YOU ARE PLANNING TO
ATTEND THE MEETING __
IF THE ADDRESS ON THE MAILING
LABEL IS NOT CORRECT, PLEASE
PROVIDE THE CORRECT ADDRESS IN THE
FOLLOWING SPACE.
<PAGE>
