SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to ss 240.14a-11(c) or ss 240.14a-12
CROWN ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
(same)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
No fee required.
X Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies: n/a
2) Aggregate number of securities to which transaction
applies: n/a
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1 n/a
4) Proposed maximum aggregate value of transaction:
$500,000
5) Total fee paid: $100.00
__________________
1Set forth the amount on which the filing fee is calculated and state
how it was determined.
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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CROWN ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 21, 1997
TO THE SHAREHOLDERS OF CROWN ENERGY CORPORATION:
The 1997 Annual Meeting of Shareholders of Crown Energy
Corporation, a Utah corporation, will be held on Tuesday,
October 21, 1997, at 2:30 p.m., Mountain Standard Time, in
Salon I of the Doubletree Hotel, 255 South West Temple, Salt
Lake City, Utah, for the following purposes:
1. To elect a Board of Directors, comprised of four persons,
to serve until the next Annual Meeting of Shareholders or
until their respective successors shall be duly elected
or appointed.
2. To approve the appointment of Pritchett, Siler and Hardy
as the independent accountants for Crown Energy
Corporation for the 1997 fiscal year.
3. To approve the Crown Energy Corporation 1997 Long-Term
Incentive Compensation Plan.
4. To approve the transfer of the Company's oil sands
reserves and related technology to a Joint Venture with
MCNIC Pipeline & Processing Company.
Only shareholders of record at the close of business on
September 5, 1997, the "Record Date," are entitled to notice
of, and to vote at, the Meeting. In accordance with Utah law,
a list of the Company's Shareholders entitled to vote at the
1997 Annual Meeting will be available for examination at the
offices of the Company, 215 South State Street, Suite 550,
Salt Lake City, Utah 84111, for ten business days prior to the
Annual Meeting, between the hours of 9:00 a.m. and 5:00 p.m.,
and during the Annual Meeting.
All shareholders are cordially invited to attend the Meeting
in person.
Whether or not you expect to attend, please immediately sign
and complete
the enclosed Proxy Designation and Instruction Card ("Proxy")
and return
it in the envelope provided so that your shares may be
represented at the
Annual Meeting. No postage is required if a proxy is mailed
in the United
States. If a majority of outstanding shares are not present
at the Meeting
either in person or by proxy, the Meeting must be adjourned
without
conducting business, and additional expense will be incurred
to resolicit the
Shareholders for a new Meeting date.
Date: October 3, 1997 By Order of the Board of Directors
Richard S. Rawdin, Secretary
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CROWN ENERGY CORPORATION
215 South State, Suite 550
Salt Lake City, Utah 84111
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 21, 1997
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of Crown
Energy Corporation, a Utah corporation (the "Company"), in
connection with the solicitation by the Company of Proxies, in
the enclosed form, for use at the 1997 Annual Meeting of
Shareholders of the Company (the "Meeting") to be held on
Tuesday, October 21, 1997, at 2:30 p.m., Mountain Standard Time,
in Salon I of the Doubletree Hotel, 255 South West Temple, Salt
Lake City, Utah. The purposes of the Meeting are set forth in
the accompanying Notice of Annual Meeting of Shareholders.
A Proxy Designation and Instruction Card ("Proxy" or "Proxy
Card") for your use in connection with the Annual Meeting is
enclosed. You are requested to sign and date the Proxy Card and
to return it in the envelope provided.
Voting Securities
The Board of Directors has fixed the close of business on
September 5, 1997 as the Record Date for determination of
Shareholders entitled to notice of and to vote at the 1997
Annual Meeting (the "Record Date"). As of the Record Date,
there were issued and outstanding 11,572,141 shares of Common
Stock. The holders of record of the shares of the Company's
Common Stock on the Record Date entitled to be voted at the
Annual Meeting are entitled to cast one vote per share on each
matter submitted to a vote at the Annual Meeting.
Proxies
Shares of Common Stock which are entitled to be voted at the
Annual Meeting and which are represented by properly executed
Proxies will be voted in accordance with the instructions
indicated on such Proxies. If no instructions are indicated,
such shares will be voted FOR all of the proposals listed on the
Notice of Annual Meeting, including the election of each of the
Director nominees described herein; and, in the discretion of
the designated Proxy holders, as to any other matters which may
properly come before the Annual Meeting.
Any Shareholder signing and delivering a Proxy has the power to
revoke it at any time before the vote at the Annual Meeting (a)
by notifying the Secretary of the Company in writing prior to
2:30p.m. M.S.T. on October 21, 1997, (b) by signing and dating
a later Proxy and submitting the new Proxy in time to be counted
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for the Annual Meeting, or (c) by attending the Annual Meeting
and voting contrary to the submitted Proxy at the time votes are
requested. Any written notice revoking a Proxy should be sent
to Crown Energy Corporation, 215 South State, Suite 550, Salt
Lake City, Utah 84111, Attention: Richard S. Rawdin, Secretary.
If a Shareholder wishes to designate someone other than the
designated persons named on the Proxy Card as his authorized
agent to vote at the 1997 Annual Meeting, you may do so by
crossing out the names of all of the designated persons printed
on the Proxy Card and by writing in the name of another person
or persons (not more than 2) to act as agent for the Shareholder
in voting his shares. Such a special designation signed by the
Shareholder(s) must be presented at the Annual Meeting by the
person or persons you have designated on the Proxy Card.
The cost of preparing, assembling and mailing this Proxy
Statement and related materials will be borne by the Company.
The solicitation of Proxies by the Directors is being made by
mail, and may also be made by agents of the Company, in person,
by telephone, or by mail. No additional compensation will be
given to employees or Directors for such solicitation.
Custodians of securities held for Shareholders of record (for
example, banks, brokers, etc.) may be paid their reasonable
out-of-pocket expenses incurred in forwarding Proxy Cards and
this Proxy Statement to Shareholders.
This Proxy Statement and the enclosed form of Proxy are being
mailed to Shareholders beginning on October 3, 1997. Mailed
together with this Proxy Statement is a copy of the Company's
Annual Report to Shareholders for the year ended December 31,
1996. Shareholders who do not receive a copy of the 1996 Annual
Report with this Proxy Statement, or who desire extra copies,
should contact the Company at (801) 537-5610.
Votes Required For Action to be Taken at the 1997 Annual Meeting
A majority of the share votes entitled to be cast at the Annual
Meeting (legal ownership of outstanding shares as of the Record
Date) must be present in person or by Proxy for a quorum to
exist at the Annual Meeting. Abstentions and broker non-votes
are counted "present" for determining the presence or absence of
a quorum for the transaction of business.
In the election of Directors, the four (4) nominees receiving
the highest number of votes cast in their favor will be elected
as the Board of Directors of the Company for the 1997-98 period
until the 1998 Annual Shareholders' Meeting. Accordingly,
abstentions and broker non-votes will not affect the outcome of
the election of Directors.
As to proposal Numbers 2 and 3 for shareholder action at the
Annual Meeting, a majority of the shares present at the Annual
Meeting, once a quorum is established, must be voted in favor of
the proposal for it to be adopted as the action of the
Shareholders. Accordingly, abstentions and broker non-votes
will have the effect of a NO vote, and thus could affect the
outcome.
A majority of the shares entitled to vote on Proposal 4 will be
required to approve such matter. In other words, of the
11,572,141 shares of Common Stock outstanding and entitled to
vote as of the Record Date, at least 5,786,071 shares must be
voted in favor of Proposal 4 for it to pass as the action of the
Shareholders. Accordingly, abstentions and broker non-votes
will have the effect of a NO vote, and thus could affect the
outcome.
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Holders of shares of Common Stock are entitled to one vote at
the Annual Meeting for each share held of record at the Record
Date.
LAST YEAR'S (August 30, 1996) ANNUAL MEETING
The 1996 Annual Meeting of the Shareholders was held on August
30, 1996 in Salt Lake City, Utah. There were 6,645,949 shares
of Common Stock represented at the 1996 Annual Meeting in person
or by proxy, which shares constituted a legal quorum. Each of
the nominees to the Board of Directors presented to the 1996
Annual Meeting was voted upon separately, and each was elected
by the affirmative vote of more than 97% of the shares present
and voting.
MANAGEMENT OF THE COMPANY
Board of Directors
The business of the Company is managed under the direction of
its Board of Directors. The Board has responsibility for
establishing broad corporate policies, for the overall
performance of the Company and for the election and compensation
of officers of the Company. The Executive Officers of the
Company are in charge of the day to day affairs of the Company.
The Board of Directors meets regularly during the year to
review significant developments affecting the Company and to act
on matters requiring Board approval. It also holds special
meetings when one or more important matters requires Board
action between scheduled meetings.
As disclosed to the Company, the Board of Directors as
presently constituted beneficially own as a group 5,311,103
shares, or approximately 39.7% of the Company's outstanding
Common Stock as of the Record Date, including 1,794,444 option
shares exercisable within 60 days of the Record Date but which
were unexercised as of the Record Date.
The Board of Directors held three (3) meetings during 1996.
All Directors attended all of the Board.
As presently constituted, the Board of Directors has no
functioning committees taking any of the responsibilities of the
Board.
Executive Officers
Set forth on Table 1, below, are the names, ages, primary areas
of responsibility, and economic and beneficial stock ownership
(as of December 31, 1996) of the Company's Executive Officers.
Executive Officers serve at the pleasure of the Board of
Directors, although as disclosed later in this Proxy Statement,
all of the Executive Officers also are currently and proposed to
continue as Directors of the Company.
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Table 1
Executive Officers of Crown Energy Corporation
James A. Middleton, 61, is Chief Executive Officer of the
Company and Chairman of the Board of Directors. At the Record
Date, Mr. Middleton was the beneficial owner of 355,000 shares
of Common Stock, including 300,000 option shares exercisable
within 60 days, but not yet exercised.
Jay Mealey, 41, is President and Chief Operating Officer of the
Company, and is Director or the Company. At the Record Date,
Mr. Mealey beneficially owned 2,200,199 shares of Common Stock,
including 548,148 option shares exercisable within 60 days, but
not yet exercised. Also includes 110,000 shares gifted to Glenn
Mealey, as custodian for Mealey's children, Cameron and Andrew
Mealey. Mr. Mealey expressly disclaims beneficial ownership of
the foregoing gifted shares.
Richard S. Rawdin, 39, is Vice President and Chief Financial and
Accounting Officer of the Company. At the Record Date, Mr.
Rawdin beneficially owned 594,308 shares of Common Stock,
including 398,148 option shares exercisable within 60 days, but
not yet exercised.
Based on their disclosed share holdings at the Record Date, all
of the Company's Executive Officers as a group (three (3)
persons, beneficially owned a total of 3,149,507 shares, or
approximately 24.65%, of the Company's Common Stock (including
1,246,296 shares subject to unexercised options exercisable
within 60 days), all percentages calculated as of the Record
Date.
COMPENSATION OF MANAGEMENT
Director Compensation
The Company does not compensate its Directors for service in
that capacity. Those Directors who are also Executive Officers
are paid compensation for that service. Directors who are not
Executive Officers serve without compensation, other than
reimbursement of expenses, but may be hired by the Company as
professional advisors and paid in that capacity.
Summary of Compensation to Certain Executive Officers
Set out in Table 2, below, is a Summary Compensation Table
showing the various elements of compensation earned during 1996
and during the previous two years by the Company's Chief
Executive Officer. No Executive Officer was compensated at
$100,000 or more during any of the prior three years. The
information on other Executive Officers was calculated for each
year was determined for this purpose on the same basis as for
the Chief Executive Officer:
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Table 2
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
Name and Year Salary Bonus Restricted Options All Other
Principal Position ($) ($) Stock SARS 2 Compens
Award(s) ($) ation
($) ($)
James A. Middleton, 1996 0 0 0 300,000 0
Chairman and Chief 1995 0 0 0 0 0
Executive Officer of 1994 0 0 0 0 0
the Company
1Bonuses are listed in the year earned and normally accrued,
although such bonuses
may be paid in the following year. Stock bonuses are
valued at the market value on
the date of receipt.
2The Company has never issued SARs.
Stock Options and Similar Awards To Management.
Table 3 provides information concerning the stock options and
similar awards provided to the Executive Officers listed in Table
2 during 1996. There were no option exercises by these listed
Executive Officers during 1996.
Table 3
Option Grants To Certain Executive Officers During 1996
Individual Grants
% of Total
Name Options Options/SARS Potential
SARS Granted to Exercise or Realizable
Granted All Employees Base Price Expiration Value
(#) 1 in Fiscal Year ($/Sh) 2 Date 5% 10%
James A.
Middleton 300,000 100% $0.66 02/02/01 $54,000 $120,000
1 The Company has never issued SARs.
2 The 1996 Options were awarded by the Board of
Directors on
February 2, 1996. The exercise price is
[the "last sale" price quotation for the Company's
common stock on the last business day prior to the
date of grant.]
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Certain Relationships and Related Transactions
During the year ended December 31, 1996, the Company executed
promissory notes payable to Mr. Thomas W. Bachtell, Esq., a Director
of the Company, for loans to the Company including accrued interest
and salary payable in the amount of $63,051 and bearing interest at
the rate of 9% per annum replacing prior promissory notes. The
foregoing notes mature on July 1, 1998 (or earlier upon the
Company's receipt of at least $2,000,000 as a result of any offering
of its securities).
The Company also executed a promissory note payable to Mr. Jay
Mealey, President, Chief Operating Officer, Treasurer and a Director
of the Company for amounts loaned to the Company in the amount of
$58,196 and bearing interest at a rate of 9% per annum replacing a
prior promissory note. The foregoing note matures on July 1, 1998
(or earlier upon the Company's receipt of at least $2,000,000 as a
result of an offering of its securities).
Other Transactions
During 1996, the Company incurred approximately $43,917 in legal
fees to Pruitt, Gushee & Bachtell, a law firm of which Mr. Thomas
W. Bachtell, a Director of the Company, is a shareholder and
director.
PRINCIPAL SHAREHOLDERS
The Messrs. Mealey and Bachtell are the only persons known to the
Company to be the beneficial owner (within the meaning of applicable
governmental regulations) of five percent (5%) or more of any class
of the Company's voting securities as of the Record Date. Mr.
Mealey's share ownership is set out under the heading "EXECUTIVE
OFFICERS OF THE COMPANY," above. At the Record Date, Mr. Bachtell's
beneficial share ownership consisted of 2,161,596 shares, including
548,148 option shares exercisable within 60 days, but not yet
exercised, and 5,000 shares held as trustee of the Nielson Family
Trust - their addresses are set out under the heading "ELECTION OF
DIRECTORS," below.
PROPOSALS FOR SHAREHOLDER ACTION
Item No. 1: Election of Directors
A board of four directors is to be elected at the Meeting, to hold
office until the next Annual Meeting of Shareholders and until their
respective successors are duly elected and qualified. Unless
otherwise instructed, the proxy holders will vote all Proxies
received by them FOR the election of the four nominees named below,
who are the nominees of the current Board of Directors, all of whom
are shareholders of the Company. Nominations for election as a
Director also will be accepted from the floor by any Shareholder at
the 1997 Annual Meeting. While no formal procedure exists with
respect to nominations for Director outside of the Annual Meeting,
Shareholders are free to write to the President of the Company with
any suggestions concerning nominations to the Board of Directors.
Individuals receiving the most votes will be elected. All
nominees are present members of the Board of Directors. All duly
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signed and delivered proxies will be voted FOR the election of ALL
of the nominees listed below in the absence of contrary direction.
The Directors know of no reason why any nominee listed below may be
unable to serve as a Director. If any nominee is unable to serve,
the shares present at the 1997 Annual Meeting through proxies will
be voted FOR the election of such other person(s) as the Board of
Directors may nominate at the Annual Meeting, or the current
Directors may conclude to reduce the number of Directors to be
elected.
All of the nominees were elected to their present term of office
by a vote of the Shareholders at the 1996 Annual Meeting.
Nominees
There is set forth below as to each of the four (4) Board nominees
for election as a Director of the Company, his/her age, the year
he/she first became a Director of the Company, his/her principal
occupation, his/her business experience during the past five years,
other material officerships or directorships in other companies held
at this time. The beneficial stock ownership of the nominees in the
Company's common stock as of the Record Date is set out under the
heading "EXECUTIVE OFFICERS OF THE COMPANY," above.
James A. Middleton, 61, is Chairman and Chief Executive Officer of
the Company. Previously Mr. Middleton was President of ARCO Oil and
Gas Company as well as Executive Vice President and a member of the
Board of Directors of Atlantic Richfield Company. He remains on the
Board of Directors of ARCO Chemical Company and is Executive Vice
President - Emeritus of ARCO. Mr. Middleton also serves on the
Board of Directors of Texas Utilities Company as well as many
community and civic organizations. Mr. Middleton joined the Board
of Directors of Monterey Resources, Inc. in July, 1997.
Jay Mealey, 41, has been the President, Treasurer and a Director
of the Company since 1991. Mr. Mealey became Chief Operating
Officer in 1996. Mr. Mealey has been actively involved in the oil
and gas exploration and production business since 1978. Prior to
employment with the Company, he was Vice President of Ambra Oil and
Gas Company and worked for Belco Petroleum Corporation and Conoco,
Inc. in their exploration divisions. Mr. Mealey is responsible for
managing the day to day operations of the Company. He is a full-
time employee and it is anticipated that he will devote one hundred
percent of his time to the Company.
Richard S. Rawdin, 39, is Vice President and the Chief Financial
and Accounting Officer of the Company. Prior to joining the Company
in 1991, he was Controller and Vice President of Finance for Kerry
Petroleum Company, Inc. where he was responsible for directing the
financial and accounting affairs of the Company, its two
subsidiaries and six partnerships. Prior to that, he was a Senior
Consultant with Deloitte and Touche. Mr. Rawdin is a full-time
employee of the Company and it is anticipated that he will devote
one-hundred percent of his time to the Company.
Thomas W. Bachtell, 46, is a practicing natural resources attorney
and President of the law firm of Pruitt, Gushee & Bachtell. Mr.
Bachtell's law practice focuses on advising and assisting oil, gas
and mineral companies in their exploration and development
activities in the Rocky Mountain States.
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The Board of Directors Recommends a Vote FOR all four nominees.
Item No. 2: Approval of the Board's Selection of Auditors
At the Annual Meeting, the Shareholders will be asked to approve
the Board's selection of Pritchett, Siler and Hardy as the
independent public accountants to audit the financial statements of
the Company for the 1997 fiscal year. Pritchett, Siler and Hardy
has audited the financial statements of the Company for the last
seven fiscal years. The Company does not anticipate that any
representatives of Pritchett, Siler & Hardy will be present at the
Meeting.
Unless a contrary choice is specified, Proxies received by the
Company pursuant to this solicitation will be voted FOR the
appointment of Pritchett, Siler and Hardy as the independent public
accountants of the Company for the 1997 fiscal year.
The Board of Directors Recommends a Vote FOR the appointment of
Pritchett, Siler and Hardy as the independent public accountants
of the Company for the 1997 fiscal year.
Item No. 3: Approval of the Crown Energy Corporation
Long Term Equity-Based
Incentive Plan
The Board of Directors has adopted the Crown Energy Corporation
Long-Term Equity-Based Incentive Plan ("Plan"), subject to approval
by the Shareholders at the Annual Meeting. (A copy of the Plan is
attached to this Proxy Statement as Appendix "A". The information
in the following summary statement is limited in its scope. Please
refer to the Plan itself for a fuller explanation of its terms. If
any conflict is seen between this summary statement and the Plan
itself, the Plan will govern all such conflicts.) The purpose of
the Plan is to assist the Company in attracting, retaining and
motivating executive officers and other key employees essential to
the success of the Company through performance-related incentives
linked to long-range performance goals. Performance goals under the
Plan may be based on individual performance of the particular
employee and/or include criteria such as absolute or relative
increases in total shareholder return, revenues, sales, net income,
or net worth of the Company, any of its subsidiaries, divisions,
business units or other areas of the Company, all as the Board may
determine. The Board believes that the Plan is necessary in order
for the Company to attract and retain qualified executive officers
capable of directing the Company through an ever-changing and
increasingly competitive business environment, and that the Plan
will more closely align Executive Officer incentives and total
compensation with the economic interests of the Shareholders.
The Board also believes that the Plan is essential for the Company
to maintain for its key employees an appropriate and competitive
balance of base salaries, annual incentives and long-term
incentives.
The Plan provides for discretionary awards ("Awards") of
nonqualified stock options. All Awards will be made in, or based
on the value of, the Company's Common Stock at the date of award
grant.
The Plan will be administered by the Board of Directors. The
selection of key employees who are to receive Awards under the Plan,
as well as all terms, conditions, performance criteria and
restrictions applicable to each Award will be determined by the
Board in its discretion.
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The maximum number of shares of Common Stock for which Awards may
be granted under the Plan is 2,000,000 subject to adjustment in the
event of a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other similar event. Shares subject
to previously canceled, lapsed or forfeited Awards may be reissued
under the Plan. The shares to be issued under the Plan may consist
of authorized but unissued shares or shares purchased in the open
market.
Regular, full-time employees of the Company and its subsidiaries
or affiliates who are designated by the Board will be eligible to
participate in, and receive Awards under, the Plan. All of the
executive officers of the Company will be eligible to participate
in the Plan, and it is intended that all of them will participate.
Stock Options. The number of shares and other terms of each grant
will be determined by the Board. The price payable upon exercise of
an option may not be less than 100% of the fair market value of the
Common Stock at the time of the grant, and may be paid in cash or
with shares of Common Stock. Under the terms of the Plan, options
may not be exercised until at least six months after they are
granted, except in the case of the death or disability of the
participant or a change in control of the Company. Options may
remain outstanding for no more than ten years. During the lifetime
of the employee receiving the Option (the "Optionee"), the Option
may be exercisable only by the Optionee and shall not be assignable
or transferrable. Each Option will become exercisable in such
installments, at such time or times, and is subject to such
conditions, as the Board, in its discretion, may determine at or
before the time the Option is granted. The Board may provide for
the accelerated exercisability of an Option in the event of the
death, disability or retirement of the Optionee and may provide for
expiration of the Option prior to the end of its term in the event
of the termination of the Optionee's employment.
In the event of a change in control of the Company, all
outstanding stock options shall immediately become fully vested, and
all restrictions on all outstanding Awards shall be deemed to have
been fully satisfied, unless the transaction or event constituting
the change in control was approved in advance by a majority of the
Company's Board of Directors. Under the terms of the Plan, a change
in control shall be deemed to have occurred if: (i) any person
becomes the beneficial owner of 20% or more of the Company's voting
securities excluding those shares issued directly pursuant to
negotiations with the Company's Board; (ii) the Company is involved
in a merger, acquisition or similar transaction pursuant to which
the Company's directors immediately before the transaction ceases
to constitute a majority of the Company's directors after the
transaction; or (iii) the Company is involved in a transaction
pursuant to which it is not the surviving corporation, its Common
Stock is exchanged for, or converted into securities of another
entity, it becomes a subsidiary of another entity, or 50% or more
of its assets or business is sold to another entity.
The Plan may be amended, modified, suspended or terminated by the
Board of Directors at any time. No amendment shall be effective
prior to approval of the shareholders to the extent such approval
is necessary to comply with any legal requirement, including the
requirement for the performance based compensation exception under
Internal Revenue Code Section 162(m). If not earlier terminated, the
Plan shall terminate on December 31, 2006.
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Federal Income Tax Consequences
The grant of an option under the Plan will not cause the
recognition of ordinary income by the participant or entitle the
Company to a compensation deduction for federal income tax purposes
because, under existing Treasury regulations, such an option does
not have a "readily ascertainable" fair market value. The exercise
of an option which is not subject to any restrictions on the
participant's ownership or disposition thereof will cause the
recognition of taxable compensation income in an amount equal to the
difference between the exercise price and the fair market value on
the exercise date of the shares purchased by the participant. The
Company will be able to take a corresponding tax deduction for
compensation expense in an amount equal to the compensation
recognized by the participant.
If restrictions apply to the shares acquired upon exercise of an
option, the time of recognition of taxable compensation income and
the amount thereof, and the availability of a corresponding tax
deduction to the Company, will be determined when such restrictions
cease to apply.
The Board of Directors has previously adopted the Plan, subject to
shareholder approval at the 1997 Annual Meeting. The Board believes
that the approval and adoption of the Plan will advance the
interests of the Company and its shareholders by enabling the
Company to attract and retain high caliber, motivated executive
officers and other key employees by offering compensation incentives
which provide such officers and employees with a sense of
proprietorship through stock ownership.
Shareholder Approval; Effect of Non-Approval.
Approval of the Plan requires that a majority of the shares
present at the Annual Meeting vote in favor of the Plan at the
Annual Meeting exceed the number of votes cast in opposition to the
Plan. Approval of the Plan will not result directly in the grant
of any Awards to Executive Officers, key employees of the Company.
Shareholder approval will, however, allow the Company to use the
plan as it was intended and approved by the Directors: as an
incentive to excellent performance, even if the value of Awards may
total in excess of $1,000,000 over time. If the Shareholders fail
to approve the Plan in this vote, the Company will continue to use
the Plan and will grant future Awards under it. The only result of
Shareholder non-approval at this time is that the Company may be
denied a tax deduction for compensation to an executive officer to
the extent that compensation, including option exercises under the
Plan, exceeds $1,000,000.
Certain Interests of Directors
In considering the recommendation of the Board of Directors with
respect to the Plan, Shareholders should be aware that the members
of the Board of Directors have certain interests which may present
them with conflicts of interest in connection with such proposal.
All Directors would be eligible to participate in the Plan.
The Board of Directors believes that the Plan is in the best
interests of the Company and its Shareholders, and therefore,
unanimously recommends a vote FOR the Plan. In considering the
foregoing recommendation of the Board of Directors, Shareholders
should be aware that the current members of the Board of Directors
own, in the aggregate, approximately 39.7% of the shares of the
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Company's issued and outstanding Common Stock, including option
shares exercisable within 60 days of the Record Date.
The Board of Directors Recommends a Vote FOR Approval of the
Crown Energy Equity-Based Long-Term Incentive Plan.
Item No. 4: Approval of the Transfer of the Company's
Oil Sands Reserves and
Related Technology to A Joint Venture with MCNIC Pipeline &
Processing Company
General Background of the Joint Venture Proposal
The Company has been actively seeking opportunities to develop and
profit from its large holdings of oil sands at Asphalt Ridge in
Eastern Utah, particularly as the revenue production abilities of
the Company's other assets declines. As part of its ongoing efforts
to finance the Asphalt Ridge project, the Company began discussions
with representatives of MCN Energy Group, Inc., a large diversified
energy holding company with approximately $4 billion in assets
("MCN"). These discussions produced an agreement in principle for
MCN to provide financial and other resources to the Company to
assist in the commercial exploitation of the Company's oil sands
reserves.
Further discussions produced a joint venture concept whereby the
Company's Crown Asphalt Corporation subsidiary, the legal owner of
the oil sands reserves and certain proprietary licenses to oil sands
technology ("Crown"), would form a new limited liability company
(the "Joint Venture") with MCN's MCNIC Pipeline & Processing Inc.
subsidiary ("MCNIC"). The deal calls for Crown to contribute some
cash, equipment, the oil sands reserves, and Crown Asphalt's
technology licenses to the new Joint Venture, and for MCNIC to
contribute cash. In return, both Crown and MCNIC would be members
in the Joint Venture, with the relative percentage of their
ownership determined by what each one ultimately puts into the Joint
Venture and, to some extent, how the Joint Venture performs
economically.
The following summary describes the Joint Venture in more detail,
focusing on its impact and potential for the Company. The Company
believes that the Joint Venture offers significant potential
economic benefits to the Company, including the opportunity for
profitable exploitation of its oil sands reserves that are currently
producing no revenue because the Company has insufficient funds to
develop them. For these reasons, the Board of Directors has
approved the Joint Venture unanimously, and recommends that the
Shareholders also vote to approve it.
Shareholders who disagree with the Joint Venture are entitled to
perfect their Dissenters Rights under Utah law. See "RIGHTS OF
DISSENTING SHAREHOLDERS," below.
Because the Joint Venture is only recently formed, with limited
assets, it currently has no meaningful financial information to
provide to the shareholders of the Company other than as set forth
textually below. Detailed financial and other information
concerning the Company's oil sands reserves and the recent financial
results of the Company are contained in the Company's Annual Report
to Shareholders and in the Company's most recent quarterly report
on Form 10-Q, both of which accompany this Proxy Statement.
Shareholders who do not receive an Annual Report and a Form 10-Q for
the June 30, 1997 quarter should contact the Company and a set will
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be sent out to them. On September 2, 1997, the date preceding the
public announcement of the transaction, the Company's shares traded
on the NASD Electronic Bulletin Board at the bid and ask prices of
$.75-$.81.
The Recommendation of the Board of Directors
The Board of Directors believes that the Joint Venture represents
a significant and positive event in the Company's development, and
that the Joint Venture is a preferable course of action to its other
alternatives because the Joint Venture provides the Company with the
opportunity to develop its considerable oil sands reserves in
coordination with a financially solid natural resource industry
participant. The Joint Venture provides for MCNIC to contribute 75%
of the costs of the initial plant (the "Initial Plant") and for
Crown to contribute all of its oil sands reserves, certain equipment
and cash equal to the 25% of total costs.
The Board of Directors unanimously recommends that the Company's
shareholders vote FOR the Joint Venture.
The Joint Venture will complete up to $400,000 of detailed
engineering and the Board has agreed to participate for its $100,000
(25%) share, but will wait for the Shareholder vote to proceed
further with the Joint Venture. If the Shareholders do not approve
the transfer of the oil sands reserves to the Joint Venture, the
Company will not be obligated to reimburse MCNIC for its initial
capital contribution of $300,000, but will have lost the Company's
$100,000 contribution. (See below)
In coming to its decision to recommend the Joint Venture to the
Shareholders, the Board of Directors considered a number of factors,
including without limitation, (i) MCNIC's financial resources and
reputation in the natural resource industry; (ii) its other
financing alternatives; and (iii) the terms and conditions of the
Joint Venture agreement, including the required capital
contributions from both Crown and MCNIC and the ability of Crown to
participate meaningfully in the management of the Joint Venture.
The Board of Directors did not assign relative weights to any
specific factor in reaching its recommendation.
The Joint Venture
Various written agreements create and govern the Joint Venture.
These documents are not attached to this Proxy Statement because of
their size and complexity. The Joint Venture's Operating Agreement
will be filed with the Company's future public filings and will be
available publicly at that time.
Limited Liability Company Status
The Joint Venture is a newly formed Utah limited liability company
called "Crown Asphalt Ridge, L.L.C.", and Crown and MCNIC are the
members of the Joint Venture. Crown and MCNIC will be entitled to
the protections and benefits afforded by the Utah Limited Liability
Company Act (the "Act"). Under the Act, members of limited
liability companies are afforded limited liability protection
similar to that afforded to shareholders of a corporation in that
the members' risk from the operation of the enterprise is limited
to the loss of the members' investment without recourse to the
members' other assets. Accordingly, except as described below in
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connection with the Company's guaranty (the "Guaranty") of Crown's
obligations, neither the Company nor Crown will face liability from
the operation of the Joint Venture which exceeds the value of the
oil sands properties and other capital contributions made to the
Joint Venture.
Sharing In Profits and Losses of the Joint Venture
MCNIC and Crown will initially own shares of 75% and 25%,
respectively, in the profits, losses and obligations of the Joint
Venture. Once the Initial Plant is built by the Joint Venture and
the economic operations of the Joint Venture are successful to the
extent of paying out profits to MCNIC equal to 115% of its
investment in the Joint Venture, excluding tax benefits, Crown's
interest in the Joint Venture will increase to 50%. Thereafter the
Joint Venture may build other plants to further develop the oil
sands reserves. These plants will require additional capital
contributions from Crown and MCNIC, which are described in more
detail below. Crown or the Company may participate up to 50% in the
additional facilities and there are provisions for the Company to
retain an interest in these facilities after the recoupment of
certain amounts in the event the Company does not participate in its
costs of such additional facilities, as provided in the "Back-In
Option."
Required Capital Contributions from Crown and MCNIC
The Joint Venture will proceed in phases in order to shepherd the
risks and resources of the Members. Each phase calls for the
Members to contribute new capital to move the Joint Venture through
the next phase. The first phase is now underway, this phase calls
for detailed engineering and verification of the oil sands reserves
of the Company. Approval by the Shareholders of the Company for the
transfer of the oil sands reserves and the other Company property
to the Joint Venture is part of this first phase. MCNIC and Crown
have already agreed to contribute capital to the Joint Venture to
achieve the first phase of $300,000 and $100,000 respectively. This
first phase is scheduled to be completed by November 1, 1997,
subject to the Shareholders approval.
Based on the results of the first phase, either Crown or MCNIC may
choose to abandon the Joint Venture. If MCNIC elects not to
proceed, Crown retains all of the oil sands reserves and its
processing technology, but Crown may not recover its $100,000
initial contribution. If Crown elects not to proceed but MCNIC
wishes to do so, Crown must contribute to the Joint Venture a
sublicense of its license of proprietary oil sands extraction
technology from Park Guymon Enterprises and the oil sands reserves,
subject to Shareholder approval at the Annual Meeting, and also
subject to Crown's the Back-In Option, defined below.
Assuming Crown and MCNIC both elect to proceed with the
construction of the Initial Plant, Crown must contribute the
following to the Joint Venture:
1. Crown's rights as lessee under certain equipment leases on
mining equipment with a fair market value of up to $3.5
million dollars (MCNIC has agreed that this contribution will
be accepted in lieu of $3.5 million in cash);
2. A sublicense of Crown's License of proprietary oil sands
refining technology from Park Guymon Enterprises;
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3. The oil sands reserves. (These properties are initially
valued for the Initial Plant at $500,000); and
4. An amount of cash, if any, needed to bring Crown 's new
capital contributions up to 25% capital to construct the
Initial Plant, giving full credit to the $3.5 million of
equipment leases and the $500,000 of property rights in 1 and
3 above.
MCNIC will fund 75% of the amounts required by the Joint Venture
to construct the Initial Plant and to operate the Joint Venture.
It is presently estimated that the Initial Plant will cost $15
million to construct, but the foregoing number may be modified
during the conducting of detailed engineering.
Both Members may make such additional contributions as may be
required or agreed in the course of building the Initial Plant.
Penalties for Failure to Contribute Capital as Required
In the event either Crown or MCNIC (the "Delinquent Member") fails
to contribute as required, the Joint Venture or the other Member
(the "Non-Defaulting Member") may exercise several specified
remedies provided that under no circumstances may the Delinquent
Member be liable for more than the obligation owed. The remedies
which may be exercised by the Non-Defaulting Member include, (i)
legal action to collect the payment to the Joint Venture by the
Delinquent Member, together with interest thereon; and (ii) the
election by the Non-Defaulting Member to advance the Delinquent
Member's contribution to the Joint Venture and designate whether
such advance is to be treated as a Capital Contribution by the Non-
Defaulting Member or as a loan repayable on demand. In the event
that the Non-Defaulting Member elects to treat its advance as a
Capital Contribution to the Joint Venture, the Delinquent Member's
interest in the Joint Venture will be reduced by the percentage
which the unpaid contribution bears to the total Capital
Contributions of all of the Members, including the contribution made
by the Non-Defaulting Member.
In order to secure any loan made by the Non-Defaulting Member to
the Delinquent Member, the Delinquent Member will also be required
to grant to the Joint Venture and to the Non-Defaulting Member a
security interest in the Delinquent Member's interests in the Joint
Venture.
Conditions Precedent to the Requirements to Contribute Capital to
the Joint Venture; Representations and Warranties
MCNIC and Crown have made representations, warranties and
covenants to each other in the Joint Venture agreements, and these
have been reviewed and approved by the management and legal counsel
of both Members. The obligations of both Members to contribute
capital to the Joint Venture are subject to the satisfaction of
certain conditions precedent, including the prior performance of
required acts by the other party, the truthfulness of the
representations and warranties made by the Members to each other in
the Joint Venture agreements, and the ongoing legal and practical
ability of the Joint Venture to perform as intended by the Members.
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Once certain time periods have passed and/or certain events have
occurred, the failure to make required capital contributions by a
Member may have different consequences.
Subsequent Plants
Under the Joint Venture Operating Agreement, the Members may
construct up to two subsequent plants (the "Subsequent Plants"),
similar to the Initial Plant if the economics of the Joint Venture's
oil sands processing business so permit. In summary, a Subsequent
Plant may be constructed if certain economic returns (approximately
18% on 50% of its Capital Contributions to the Joint Venture or any
successor joint venture during any 12 month period) have been
experienced by MCNIC from the Initial Plant and if the Members
believe or are independently advised that a sufficient market exists
to allow for the operation of the Subsequent Plant without damaging
the competitive position or returns of the earlier already built
plants. The agreement of MCNIC and Crown is that any Subsequent
Plant will be held and operated by a separate legal entity (a
"Successor Joint Venture") formed by the Members with similar
provisions as the Joint Venture entity described above. Crown may
elect to participate in either of the Subsequent Plants and may
obtain, at its option, between 10% and 50% of the interests in the
newly formed entity. A portion of Crown's obligations to contribute
to the Successor Joint Venture may be satisfied through the value
of the contributed properties which Crown may be credited with, as
described below.
Following the determination by both Members or one Member to
proceed with the construction of a Subsequent Plant, the Joint
Venture will convey to the Successor Joint Venture sufficient oil
sands reserves or other property and water rights to enable it to
sustain operations in accordance with the applicable projections and
market study. If, during the twelve months prior to the sale of
products from the first Subsequent Plant, MCNIC has realized a
return of approximately 30% on 50% of its Capital Contributions to
the Joint Venture, Crown will be credited with a value for these
reserves and properties equal to $.10 per barrel for the products
estimated to be produced from the plant over a 20 year period.
If Crown elects not to proceed with any Subsequent Plant, and to
not make the needed capital contributions to build and operate the
Subsequent Plant, Crown will have a reduced interest in the
Subsequent Plant (but will still be credited with an interest equal
to the value of the contributed properties if the requisite return
is achieved), subject to an escalation under the Back-In Option.
Whether or not Crown elects to proceed with either Subsequent
Plant, if the Subsequent Plants reach certain levels of economic
success (approximately 115% of its investment without giving effect
to any tax benefits), Crown will receive an increased interest of
10% in the Subsequent Plant as a result of its oil sands properties
and technology being used by the Subsequent Plant(s).
Management of the Joint Venture; Major Decisions
The Joint Venture is governed by a Management Committee consisting
of five Managers. Initially, MCNIC is entitled to appoint four
Managers and Crown, one Manager. MCNIC's Manager appointees have
yet to be named. Crown's Manager appointee is Mr. Jay Mealey, the
Company's President. A Chairman of the Management Committee is
elected by a majority vote of the Managers. Managers may be removed
or replaced from time to time by the Member which appointed them.
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When the Initial Plant is completed both Crown and MCNIC will be
entitled to appoint one Manager for each 20% of Joint Venture
interest held by that Member (rounded to the nearest 20% level),
provided, that MCNIC and Crown shall each be entitled to at least
one Manager at all times that they are Members of the Joint Venture.
The size of the Management Committee may be increased to six
Managers if the foregoing calculation requires it.
In carrying out their duties, each Manager is required to manage
the Joint Venture in a good faith manner and with such care as an
ordinarily prudent person in a like position would exercise under
similar circumstances. The Managers shall not be liable to the
Joint Venture or to any Member for their good faith actions or
failures to act or for any errors of judgment or for any acts or
omissions believed in good faith to be within the scope of their
authority. Further, subject to the limitations of the Act, the
Joint Venture will indemnify and hold harmless each of the Managers
and any of the Joint Venture's officers, as described below, from
and against any third party claims arising as a result of any good
faith act or omission of any such Manager or officer. The Joint
Venture's obligation to indemnify the foregoing persons, however,
is limited to the extent of the net assets of the Joint Venture.
The Managers may designate one or more persons to act as officers
of the Joint Venture. Such officers may bear the titles and
responsibilities typically associated with a business corporation
formed under the Utah Revised Business Corporation Act, such as
"President" or "Managing Director", etc. The Managers shall serve
without receiving any fee or salary from the Joint Venture, but
shall be entitled to reimbursement by the Joint Venture for any
reasonable out-of-pocket costs incurred on the Joint Venture's
behalf.
Management decisions shall generally be made through a majority
vote of the Managers. However, certain "Major Decisions" such as:
(i) the approval of the detailed engineering for the Initial Plant;
(ii) the approval of, or substantial amendment to, the annual
operating plan (the "Annual Operating Plan"); and (iii) calls for
additional Capital Contributions (except for calls contemplated by
the EPC Contract and those required to maintain the Joint Venture
in emergencies); most distributions to the Members, require
unanimous approval of the Managers.
The Joint Venture's operations shall be conducted each year
pursuant to an Annual Operating Plan. The Annual Operating Plan
shall address all aspects of the Joint Venture's operations for the
coming year, including budgeting for operations, the mining of oil
sands products and the marketing of those products. In the event
the Management Committee is unable to unanimously approve an Annual
Operating Plan for any given calendar year, a majority of the
Managers shall have the authority to continue to maintain the Joint
Venture's operations at levels comparable to those approved under
the last Annual Operating Plan.
Additional Opportunities Within the Project Area and Area of
Mutual Interest
The Joint Venture may elect to pursue additional opportunities
("Additional Opportunities") in the Project Area which are brought
to its attention by one of its Members. Should the Joint Venture
elect to pursue such an Additional Opportunity, it may do so either
through the Joint Venture entity or by forming a new company
containing terms and provisions substantially similar to those of
the Joint Venture. In the event that the Joint Venture does proceed
with any Additional Opportunity, Crown shall have the right, but not
the obligation, to obtain an equity interest in each such Additional
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Opportunity of no less than 10% and no greater than 50% (with MCNIC
obtaining the remaining interest). If the Management Committee
determines not to proceed with the Additional Opportunity, any
Member of the Joint Venture may then do so alone, subject to the
Back-In Option, discussed below, of the nonparticipating Member.
If either Member desires to develop any interests in real
property, fixtures or improvements within the State of Utah relating
to the processing of oil sands, bitumen, asphaltum or other minerals
or mineral resources into asphalt, performance grade asphalt,
synthetic crude oil, diesel fuel, or any other product produced
using the intellectual property covered by the Crown Sublicense or
any derivation thereof (an "AMI Opportunity"), the AMI Opportunity
must first be offered to the Joint Venture. Crown or the Company,
shall then have the option, but not the obligation, of acquiring (i)
up to a 50% equity interest if the AMI Opportunity relates to, or
is designed for, the production and sale of asphalt or performance
grade asphalt; or, (ii) up to a 66 % equity interest if the AMI
Opportunity relates to the production of synthetic crude oil, diesel
fuel or any other similar products.
If the Joint Venture elects not to proceed with the AMI
Opportunity, the Member who brought the opportunity to the Joint
Venture may proceed alone and the nonparticipating Member shall have
no further interest in the activity covered by such opportunity.
Except as limited in the discussion above, each Member of the Joint
Venture shall have the right to independently engage in any business
activities except that MCNIC shall not be entitled to use Crown's
technology provided to the Joint Venture in connection with such
activities.
The Back-In Option
The Back-in Option is a means by which the Member which initially
elects not to participate in a plant may subsequently participate
at a later date upon favorable terms. The Back-in Option shall
apply if:
(i) Crown elects not to proceed with construction of the Initial
Plant following the completion of the detailed engineering
(and MCNIC elects to proceed);
(ii) either Member elects not to participate in the construction
of a Subsequent Plant; or
(iii) either Member elects not to participate in an Additional
Opportunity.
In the case of Crown's election not to participate in the Initial
Plant, Crown shall be entitled to receive a 50% interest in such
Plant following MCNIC's achievement of a 200% payout, as defined
below. In the case of any Subsequent Plants or Additional
Opportunity, Crown shall be entitled to a 60% interest in the
particular plant or opportunity if it is the non-participating
Member, and MCNIC shall be entitled to a 40% interest if it is the
non-participating Member, after the participating Member has
achieved a 200% payout of the costs of the respective facility.
Distributions; Allocations of Profits and Losses
The Management Committee shall cause the Joint Venture to
distribute Available Cash, as defined within the Operating
Agreement, to the Members quarterly, within 30 days following the
end of each quarter. Distributions will be made in connection with
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the respective capital account balances after taking into account
all allocations for profits and losses. Except as expressly stated
within the Operating Agreement, allocations for profits and losses
shall be made to the Members in accordance with their respective
interests in the Joint Venture.
Restrictions on Transfers of Interests; "Tag Along Rights"
Additional Members may not be admitted to the Joint Venture
without the prior written consent of all Members. In addition, in
the event that a Member (the "Soliciting Member") proposes to sell
or otherwise dispose of all or any part of its membership interest
in the Joint Venture, it must first notify the other Member (the
"Notified Member"), of such intent. The Notified Member shall then
have the option to present the Soliciting Member with an offer to
purchase its interest. The Soliciting Member shall, in turn, have
the option of accepting the Notified Member's offer or of selling
its interest to a third party for a higher price.
Following the receipt by a Member of an offer to purchase its
interest in the Joint Venture from a third party, the remaining
Member may require the third party purchaser to also purchase a
proportionate share of its interests on identical terms. If Crown
is the non-transferring Member, the notice pursuant to which the
"Tag Along Rights" are triggered must also expressly indicate
whether the third party intends to remove Crown as the Joint Venture
operator under the Management Agreement, described below.
Dissolution and Termination
The Joint Venture may be dissolved upon:
(i) the consent in writing of all Members,
(ii) the election by any nondefaulting Member following written
notice to the Joint Venture that the other Member is in
default of any material obligation under the Agreement and
the failure of such default to be cured (or efforts to cure
commenced) within 90 days;
(iii) the sale of all, or substantially all, of the assets of the
Joint Venture,
(iv) the occurrence of an event under the Act that causes the
dissolution of a limited liability company;
(v) unless the Members unanimously agree otherwise, the failure
of the Joint Venture to commence construction of the Initial
Plant by January 1, 1999; or
(vi) if after commencement of construction of the Initial Plant,
MCNIC has the right to, and does, withhold Capital
Contributions necessary to complete construction of the
Initial Plant for a period of 24 months.
Upon dissolution, the Management Committee shall appoint one or
more liquidators to wind up the affairs of the Joint Venture. If
the Joint Venture is dissolved at any time prior to commencement of
the construction of the Initial Plant, the oil sands reserves and
the technology will revert 100% back to Crown. Should the Joint
Venture be dissolved at any time after commencement of the
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construction of the Initial Plant, the liquidator of the Joint
Venture shall not have the right to sell the oil sands reserves or
the technology as part of the winding up process, but rather such
reserves and technology shall be distributed to Crown to the extent
of Crown's adjusted capital account balance. Any oil sands reserves
which remain following the foregoing distribution to Crown may be
distributed in kind to MCNIC.
During the five year period following the above distribution of
oil sands reserves in kind, either Member may only develop the
reserves it has received from the Joint Venture after giving the
other Member the opportunity to participate in such development in
the same manner and on the same terms as such Member would have been
entitled to participate if such development were an AMI Opportunity
(see above).
Indemnification
Crown will indemnify MCNIC and the Joint Venture against (i) any
claims, demands, causes of action, losses or damages incurred with
respect to the oil sands reserves which accrued prior to the time
Crown contributed the reserves to the Joint Venture; (ii) any
violation or breach of applicable environmental laws by the Company
or by Crown or their respective predecessors in title; or (iii) any
breach of any representation, warranty or covenant by Crown. The
sole remedy of MCNIC for any claim relating to the loss of title to
any portion of the reserves shall be Crown's obligation to
contribute to the Joint Venture the amount of such loss or damage
incurred up to $500,000 in the aggregate.
MCNIC is also required to indemnify Crown, the Company and the
Joint Venture against any losses from any claims, demands, causes
of action, losses, damages, liabilities, costs and expenses incurred
by any of the foregoing parties which result from a breach by MCNIC
of any warranty, agreement or covenant.
The Guaranty
MCNIC has required and the Company has agreed that the Company
will guarantee, for a period of two years, the obligations of Crown
under the Joint Venture agreements.
Management Agreement
Pursuant to a "Management Agreement", Crown will act as the
"Operator" of the Initial Plant upon commencement of operations.
Under the Management Agreement, Crown will act as an independent
contractor to the Joint Venture and will (i) manage, supervise and
conduct the operations of the Joint Venture; (ii) carry out the
terms of the Annual Operating Plan adopted and approved by the
Management Committee of the Joint Venture; (iii) implement the
decisions made and instructions given from time to time by the
Management Committee. As compensation for the services rendered
under the Management Agreement, Crown will receive (i) a monthly fee
of $3,000; (ii) the payment of all out-of-pocket expenses incurred
through the performance of its duties; (iii) the payment of the
reasonable salaries, wages, overtime and other similar compensation
paid to employees who are employed full time in connection with the
operations of the Joint Venture; and (iv) a monthly home office
overhead charge of $10,000.
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During the first two years, Crown may be removed as Operator only
for "good cause" as defined within the Management Agreement. After
this initial term, the agreement will automatically renew for
unlimited succeeding one year terms unless either party indicates
its desire to not renew within 90 days of the expiration of the
term. Also following the expiration of the initial term, the Joint
Venture may challenge Crown's status as Operator on economic grounds
by serving written notice to Crown that it believes that the
operations of the Plant may be conducted more efficiently and
cheaply and that it is willing to become the Operator (or has a bona
fide commitment from a third party to do so) on a reduced charge
basis. Following the receipt of the economic challenge, Crown will
have 30 days to notify the Joint Venture that it elects to (i) allow
the Joint Venture, or its designee, to become the Operator under the
proposed terms, or (ii) continue as the Operator under the proposed
terms.
Tax Effects of Contributing the Oil Sands Reserves and Technology
to the Joint Venture
Because the contribution of the oil sands reserves and the
technology to the Joint Venture will constitute a tax free
transaction by the Company, the Shareholders will not suffer an
adverse tax affect as a result.
RIGHTS OF DISSENTING SHAREHOLDERS
Requirements of Utah Law.
Under Utah law, a Shareholder who has perfected dissenter's rights
with respect to the MCNIC Joint Venture will be entitled to receive
in cash the fair value of his shares of the Company's Common Stock,
if and when the Company contributes its property to the MCNIC Joint
Venture, as described above. To perfect dissenter's rights, a
Shareholder must comply with the requirements included in Part 13
of Chapter 10a of Title 16 of the Utah Code.
The following is a summary of steps that Shareholders must take
for effective exercise of dissenters' rights. This summary is
qualified in its entirety by reference to the provisions of Utah law
creating and governing dissenters' rights, a copy of which is
included as Appendix "B" to this Proxy Statement. Any Shareholder
contemplating the exercise of dissenters' rights is urged to review
Appendix "B" carefully.
1. Action At or Prior to Special Meetings. A Shareholder
wishing to assert dissenters' rights must NOT vote in favor of the
MCNIC Joint Venture, and the Shareholder must send or deliver a
notice of dissent to the Company prior to or at the Annual Meeting,
but before the vote on the MCNIC Joint Venture is taken.
2. Shareholder Status. To claim dissenters' rights, a
Shareholders must have been a shareholder of the Company on the
Record Date.
3. Information and Payment to Be Submitted By the Company.
Within 10 days after the vote on the MCNIC Joint Venture, the
Company must notify all Shareholders who informed the Company prior
to the vote that they would claim dissenters' rights of the results
of the vote and with respect to the process to be followed for
redeeming the dissenting Shareholders' shares for cash as provided
in the Utah Code. The Company will provide financial information
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and its calculation of the fair market value of the Company's
shares, along with a check for the same amount, as part of the
information required to be provided to dissenting shareholders.
4. Acceptance of Payment For Shares. Any Shareholder who
accepts the Company's calculation and offer of fair value for his
shares in the Company will be deemed to have settled with the
Company unless within 60 days of receiving the Company's offer, the
dissenting Shareholder commences an action in Third District Court
in Salt Lake City to dispute the Company's valuation of the
dissenting shares.
If a dissenting Shareholder votes against the transfer of oil
sands reserves and related technology to the MCNIC Joint Venture but
otherwise fails to perfect a dissent, or who notifies the Company
of his intent to dissent, but then votes in favor of the transfer
to the MCNIC Joint Venture shall have effectively lost his or her
right to appraisal of and payment for the fair value of his or her
shares, and such dissenting Shareholder shall be treated identically
to a nondissenting Shareholder.
ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF DISSENTERS'
RIGHTS WITH RESPECT TO HIS OR HER SHARES IS URGED TO REVIEW
CAREFULLY THE PROVISIONS OF APPENDIX "B" INASMUCH AS
DISSENTERS' RIGHTS MAY BE LOST IF THE REQUIREMENTS OF UTAH LAW
ARE NOT FULLY AND PRECISELY SATISFIED.
Tax Consequences to Dissenting Shareholders.
The redemption of a dissenting Shareholder's shares in the
Company by the Company pursuant to Utah law, as described above, is
equivalent to a sale of such shares under Federal and State income
tax laws. The cash received from the Company will be taxable as a
capital gain to the extent the value received from the Company is
in excess of the dissenting Shareholder's basis in his shares.
Whether the gain will be taxed as long term capital gains or short
term capital gains will depend on how long the dissenting
shareholder has held his shares.
Dissenting shareholders should consult their own tax advisor(s)
for a full understanding the tax effects on them from and exercise
of dissenters rights in connection with the MCNIC Joint Venture.
SHAREHOLDER PROPOSALS
Any proposals that shareholders of the Company desire to have
presented at the Company's 1998 Annual Meeting of Shareholders must
be received by the Company, at its principal office, no later than
April 15, 1998, or within a reasonable period of time prior to the
solicitation of proxies for such meeting. All such proposals should
be transmitted to the Company by Certified United States Mail, with
return receipt requested.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities,
to file certain reports regarding ownership of and transactions in
the Company's securities with the Securities and Exchange Commission
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(the "SEC"). Such officers, directors and ten-percent stockholders
are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on its review of copies of such forms or "no filings
required" letters received by it, the Company believes that during
the fiscal year ended December 31, 1996, all of its officers,
directors and ten percent shareholders complied with all applicable
requirements of Section 16(a).
OTHER MATTERS
The Company knows of no other matters that will be presented at
the 1997 Annual Meeting of Shareholders. If any other matter
properly comes before the Meeting, it is the intention of the
persons named as proxies on the Proxy Cards to vote all common
shares represented by such Proxy Cards in accordance with the
directions of the present Board of Directors.
By Order of the Board of Directors
Richard S. Rawdin
Secretary
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APPENDIX "A"
THE CROWN ENERGY LONG TERM EQUITY-BASED INCENTIVE PLAN
Section 1. Purpose
Crown Energy Corporation, a Utah corporation (the "Company"),
hereby establishes the Crown Energy Long Term Equity-Based
Incentive Plan (the"Plan") to promote the interests of the
Company and its shareholders through the (i) attraction and
retention of executive officers and other key employees
essential to the success of the Company; (ii) motivation of
executive officers and other key employees using performance-
related incentives linked to long-range performance goals and
the interests of Company shareholders; and (iii) enabling of
such employees to share in the long-term growth and success of
the Company. The Plan permits the grant of Nonqualified Stock
Options as the Board, in its sole and complete discretion, may
determine to be appropriate in carrying out the intent and
purposes of this Plan.
Section 2. Definitions
When used in the Plan, the following terms shall have the
meanings set forth below:
2.1 "Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 under the Exchange Act.
2.2 "Agreement" or "Option Agreement" means a written
agreement between the Company and a Participant
implementing the grant, and setting forth the particular
terms, conditions and restriction of each Award.
2.3 "Award" means a grant under the Plan of Nonqualified
Stock Options.
2.4 "Award Date" or "Grant Date" means the date on which an
Award is made by the Board under the Plan.
2.5 "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 under the Exchange Act.
2.6 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.7 "Cashless Exercise" means the exercise of an Option by
the Participant through the use of a brokerage firm to
make payment to the Company of the exercise price either
from the proceeds of a loan to the Participant from the
brokerage firm or from the proceeds of the sale of Stock
issued pursuant to the exercise of the Option, and upon
receipt of such payment, the Company delivers the
exercised Shares to the brokerage firm.
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2.8 "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) Any Person, corporation or other entity or group,
including any "group" as defined in Section 13(d)(3) of
the Exchange Act, becomes the Beneficial Owner of Share
of the Company having 20% (excluding those shares
acquired by third parties through direct negotiations
with the Board of Directors) or more of the total number
of votes that may be cast for the election of directors
of the Company; or
(b) As the result of, or in connection with, any tender or
exchange offer, merger or other business combination,
sale of assets, sale of securities, contested election,
or any combination of the foregoing (a "Transaction"),
the persons who were directors of the Company immediately
before the Transaction shall cease to constitute a
majority of the Board of Directors of the Company or any
successor to the Company or its assets; or
(c) If at any time: (i) the Company shall consolidate or
merge with any other Person and the Company shall not be
the continuing or surviving corporation; (ii) any Person
shall consolidate or merge with the Company, and the
Company shall be the continuing or surviving corporation
and in connection therewith, all or part of the
outstanding Stock shall be converted into, or exchanged
for, stock or other securities of any other Person or
cash or any other property; (iii) the Company shall be a
party to a statutory share exchange with any other Person
after which the Company is a Subsidiary of any other
Person; or (iv) the Company shall sell or otherwise
transfer 50% or more of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to
any Person or Persons.
2.9 "Code" means the Internal Revenue Code of 1986 and the
rules and regulations promulgated thereunder, or any
successor law, as amended from time to time.
2.10 "Common Stock" or "Stock" means the Common Stock of the
Company or such other security or right or instrument into
which such Common stock may be changed or converted in the
future.
2.11 "Company" means Crown Energy Corporation, including all
Affiliates and wholly-owned subsidiaries, or any successor
thereto.
2.12 "Designated Beneficiary" means the beneficiary designated
by the Participant, pursuant to procedures established by
the Board, to receive amounts due to the Participant in the
event of the Participant's death. If the Participant does
not make an effective designation, then the Designated
Beneficiary will be deemed to be the Participant's estate.
2.13 "Disability" means (i) the mental or physical disability of
the Participant defined as "Disability under the terms of
the Crown Energy Corporation Employee Long-Term Disability
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Income Plan, as amended from time to time in accordance
with the provisions of such plan; or (ii) a determination
by the Board, in its sole discretion, of total disability
(based on medical evidence) that precludes the Participant
from engaging in any occupation or employment for wage or
profit for at least twelve moths and appears to be
permanent. All decisions by the Board relating to a
Participant's Disability (including a decision that a
Participant is not disabled), shall be final and binding on
all parties.
2.14 "Divestiture" means the sale of, or closing by, the Company
of the business operations in which the Participant is
employed.
2.15 "Exchange Act" means the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, or
any successor law as amended from time to time.
2.16 "Executive Officer" means any employee considered by the
Company to be an Executive Officer.
2.17 "Fair Market Value" means, on any given date, the closing
price of Stock as reported on the Electronic Bulletin
Board.
2.18 "Full-time Employee" means an individual who is employed by
the Company or a Subsidiary in a customary employer-
employee relationship, is on the payroll of the Company or
such Subsidiary, and is designated in the internal payroll
or other records of the Company or a Subsidiary as a
regular, full-time employee. This designation excludes all
leased employees (within the meaning of Code Section
414(n)), part-time employees, temporary employees, or
contract employees, as well as all consultants to, the
Company.
2.19 "Key Employee" means a Full-time Employee who is an officer
or other key employee of the Company or its Subsidiaries as
designated or determined by the Board.
2.20 "Nonqualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article 6 herein, which is
not intended to qualify as, or constitute an Incentive
Stock Option.
2.21 "Option" means a Nonqualified Stock Option.
2.22 "Participant' means a Key Employee who has been granted an
Award under the Plan.
2.23 "Performance Criteria" means the objectives established by
the Board for a Performance Period, for the purpose of
determining when an Award subject to such objectives has
been earned.
2.24 "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
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2.25 "Plan" means the Crown Energy Corporation Long-Term
Incentive Plan as herein established and as hereafter
amended from time to time.
2.26 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act as adopted in Exchange Act Release No. 34-
37269 (May 30, 1996), or any successor rule as amended from
time to time.
2.27 "Section 162(m)" means Section 162(m) of the Code, or any
successor section under the Code, as amended from time to
time and as interpreted by final or proposed regulations
promulgated thereunder from time to time.
2.28 "Securities Act" means the Securities Act of 1933 and the
rules and regulations promulgated thereunder, or any
successor law, as amended from time to time.
2.29 "Stock" or "Shares" means the Common Stock of the Company.
2.30 "Subsidiary" means a corporation in which the Company owns,
either directly or through one or more of its Subsidiaries,
at least 50% of the total combined voting power of all
classes of stock.
Section 3. Administration
3.1 The Board. The Plan shall be administered and
interpreted
by the Board which shall have full authority, discretion
and power necessary or desirable for such administration
and interpretation. The express grant in this Plan of any
specific power to the Board shall not be construed as
limiting any power or authority of the Board. In its sole
and complete discretion the Board may adopt, alter,
suspend and repeal any such administrative rules,
regulations, guidelines, and practices governing the
operation of the Plan as it shall from time to time deem
advisable. In addition to any other powers and, subject
to the provisions of the Plan, the Board shall have the
following specific power: (i) to determine the terms and
conditions upon which Awards may be made and exercised;
(ii) to determine the Participants to which Awards shall
be made; (iii) to determine all terms and provisions of
each Agreement, which need not be identical for types of
Awards nor for the same type of Award to different
Participants; (iv) to construe and interpret all terms,
conditions and provisions of the Plan and all Agreements;
(v) to establish, amend, or waive rules or regulations
for the Plan's administration; (vi) to accelerate the
exercisability of any Award, the length of a Performance
Period or the termination of any Period of Restriction;
and (vii) to make all other determinations and take all
other actions necessary or advisable for the
administration or interpretation of the Plan. The Board
may seek the assistance or advice of any persons it deems
necessary to the proper administration of the Plan.
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3.2 Board Decisions. Unless strictly and expressly
prohibited by law, all determinations and decisions made
by the Board pursuant to the provisions of this Plan
shall be final, conclusive, and binding upon all persons,
including Participants, Designated Beneficiaries, the
Company, its shareholders and employees.
3.3 Rule 16b-3 and Section 162(m) Requirements.
Notwithstanding any other provision of the Plan, the
Board may impose such conditions on any Award as it may
deem to be advisable or required to satisfy the
requirements of Rule 16b-3 or Section 162(m).
Section 4. Eligibility
The Board shall have sole and complete discretion in determining
those Key Employees who shall participate in the Plan. The Board
may request recommendations for individual awards from the
Company's Chief Executive Officer and may delegate to the Chief
Executive Officer the authority to make Awards to Participants
who are not Executive Officers of the Company.
Section 5. Shares Subject to the Plan
5.1 Number of Shares. Subject to adjustment as
provided for
in Section 5.4 below, the maximum aggregate number of
Shares that may be issued pursuant to Awards made under
the Plan shall not exceed 2,000,000 Shares. Shares of
Common Stock may be available from the authorized but
unissued Shares or Shares purchased in the open market
for purposes of the Plan. Except as provided in Section
5.2 and 5.3 herein, the issuance of Shares in connection
with the exercise of, or as other payment for, Awards
under the Plan shall reduce the number of Shares
available for future Awards under the Plan.
5.2 Lapsed Awards or Forfeited Shares. In the event
that (i)
any Option granted under the Plan terminates, expires, or
lapses for any reason without having been exercised in
accordance with its terms, the Options subject to such
Award shall thereafter be again available for grant of an
Award under the Plan.
5.3 Delivery of Shares as Payment. In the event a
Participant pays for any Option through the delivery of
previously acquired shares of Common Stock, the number of
shares of Common Stock available for Awards under the
Plan shall be increased by the number of shares
surrendered by the Participant.
5.4 Capital Adjustments. The Option Price and the aggregate
number shall be subject to adjustment, if any, as the
Board deems appropriate, based on the occurrence of a
number of specified and non-specified events. Such
specified events are discussed in this Section 5.4, but
such discussion is not intended to provide an exhaustive
list of such events which may necessitate adjustments.
(a) If the outstanding Shares are
increased, decreased or
exchanged through merger, consolidation, sale of all or
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substantially all of the property of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other
distribution in respect to such Shares, for a different
number or type of Shares, or if additional Shares or new
or different Shares are distributed with respect to such
Shares, an appropriate and proportionate adjustment shall
be made in: (i) the maximum number of shares of Stock
available for the Plan as provided in Section 5.1 herein,
(ii) the type of shares or other securities available for
the Plan, (iii) the number of shares of Stock subject to
any then outstanding Awards under the Plan, and (iv) the
price (including Exercise Price) for each share of Stock
(or other kind of shares or securities) subject to then
outstanding Awards, but without change in the aggregate
purchase price as to which such Options remain
exercisable or Restricted Stock releasable.
(b) In the event other events not specified
above in this
Section 5.4, such as any extraordinary cash dividend,
split-up, reverse split, spin-off, combination, exchange
of share, warrants or rights offering to purchase Common
Stock, or other similar corporate event, affect the
Common Stock such that an adjustment is necessary to
maintain the benefits or potential benefits intended to
be provided under this Plan, then the Board its
discretion may make adjustments to any or all of (i) the
number and type of shares which thereafter may be
optioned and sold or awarded under the Plan, (ii) the
grant, exercise or conversion price of any Award made
under the Plan thereafter, and (iii) the number and price
(including Exercise Price) of each share of Stock (or
other kind of shares or securities) subject to the then
outstanding Awards.
(c) Any adjustment made by the Board pursuant to the
provisions of this Section 5.4 shall be final, binding
and conclusive. A notice of such adjustment, including
identification of the event causing such adjustment, the
calculation method of such adjustment, and the change in
price and the number of shares of Stock, or securities,
cash or property purchasable subject to each Award shall
be sent to each Participant. No fractional interests
shall be issued under the Plan based on such adjustments.
Section 6. Stock Options
6.1 Grant of Stock Options. Subject to the terms and
provisions of the Plan and applicable law, the Board, at
any time and from time to time, may grant Options to Key
Employees as it shall determine. The Board shall have
sole and complete discretion in determining the number of
Options granted, the Option Price (as hereinafter
defined), the duration of the Option, the number of
Shares to which an Option pertains, any conditions
imposed upon the exercisability or the transferability of
the Options, including vesting conditions, the conditions
under which the Option may be terminated, and any such
other provisions as may be warranted to comply with the
law or rules of any securities trading system or stock
exchange. Each Option grant shall have such specified
terms and conditions detailed in an Option Agreement.
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6.2 Option Price. The exercise price per share of Stock
covered by an Option ("Option Price") shall be determined
on the Grant Date by the Board; provided that the Option
Price shall not be less than 100% of the Fair Market
Value of the Common Stock on the Grant Date.
6.3 Exercisability. Options granted under the Plan shall be
exercisable at such times and be subject to such
restrictions and conditions as the Board shall determine,
which will be specified in the Option Agreement and need
not be the same for each Participant. However, no Option
granted under the Plan may be exercisable until the
expiration of at least six months after the Grant Date
(except that such limitations shall not apply in the case
of death or Disability of the Participant, or a Change in
Control), nor after the expiration of ten years from the
Grant Date.
6.4 Method of Exercise. Options shall be exercised by the
delivery of a written notice from the Participant to the
Company in a form prescribed by the Board setting forth
the number of Shares with respect to which the Option is
to be exercised, accompanied by full payment for the
Shares. The Option price shall be payable to the Company
in full in cash, or its equivalent, or by delivery of
Shares of Stock (not subject to any security interest or
pledge) having a Fair market Value at the time of
exercise equal to the exercise price of the Shares, or by
a combination of the foregoing. In addition, at the
request of the Participant, and subject to applicable
laws and regulations, the Company may (but shall not be
required to) cooperate in a Cashless Exercise of the
Option. As soon as practicable, after receipt of written
notice and full payment of the exercise price, the
Company shall deliver to the Participant a stock
certificate, issued in the Participant's name, evidencing
the number of Shares with respect to which the Option was
exercised.
Section 7. Change in Control
Notwithstanding any other provision of this Plan, in the event
of a Change in Control: (i) all outstanding Options shall
immediately become fully vested and exercisable; (ii) all
Periods of Restriction shall be deemed to have been completed;
(iii) all Performance Criteria shall be deemed to have been
satisfied in full; and (iv) all other restrictions of any kind
applicable to all outstanding awards shall be deemed to have
lapsed or been satisfied in full; provided that none of the
effects described in (i) - (iv) above shall occur if the Change
in Control, or the transaction, event or occurrence causing the
Change in Control was duly and effectively approved in advance
by the affirmative vote of a majority of the company's Board of
Directors.
Section 7. General Provisions
7.1 Plan Term. The Plan was adopted by the Board on
September 2, 1997, and became effective upon receiving
shareholder approval on October 21, 1997. The Plan shall
terminate December 31, 2006; however, all Awards made
prior to, and which are outstanding on such date, shall
remain valid in accordance with their terms and
conditions.
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7.2 Withholding. The Company shall have the right to deduct
or withhold, or require a Participant to remit to the
Company, any taxes required by law to be withheld from
Awards made under this Plan. In the event an Award is
paid in the form of Common Stock, the Board may require
the Participant to remit to the Company the amount of any
taxes required to be withheld from such payment in Common
Stock, or in lieu thereof, the Company may withhold (or
the Participant may be provided the opportunity to elect
to tender) the number of shares of Common Stock equal in
Fair market Value to the amount required to be withheld.
7.3 Awards. Each Award granted under the Plan shall be
evidenced in a corresponding Award Agreement provided in
writing to the Participant, which shall specify the
terms, conditions and any rules applicable to the Award,
including but not limited to the effect of a Change in
Control, or death, Disability, Divestiture, Early
Retirement, Normal Retirement or other termination of
employment of the Participant on the Award.
7.4 Nontransferability. Except with respect to Nonqualified
Stock Option, no Award granted under the Plan may be
sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, except by will or the laws of
descent and distribution. Further, no lien, obligation,
or liability of the Participant may be assigned to any
right or interest of any participant in an Award under
this Plan.
7.5 No Right to Employment. Neither the Plan, nor any Award
made, or any other action taken, hereunder shall be
construed as giving any Participant or other person any
right of employment or continued employment with the
Company.
7.6 Rights as Shareholder. Subject to the terms and
conditions of each particular Award, no Participant or
Designated Beneficiary shall be deemed a shareholder of
the Company nor having rights as such with respect to any
shares of Common Stock to be provided under the Plan
until he or she has become the holder of such shares.
7.7 Construction of the Plan. The Plan and all Agreements
shall be governed, construed, interpreted and
administered in accordance with the laws of the State of
Utah. In the event any provision of the Plan or any
Agreement shall be held invalid, illegal or
unenforceable, in whole or in part, for any reason, such
determination shall not affect the validity, legality or
enforceability of any remaining provision, portion of
provision or Plan overall, which shall remain in full
force and effect as if the Plan had been absent the
invalid illegal or unenforceable provision or portion
thereof.
7.8 Amendment of Plan. The Board or the Board of Directors
may amend, suspend, or terminate the Plan or any potion
thereof at any time, provided such amendment is made with
shareholder approval if and to the extent such approval
is necessary to comply with any legal requirement,
including for these purposes any approval requirement
which is a requirement for the performance-based
compensation exception under Code section 162(m).
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7.9 Amendment of Award. In its sole and complete discretion,
the Board may at any time amend any Award for the
following reasons: (i) additions and/or changes to the
Code, any federal or state securities law, or other law
or regulations applicable to the Award, are made prior to
the Grant Date, and the Board determines that such
additions and/or changes have some effect on the Award;
or (ii) any other event not described in clause (i)
occurs and the Participant gives his or her consent to
such amendment.
7.10 Exemption from Computation of Compensation for Other
Purposes. By acceptance of an applicable Award under this
Plan, subject to the conditions of such Award, each
Participant shall be considered in agreement that all
shares of Stock sold or awarded and all Options granted
under this Plan shall be considered extraordinary, special
incentive compensation and will not be included as
"earning," "wages," "salary" or "compensation" in any
pension, welfare, life insurance, or other employee benefit
arrangement of the Company.
7.11 Legend. In its sole and complete discretion, the Board may
elect to legend certificates representing Shares sold or
awarded under the Plan, to make appropriate references to
the restrictions imposed on such Shares.
7.12 Certain Participants. All Award Agreements for
Participants subject to Section 16(b) of the Exchange Act
shall be deemed to include any such additional terms,
conditions, limitations and provisions as Rule 16b-3
requires, unless the Board in its discretion determines
that any such Award should not be governed by Rule 16b-3.
All performance-based Awards to Covered Participants shall
be deemed to include any such additional terms, conditions,
limitations and provisions as are necessary to comply with
the performance-based compensation exemption of Code
Section 162(m), unless the Board, in its discretion,
determines that any such Award is not intended to qualify
for the exemption for performance-based compensation under
Code Section 162(m).
EXECUTED on this ___ day of ____________, 1997.
CROWN ENERGY CORPORATION
By:____________________________
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APPENDIX B
PART 13
DISSENTERS' RIGHTS
16-10a-1301. Definitions.
For purposes of Part 13:
(1) "Beneficial shareholder" means the
person who is a
beneficial owner of shares held in a voting trust or by a
nominee as the record shareholder.
(2) "Corporation" means the issuer of
the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that
issuer.
(3) "Dissenter" means a shareholder who is
entitled to
dissent from corporate action under Section 16-10a-1302 and who
exercises that right when and in the manner required by
Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a
dissenter's shares, means
the value of the shares immediately before the effectuation of
the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the
corporate action.
(5) "Interest" means interest from the
effective date of the
corporate action until the date of payment, at the statutory
rate set forth in Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person
in whose name
shares are registered on the records of a corporation or the
beneficial owner of shares that are registered in the name of
a nominee to the extent the beneficial owner is recognized by
the corporation as the shareholder as provided in Section 16-
10a-723.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
16-10a-1302. Right to Dissent.
(1) A shareholder, whether or not entitled to vote, is
entitled to dissent from, and obtain payment of the fair value
of shares held by him in the event of, any of the following
corporate actions:
(a) consummation of a plan of merger to
which the corporation
is a party if:
(i) shareholder approval is required for
the merger by
Section 16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is
merged with
its parent under Section 16-10a-1104;
(b) consummation of a plan of share exchange
to which the
corporation is a party as the corporation whose shares will be
acquired;
(c) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of
the corporation for which a shareholder vote is required under
Subsection 16-10a-1202(1), but not including a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an
entity controlled by the corporation if the shareholders of the
corporation were entitled to vote upon the consent of the
corporation to the disposition pursuant to Subsection 16-10a-
1202(2).
(2) A shareholder is entitled to dissent and obtain payment
of the fair value of his shares in the event of any other
corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors so provides.
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(3) Notwithstanding the other provisions of this part, except
to the extent otherwise provided in the articles of
incorporation, bylaws, or a resolution of the board of
directors, and subject to the limitations set forth in
Subsection (4), a shareholder is not entitled to dissent and
obtain payment under Subsection (1) of the fair value of the
shares of any class or series of shares which either were listed
on a national securities exchange registered under the federal
Securities Exchange Act of 1934, as amended, or on the National
Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than
2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to
determine the shareholders entitled to receive notice of the
shareholders' meeting at which the corporate action is
submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to
determine shareholders entitled to sign writings consenting to
the proposed corporation action; or
(c) the effective date of the corporate action if the
corporate action is authorized other than by a vote of
shareholders.
(4) The limitation set forth in Subsection (3) does not apply
if the shareholder will receive for his shares, pursuant to the
corporate action, anything except:
(a) shares of the corporation surviving the
consummation of
the plan of merger or share exchange;
(b) shares of a corporation which at the
effective date of
the plan of merger or share exchange either will be listed on
a national securities exchange registered under the federal
Securities Exchange Act of 1934, as amended, or on the National
Market System of the National Association of Securities Dealers
Automated Quotation System, or will be held of record by more
than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described
in Subsection
(4), or cash in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for
his shares under this part may not challenge the corporate
action creating the entitlement unless the action is unlawful or
fraudulent with respect to him or to the corporation.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in his name only if the
shareholder dissents with respect to all shares beneficially
owned by any one person and causes the corporation to receive
written notice which states the dissent and the name and address
of each person on whose behalf dissenters' rights are being
asserted. The rights of a partial dissenter under this
subsection are determined as if the shares as to which the
shareholder dissents and the other shares held of record by him
were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as
to shares held on his behalf only if:
(a) the beneficial shareholder causes the
corporation to
receive the record shareholder's written consent to the dissent
not later than the time the beneficial shareholder asserts
dissenters' rights; and
(b) the beneficial shareholder dissents
with respect to all
shares of which he is the beneficial shareholder.
(3) The corporation may require that, when a record
shareholder dissents with respect to the shares held by any one
or more beneficial shareholders, each beneficial shareholder
33
<PAGE>
must certify to the corporation that both he and the record
shareholders of all shares owned beneficially by him have
asserted, or will timely assert, dissenters' rights as to all
the shares unlimited on the ability to exercise dissenters'
rights. The certification requirement must be stated in the
dissenters' notice given pursuant to Section 16-10a-1322.
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters'
rights under Section 16-10a-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must be sent to all
shareholders of the corporation as of the applicable record
date, whether or not they are entitled to vote at the meeting.
The notice shall state that shareholders are or may be entitled
to assert dissenters' rights under this part. The notice must
be accompanied by a copy of this part and the materials, if any,
that under this chapter are required to be given the
shareholders entitled to vote on the proposed action at the
meeting. Failure to give notice as required by this subsection
does not affect any action taken at the shareholders' meeting
for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters'
rights under Section 16-10a-1302 is authorized without a meeting
of shareholders pursuant to Section 16-10a-704, any written or
oral solicitation of a shareholder to execute a written consent
to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights
under this part, by a copy of this part, and by the materials,
if any, that under this chapter would have been required to be
given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders'
meeting. Failure to give written notice as provided by this
subsection does not affect any action taken pursuant to Section
16-10a-704 for which the notice was to have been given.
16-10a-1321. Demand for payment - Eligibility and notice of
intent.
(1) If a proposed corporate action creating dissenters'
rights under Section 16-10a-1302 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert
dissenters' rights:
(a) must cause the corporation to receive,
before the vote is
taken, written notice of his intent to demand payment for
shares if the proposed action is effectuated; and
(b) may not vote any of his shares in favor
of the proposed
action.
(2) If a proposed corporate action creating dissenters'
rights under Section 16-10a-1302 is authorized without a meeting
of shareholders pursuant to Section 16-10a-704, a shareholder
who wishes to assert dissenters' rights may not execute a
writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this
part, unless otherwise provided in the articles of
incorporation, bylaws, or a resolution adopted by the board of
directors, a shareholder must have been a shareholder with
respect to the shares for which payment is demanded as of the
date the proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is approved by the shareholder, if
shareholder approval is required, or as of the effective date of
the corporate action if the corporate action is authorized other
than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of
Subsection (1) through (3) is not entitled to payment for shares
under this part.
34
<PAGE>
16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized, the corporation shall
give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this part.
(2) The dissenters' notice required by Subsection (1)
must be
sent no later than ten days after the effective date of the
corporate action creating dissenters' rights under Section 16-
10a-1302, and shall:
(a) state that the corporate action was
authorized and the
effective date or proposed effective date of the corporate
action;
(b) state an address at which the corporation
will receive
payment demands and an address at which certificates for
certificated shares must be deposited;
(c) inform holders of uncertificated shares
to what extent
transfer of the shares will be restricted after the payment
demand is received;
(d) supply a form for demanding payment,
which form requests
a dissenter to state an address to which payment is to be made;
(e) set a date by which the corporation must
receive the
payment demand and by which certificates for certificated
shares must be deposited at the address indicated in the
dissenters' notice, which dates may not be fewer than 30 nor
more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by
Subsection 16-10a-
1303(3), if the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice
described in Section 16-10a-1322, who meets the requirements of
Section 16-10a-1321, and wishes to assert dissenters' rights
must, in accordance with the terms of the dissenters' notice:
(a) cause the corporation to receive a
payment demand, which
may be the payment demand form contemplated in Subsection 16-
10a-1322(2)(d), duly completed, or may be stated in another
writing;
(b) deposit certificates for his certificated
shares in
accordance with the terms of the dissenters' notice; and
(c) if required by the corporation in the
dissenters' notice
described in Section 16-10a-1322, as contemplated by Section
16-10a-1327, certify in writing, in or with the payment demand,
whether or not he or the person on whose behalf he asserts
dissenters' rights acquired beneficial ownership of the shares
before the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action
creating dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demand payment in accordance with
Subsection (1) retains all rights of a shareholder except the
right to transfer the shares until the effective date of the
proposed corporate action giving rise to the exercise of
dissenters' rights and has only the right to receive payment for
the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit
share certificates as required, by the date or dates set in the
dissenters' notice, is not entitled to payment for shares under
this part.
35
<PAGE>
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section 16-
10a-1323 from a shareholder holding uncertificated shares, and
in lieu of the deposit of certificates representing the shares,
the corporation may restrict the transfer of the shares until
the proposed corporate action is taken or the restrictions are
released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-
1323 apply to shareholders who own uncertificated shares.
16-10a-1325. Payment.
(1) Except as provided in Section 16-10a-1327, upon the later
of the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and receipt by the
corporation of each payment demand pursuant to Section 16-10a-
1323, the corporation shall pay the amount the corporation
estimates to be the fair value of the dissenters' shares, plus
interest to each dissenter who has complied with Section 16-10a-
1323, and who meets the requirements of Section 16-10a-1321, and
who has not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be
accompanied by:
(a) (i) (A) the corporation's balance
sheet as of the end
of its most recent fiscal year, or if not available, a
fiscal year ending not more than 16 months before the date
of payment;
(B) an income statement for that year;
(C) a statement of changes in
shareholders' equity for
that year and a statement of cash flow for that year, if
the corporation customarily provides such statements to
shareholders; and
(D) the latest available interim
financial statements,
if any;
(ii) the balance sheet and statements referred to in
Subsection (i) must be audited if the corporation customarily
provides audited financial statements to shareholders;
(b) a statement of the corporation's estimate
of the fair
value of the shares and the amount of interest payable with
respect to the shares;
(c) a statement of the dissenters' right to
demand payment
under Section 16-10a-1328; and
(d) a copy of this part.
16-10a-1326. Failure to take action.
(1) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 does not occur
within 60 days after the date set by the corporation as the date
by which the corporation must receive payment demands as
provided in Section 16-10a-1322, the corporation shall return
all deposited certificates and release the transfer restrictions
imposed on uncertificated shares, and all shareholders who
submitted a demand for payment pursuant to Section 16-10a-1323
shall thereafter have all rights of a shareholder as if no
demand for payment had been made.
(2) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 occurs more than 60
days after the date set by the corporation as the date by which
the corporation must receive payment demands as provided in
Section 16-10a-1322, then the corporation shall send a new
dissenters' notice, as provided in Section 16-10a-1322, and the
provisions of Sections 16-10a-1323 through 16-10a-1328 shall
again be applicable.
36
<PAGE>
16-10a-1327. Special provisions relating to shares acquired
after announcement of proposed corporate action.
(1) A corporation may, with the dissenters' notice given
pursuant to Section 16-10a-1322, state the date of the first
announcement to news media or to shareholders of the terms of
the proposed corporate action creating dissenters' rights under
Section 16-10a-1302 and state that a shareholder who asserts
dissenters' rights must certify in writing, in or with the
payment demand, whether or not he or the person on whose behalf
he asserts dissenters' rights acquired beneficial ownership of
the shares before that date. With respect to any dissenter who
does not certify in writing, in or with the payment demand that
he or the person on whose behalf the dissenters' rights are
being asserted, acquired beneficial ownership of the shares
before that date, the corporation may, in lieu of making the
payment provided in Section 16-10a-1325, offer to make payment
if the dissenter agrees to accept it in full satisfaction of his
demand.
(2) An offer to make payment under Subsection (1) shall
include or be accompanied by the information required by
Subsection 16-10a-1325(2).
16-10a-1328. Procedure for shareholder dissatisfied with
payment or offer.
(1) A dissenter who has not accepted an offer made by a
corporation under Section 16-10a-1327 may notify the corporation
in writing of his own estimate of the fair value of his shares
and demand payment of the estimated amount, plus interest, less
any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the
amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than
the fair value of the shares;
(b) the corporation fails to make payment
under Section 16-
10a-1325 within 60 days after the date set by the corporation
as the date by which it must receive the payment demand; or
(c) the corporation, having failed to take
the proposed
corporate action creating dissenters' rights, does not return
the deposited certificates or release the transfer restrictions
imposed on uncertificated shares as required by Section 16-10a-
1326.
(2) A dissenter waives the right to demand payment under this
section unless he causes the corporation to receive the notice
required by Subsection (1) within 30 days after the corporation
made or offered payment for his shares.
16-10a-1330. Judicial appraisal of shares - Court action.
(1) If a demand for payment under Section 16-10a-1328 remains
unresolved, the corporation shall commence a proceeding within
60 days after receiving the payment demand contemplated by
Section 16-10a-1328, and petition the court to determine the
fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day
period, it shall pay each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described
in Subsection (1) in the district court of the county in this
state where the corporation's principal office, or if it has no
principal office in this state, the county where its registered
office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with, or whose shares
were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters who have
satisfied the requirements of Sections 16-10a-1321, 16-10a-1323,
and 16-10a-1328, whether or not they are residents of this state
whose demands remain unresolved, parties to the proceeding
commenced under Subsection (2) as an action against their
shares. All such dissenters who are named as parties must be
served with a copy of the petition. Service on each dissenter
37
<PAGE>
may be by registered or certified mail to the address stated in
his payment demand made pursuant to Section 16-10a-1328. If no
address is stated in the payment demand, service may be made at
the address stated in the payment demand given pursuant to
Section 16-10a-1323. If no address is stated in the payment
demand, service may be made at the address shown on the
corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be
made otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under Subsection (2) is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value.
The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced
under Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which
the court finds that the
fair value of his shares, plus interest, exceeds the amount
paid by the corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus
interest, of the dissenters'
after-acquired shares for which the corporation elected to
withhold payment under Section 16-10a-1327.
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under
Section 16-10a-1330 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds that the
dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under Section 16-10a-1328.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) against the corporation and
in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of Sections 16-10a-
1320 through 16-10a-1328; or
(b) against either the corporation or
one or more dissenters,
in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this part.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
those counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
245341.02
38
<PAGE>
PROXY
CROWN ENERGY CORPORATION
215 South State Street, Suite 550, Salt Lake City, UT 84111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned stockholder of CROWN ENERGY
CORPORATION (the "Company") hereby appoints JAMES A. MIDDLETON
and the Corporate
Secretary of Crown Energy Corporation as proxies of the
undersigned, with the powers the undersigned would possess
if personally
present, and with full power of substitution, to vote all
shares of Common Stock of the Company at the annual meeting of
stockholders of the Company to be held on Tuesday,
October 21, 1997, at 2:30 p.m., Mountain Standard Time,
in Salon I of the
Doubletree Hotel, 255 South West Temple, Salt Lake City, Utah,
and any adjournment or postponement thereof, upon all subjects
that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject
to any directors indicated below.
PROPOSAL 1 -- Election of Directors:
(__) FOR all four nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all four nominees for
director listed below.
(__) FOR all four nominees for director listed below,
except WITHHOLD AUTHORITY to vote for the nominee(s) whose name(s)
is (are) lined through.
Nominees: James A. Middleton, Jay Mealey,
Thomas W. Bachtell, Richard S. Rawdin
PROPOSAL 2 -- Appointment of Pritchett, Siler and Hardy as
the Independent Accountants for the Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 3 -- Approval of Crown Energy Long-Term Equity-Based
Incentive Compensation Plan.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 4 -- Approval of Transfer of Tar Sands Reserves and
Related Technology to a Joint Venture with MCN Investment
Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN
PROXY
CROWN ENERGY CORPORATION
215 South State Street, Suite 550, Salt Lake City, UT 84111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned stockholder of CROWN ENERGY CORPORATION
(the "Company") hereby appoints JAMES A. MIDDLETON and the Corporate
Secretary of Crown Energy Corporation as proxies of the
undersigned, with the powers the undersigned would possess
if personally
present, and with full power of substitution, to vote all
shares of Common Stock of the Company at the annual meeting of
stockholders of the Company to be held on Tuesday,
October 21, 1997, at 2:30 p.m., Mountain Standard Time,
in Salon I of the
Doubletree Hotel, 255 South West Temple, Salt Lake City, Utah,
and any adjournment or postponement thereof, upon all subjects
that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject
to any directors indicated below.
PROPOSAL 1 -- Election of Directors:
(__) FOR all four nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all four nominees for
director listed below.
(__) FOR all four nominees for director listed below,
except WITHHOLD AUTHORITY to vote for the nominee(s) whose name(s)
is (are) lined through.
Nominees: James A. Middleton, Jay Mealey,
Thomas W. Bachtell, Richard S. Rawdin
PROPOSAL 2 -- Appointment of Pritchett, Siler and Hardy as the
Independent Accountants for the Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 3 -- Approval of Crown Energy Long-Term Equity-Based
Incentive Compensation Plan.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 4 -- Approval of Transfer of Oil Sands Reserves
and Related Technology to a Joint Venture with MCN Investment
Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN
39
<PAGE>
PROXY
CROWN ENERGY CORPORATION
215 South State Street, Suite 550, Salt Lake City, UT 84111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned stockholder of CROWN ENERGY CORPORATION
(the "Company") hereby appoints JAMES A. MIDDLETON and the Corporate
Secretary of Crown Energy Corporation as proxies of the
undersigned, with the powers the undersigned would possess
if personally
present, and with full power of substitution, to vote all
shares of Common Stock of the Company at the annual meeting of
stockholders of the Company to be held on Tuesday,
October 21, 1997, at 2:30 p.m., Mountain Standard Time,
in Salon I of the
Doubletree Hotel, 255 South West Temple, Salt Lake City, Utah,
and any adjournment or postponement thereof, upon all subjects
that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject
to any directors indicated below.
PROPOSAL 1 -- Election of Directors:
(__) FOR all four nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all four nominees for
director listed below.
(__) FOR all four nominees for director listed
below, except WITHHOLD AUTHORITY to vote for the nominee(s)
whose name(s)
is (are) lined through.
Nominees: James A. Middleton, Jay Mealey,
Thomas W. Bachtell, Richard S. Rawdin
PROPOSAL 2 -- Appointment of Pritchett, Siler and Hardy as
the Independent Accountants for the Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 3 -- Approval of Crown Energy Long-Term Equity-Based
Incentive Compensation Plan.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 4 -- Approval of Transfer of Oil Sands Reserves
and Related Technology to a Joint Venture with MCN Investment
Corporation.
(__) FOR (__) AGAINST (__) ABSTAIN<PAGE>
This proxy
when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no
direction is made, the Proxy will be voted "FOR" the nominees
of the Board of Directors in the election of directors and "FOR"
all other proposals. This proxy also delegates discretionary
authority to vote with respect to any other business which may
properly come before the meeting or any adjournment or
postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE
OF ANNUAL MEETING, THE PROXY STATEMENT FURNISHED IN CONNECTION
THEREWITH AND THE ANNUAL REPORT AND HEREBY RATIFIES ALL
THAT THE SAID DIRECTORS AND PROXIES MAY DO BY VIRTUE HEREOF.
Dated:
, 1997
(Complete Date)
(Stockholder's Signature)
(Stockholder's Signature)
NOTE: Please mark, date and sign this proxy
card and return it to the address on the reverse
side of this card. Please sign as your name appears
on the label. If shares are registered in more than
one name, all owners should sign. If signing in a
fiduciary or representative capacity, please give
full title and attach evidence of authority.
Corporations please sign with full corporate name by
a duly authorized officer and affix corporate seal.
This proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder(s). If no
direction is made, the Proxy will be voted "FOR" the
nominees of the Board of Directors in the election of
directors and "FOR"
all other proposals. This proxy also delegates
discretionary authority to vote with respect to any
other business which may
properly come before the meeting or any adjournment or
postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL MEETING, THE PROXY STATEMENT FURNISHED
IN CONNECTION
THEREWITH AND THE ANNUAL REPORT AND HEREBY RATIFIES ALL
THAT THE SAID DIRECTORS AND PROXIES MAY DO BY VIRTUE HEREOF.
Dated:
, 1997
(Complete Date)
(Stockholder's Signature)
(Stockholder's Signature)
NOTE: Please mark, date and sign this proxy
card and return it to the address on the reverse
side of this card. Please sign as your name appears
on the label. If shares are registered in more than
one name, all owners should sign. If signing in a
fiduciary or representative capacity, please give
full title and attach evidence of authority.
Corporations please sign with full corporate name by
a duly authorized officer and affix corporate seal.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder(s). If no
direction is made, the Proxy will be voted "FOR" the nominees
of the Board of Directors in the election of directors and "FOR"
all other proposals. This proxy also delegates discretionary
authority to vote with respect to any other business which may
properly come before the meeting or any adjournment or
postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE
OF ANNUAL MEETING, THE PROXY STATEMENT FURNISHED IN CONNECTION
THEREWITH AND THE ANNUAL REPORT AND HEREBY RATIFIES ALL
THAT THE SAID DIRECTORS AND PROXIES MAY DO BY VIRTUE HEREOF.
Dated:
, 1997
(Complete Date)
(Stockholder's Signature)
(Stockholder's Signature)
NOTE: Please mark, date and sign this proxy
card and return it to the address on the reverse
side of this card. Please sign as your name appears
on the label. If shares are registered in more than
one name, all owners should sign. If signing in a
fiduciary or representative capacity, please give
full title and attach evidence of authority.
Corporations please sign with full corporate name by
a duly authorized officer and affix corporate seal.
<PAGE>
