<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
----------------------------
OMB APPROVAL
----------------------------
UNITED STATES OMB Number: 3235-0145
SECURITIES AND EXCHANGE COMMISSION Expires: October 31, 1997
WASHINGTON, D.C. 20549 Estimated average burden
hours per response... 14.90
----------------------------
</TABLE>
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Crown Energy Corporation
------------------------
(Name of Issuer)
Common Stock, par value $0.02 per share
---------------------------------------
(Title of Class of Securities)
228341301
---------
(CUSIP Number)
Jay Mealey, Crown Energy Corporation, 215 South State, Suite 550, Salt Lake
---------------------------------------------------------------------------
City, Utah 84111
----------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
November 4, 1997
----------------
(Date of Event which Requires Filing of this Statement)
If the person has previously filed a statement on Schedule 13G to report the
acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement.[ ] (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 8 Pages
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 228341301 PAGE 2 OF 8 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Capital & Trade Resources Corp.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States of America, State of Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
4,285,000
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
4,285,000
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
4,285,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
27%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 228341301 PAGE 3 OF 8 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States of America, State of Oregon
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 4,285,000
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
4,285,000
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
4,285,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
27%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $0.02 per share (the
"Common Stock"), of Crown Energy Corporation, a Utah corporation (the "Issuer").
The address of the principal executive offices of the Issuer is 215 South State,
Suite 550, Salt Lake City, Utah, 84111.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed by Enron Capital & Trade Resources Corp., a
Delaware corporation ("ECT"), and by Enron Corp., an Oregon corporation
("Enron"). ECT is a wholly owned subsidiary of Enron and is engaged primarily in
the business of purchasing natural gas, gas liquids and power through a variety
of contractual arrangements and marketing these energy products to local
distribution companies, electric utilities, cogenerators and both commercial and
industrial end-users. ECT also provides risk management services. Enron is an
integrated natural gas company that engages, primarily through subsidiaries, in
the gathering, transportation and wholesale marketing of natural gas, the
exploration for and the production of natural gas and crude oil, the production,
purchase, transportation and worldwide marketing and trading of natural gas
liquids, crude oil and refined petroleum products, the production and sale of
cogenerated electricity and steam and the purchasing and marketing of long-term
energy-related commitments. ECT and Enron are referred to herein as the
"Reporting Entities."
The address of the principal business and the principal office of ECT and Enron
is 1400 Smith, Houston, Texas 77002. Schedules 1 and 2 attached hereto set forth
certain additional information with respect to each director and each executive
officer of ECT and Enron. The filing of this statement on Schedule 13D shall not
be construed as an admission that Enron or ECT or any person listed on Schedule
I hereto is, for the purposes of Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, the beneficial owner of any securities covered by this
statement.
Neither of the Reporting Entities nor, to their knowledge, any person listed on
Schedule I hereto, has been, during the last five years (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violation of, or
prohibiting or mandating activities subject to, U.S. federal or state securities
laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Under the terms of a Stock Purchase Agreement dated September 25, 1997, between
ECT and the Issuer (the "Stock Purchase Agreement"), ECT agreed to purchase from
the Issuer 45,000 shares of $10 Series A Preferred Stock of the Issuer (the
"Preferred Stock") for a cash purchase price of $450,000. The Preferred Stock
was issued effective September 30, 1997, the date upon which the Certificate of
the Voting Powers, Designations, Preferences and Relative Participating, Option
or other Special Rights, and Qualifications, Limitations and Restrictions
Thereof, of Series A Cumulative Convertible Preferred Stock (the "Certificate of
Rights and Designations") was filed and approved by the Utah Secretary of State.
Pursuant to the Stock Purchase Agreement, effective November 4, 1997, ECT
purchased an additional 455,000 shares of the Preferred Stock at a per share
price of $10.00, and additionally, has received a warrant (the "Warrant")
exersisable five years from its date of issuance for up to 925,771 shares of
Common Stock at a per share exercise price of $0.002, subject to limts based on
the financial performance of the Issuer. The source of the purchase price was
working capital of Enron and ECT.
ITEM 4. PURPOSE OF TRANSACTION.
The transactions described in Item 3 above occurred as a result of negotiations
with the Issuer. The Securities purchased by ECT were acquired for investment
purposes. ECT intends to review its investment in the Issuer on an ongoing basis
and, depending upon the price of, and other market conditions relating to, the
Common Stock,
4
<PAGE>
subsequent developments affecting the Issuer, the Issuer's business and
prospects, other investment and business opportunities available to ECT, general
stock market and economic conditions, tax considerations and other factors
deemed relevant, may decide to convert its Preferred Stock into Common Stock,
exercise its Warrant, or otherwise increase or decrease the size of its
investment in the Issuer.
Other than as described above, neither of the Reporting Entities, nor, to their
knowledge, any person listed on Schedule I hereto, has any plan or proposal that
would result in any of the consequences listed in paragraphs (a) -(j) of Item 4.
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
ECT beneficially owns and has the power to vote and dispose of 4,285,000 shares
of Common Stock, representing approximately 27% of the shares of Common Stock
outstanding (determined in accordance with Rule 13d-3). Because ECT is a wholly
owned subsidiary of Enron, Enron may also be deemed to beneficially own such
shares. Enron disclaims beneficial ownership of all of such shares. All such
shares are issuable upon conversion of Preferred Stock owned by ECT. Each share
of Preferred Stock is convertible at the option of the holder thereof at any
time for 8.57 shares of Common Stock. The number of shares of Common Stock
issuable on conversion or exercise of the Preferred Stock is subject to
adjustment pursuant to customary antidilution provisions included in the terms
of such securities. The rights and preferences of the Preferred Stock are set
forth in the Certificate of Rights and Designations included as Exhibit 2. The
remainder represent the maximum number of shares that could be acquired when the
Warrant becomes exercisable, subject to limitations set forth in the Warrant.
Except as described herein, neither of the Reporting Entities, nor, to their
knowledge, any of the persons named in Schedule I hereto, has effected any
transactions in the Common Stock during the past sixty days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
As part of the Stock Purchase Agreement, the Issuer agreed that ECT, subject to
compliance with applicable laws, shall have the right to appoint 20% of the
Issuer's board of directors at its discretion in addition to appointing a
representative who may attend and be heard at all meetings of the Issuer's board
of directors.
Pursuant to the Certificate of Rights and Designations, the Issuer has agreed to
redeem 25%, 25%, and 50% of the Preferred Stock at ECT's option on the eighth,
ninth, and tenth anniversary of the issue of the Preferred Stock, and will
establish sinking funds for this purpose. Subject to ECT's right of conversion,
the Issuer may redeem the Preferred Stock at any time for accrued and unpaid
dividends plus a percentage of stated value as set forth in the Certificate of
Rights and Designations.
The Stock Purchase Agreement provides a right of first refusal for the Issuer in
the event that ECT sells any of its Preferred Stock or Common Stock issued upon
conversion of Preferred Stock.
The Stock Purchase Agreement contains demand registration provisions, obligating
the Issuer to file a Registration Statement with the Securities and Exchange
Commission with respect to all shares of Common Stock held by or issuable to ECT
in connection with the transactions contemplated by the Stock Purchase
Agreement. The Stock Purchase Agreement also contains certain piggy-back
registration rights with respect to such shares.
The Warrant provides ECT the right to purchase up to an additional 8% of the
total outstanding shares of the Issuer's common stock calculated as of the date
of issuance of the Warrant, in the event that the internal rate of return on
ECT's investment after five years (as defined in the Stock Purchase Agreement)
is less than 39% per year. The Warrant has an exercise price of $0.002 per share
and a term of ten years.
5
<PAGE>
Pursuant to the Certificate of Rights and Designations, the Issuer will not,
without the consent of the holders of at least 75% of the Preferred Stock take
or fail to take certain action with respect to the Crown Asphalt Ridge project
(as defined in the Stock Purchase Agreement). Additionally, the Issuer will
not, without the consent of the holders of at least 75% of the Preferred Stock,
(i) alter the rights, preferences or privileges of the Preferred Stock; (ii)
authorize or issue any security having liquidation preferences or redemption,
voting or dividend rights senior to or on a parity with the Preferred Stock;
(iii) increase the number of shares of Preferred Stock which the Issuer shall
have the authority to issue; (iv) reclassify any of the Issuer's or any
subsidiary's securities; (v) acquire any material business by merger,
consolidation, stock or equity purchase, asset acquisition or otherwise (other
than businesses within the Issuer's or any subsidiary's existing business lines
with an aggregate purchase price of less than $5,000,000 (including assumption
of debt)); (vi) merge, consolidate, sell or dispose of all or substantially all
of the Issuer's or any subsidiary's assets or property, other than as provided
in the Certificate of Rights and Designations; (vii) otherwise engage in a
change in control event or fundamental corporate transaction; (viii) pay
dividends, redeem stock or make any other restricted payments, or permit any
subsidiary to pay dividends, redeem stock or make any other restricted payments,
to the holders of the Issuer's or such subsidiary's outstanding equity
securities (other than with respect to Preferred Stock pursuant to the terms of
the Issuer's Articles of Incorporation); (ix) amend the Issuer's or any
subsidiary's Articles of Incorporation, by-laws or other charter documents, or
any stock option or other stock compensation plan, to the extent that such an
amendment affects the legal or economic rights of the Preferred Stock; (x) allow
any subsidiary of the Issuer to issue securities to an entity or person other
than the Issuer or a wholly-owned direct or indirect subsidiary of the Issuer;
(xi) make any changes in the employment status of the person holding the
position of president of the Corporation; (xii) directly or indirectly make any
guarantees or otherwise become liable in any way with respect to the obligations
or liabilities of any person or entity, or permit any subsidiary to do the same,
except in the ordinary course of business; (xiii) mortgage, pledge or create a
security interest in, or permit any subsidiary to mortgage, pledge or create a
security interest in, all or any material proportion of the Issuer's or such
subsidiary's assets; (xiv) incur, create or assume, or permit any subsidiary to
incur, create or assume any indebtedness for borrowed money in excess of
$2,500,000 (not including any capitalized leases or other financing arrangements
with respect to certain leased equipment; (xv) change the Issuer's principal
business, enter into new lines of business or exit the current line of business,
or permit any subsidiary to do the same (the Issuer's current line of business
is asphalt manufacturing, production, refining, blending, modifying, storing,
transporting, marketing, and any other activities relating to the asphalt
industry); (xvi) enter into, materially amend or terminate, or make any material
waiver pursuant to or materially breach, any material contract; (xvii) increase
or decrease the size of the Board of Directors of the Issuer; (xviii)
voluntarily liquidate, dissolve or wind-up the Issuer or any subsidiary; (xix)
allow the commencement of an involuntary case or other proceeding against the
Issuer or any subsidiary seeking liquidation, reorganization or other relief
with respect to its debts under any applicable federal or state bankruptcy,
insolvency, reorganization or similar law now or hereafter in effect or seeking
the appointment of a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or similar official of it or any substantial part of its property,
which involuntary case or other proceeding shall remain undismissed and
unstayed, or allow an order or decree approving or ordering any of the foregoing
to be entered and continued unstayed and in effect, for a period of ninety days;
(xx) commence a voluntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law or any other
case or proceeding to be adjudicated a bankrupt or insolvent or consent to the
entry of a decree or order for relief in respect of the Issuer or any subsidiary
in an involuntary case or proceeding under any applicable, federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against any of
them, or file a petition or answer or consent seeking reorganization or relief
under any applicable, federal or state law, or consent to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Issuer or
any subsidiary or any substantial part of its property or making assignment for
the benefit of creditors, or admit in writing an inability to pay their debts
generally as they become due, or take any action in furtherance of any such
action; and (xxi) consent to the sale, lease or other disposition of all or
substantially all of the assets of certain subsidiaries.
6
<PAGE>
Contemporaneous with the Stock Purchase Agreement, ECT entered into a Right of
Co-Sale Agreement (the "Co-Sale Agreement") with Jay Mealey, a shareholder of
the Issuer (the "Shareholder"). Pursuant to the Co-Sale Agreement, the
Shareholder has agreed not to sell or otherwise dispose of any Common or
Preferred Stock of the Issuer for a period of five years from the date of the
Co-Sale Agreement, except in accordance with its provisions. The Co-Sale
Agreement provides for rights of co-sale for ECT in the event the Shareholder
receives a bona fide offer to purchase his shares of Common or Preferred Stock.
The Co-Sale Agreement does not apply to sales which do not involve at least (i)
50% of the Common and Preferred Stock owned by the Shareholder and (ii) more
than 50% of the outstanding Common Stock of the Issuer, including Common Stock
issuable upon conversion of outstanding Preferred Stock. The Co-Sale Agreement
was superseded by a new Right of Co-Sale Agreement effective November 4, 1997,
having substantially similar terms to the Co-Sale Agreement. The new Right of
Co-Sale Agreement is attached as Exhibit 5.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Stock Purchase Agreement dated as of September 25, 1997 between
the Issuer and ECT.*
Exhibit 2 Certificate of Rights and Designations of the Preferred Stock, as
filed and approved by the Utah Secretary of State on September 30,
1997.*
Exhibit 3 Warrant to purchase additional shares of Common Stock.*
Exhibit 4 Right of Co-Sale Agreement*
Exhibit 5 Revised Right of Co-Sale Agreement
*Incorporated by reference to Schedule 13D filed by the Reporting Entities with
respect to the Common Stock of the Issuer on October10, 1997.
7
<PAGE>
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
November 11, 1997 ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Peggy B. Menchaca
------------------------------
Peggy B. Menchaca
Vice President and Secretary
ENRON CORP.
By: /s/ Peggy B. Menchaca
-----------------------------
Peggy B. Menchaca
Vice President and Secretary
8
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule 1 Directors and Executive Officers of Enron Capital & Trade Corp.*
Schedule 2 Directors and Executive Officers of Enron Corp.*
Exhibit 1 Stock Purchase Agreement dated as of September 25, 1997 between
the Issuer and ECT.*
Exhibit 2 Certificate of Rights and Designations of the Preferred Stock, as
filed and approved by the Utah Secretary of State on September
30, 1997.*
Exhibit 3 Warrant to purchase additional shares of Common Stock. *
Exhibit 4 Right of Co-Sale Agreement.*
Exhibit 5 Revised Right of Co-Sale Agreement
*Incorporated by reference to Schedule 13D filed by the Reporting Entities with
respect to the Common Stock of the Issuer on October 10, 1997.
9
<PAGE>
RIGHT OF CO-SALE AGREEMENT
This Right of Co-Sale Agreement (this "Agreement") dated as of November 4,
1997, is by and among Jay Mealey (together with any Affiliates, the
"Shareholder") and Enron Capital & Trade Resources Corp., a Delaware
corporation (the "Investor"). This Right of Co-Sale Agreement supersedes and
replaces that certain Right of Co-Sale Agreement between the parties dated as of
September 25, 1997 (the "Superseded Right of Co-Sale Agreement").
WITNESSETH:
WHEREAS, the Shareholder and the Investor are the owners of common stock
(the "Common Stock") or Series A Preferred Stock (the "Preferred Stock;"
together with all other capital stock of the Corporation, the "Securities") of
Crown Energy Corporation (the "Corporation"); and
WHEREAS, the Corporation and the Investor are parties to that certain Stock
Purchase Agreement dated as of September 25, 1997 (the "Stock Purchase
Agreement"), and as a condition of the Investor becoming a party to the Stock
Purchase Agreement, the Shareholder executed the Superseded Right of Co-Sale
Agreement; and
WHEREAS, the parties desire to clarify that this Agreement includes all of
the Preferred Stock acquired or to be acquired by Investor pursuant to the Stock
Purchase Agreement (and therefore all of such Preferred Stock is included in the
term "Preferred Stock"); and
WHEREAS, certain capitalized terms used herein shall have the meanings
assigned to them in the Stock Purchase Agreement; and
WHEREAS, the parties hereto agree that the success of the Corporation
requires the active interest and support of the Shareholder and the Investor and
therefore desire to promote the best interests of the Corporation and their
mutual interests by imposing certain requirements with respect to the
transferability of the Securities of the Corporation owned by the parties
hereto;
NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the parties hereby agree as follows:
<PAGE>
ARTICLE I
RIGHT OF CO-SALE
SECTION 1. Right of Co-Sale. The Shareholder agrees that he shall not
Sell any Securities or any interest therein to any Person, except in accordance
with the terms of this Agreement, for a period of five (5) years from the date
hereof (the "Restrictive Period").
1.1 "Sale", "Sell" or "Sold" shall mean and include any sale, gift or
other form of transfer, conveyance, disposal or encumbrance, whether voluntary
or involuntary, including any dividend or distribution and the pledging of any
security, and whether direct or indirect or alone or in a series of related
transactions.
1.2 Before the expiration of the Restrictive Period, if the
Shareholder receives a good faith, non-collusive offer to purchase such
Securities (an "Offer") which the Shareholder desires to accept, the Shareholder
shall first give written notice ("Notice") to the Investor as provided below.
1.3 The Notice shall be sent to the Investor in compliance with the
terms of this Agreement and shall set forth:
(1) the number of Securities and the interest therein that the
Shareholder desires to Sell;
(2) the name of any proposed purchaser (the "Offeror") and a
description of the Offer,
(3) the cash consideration per share to be received by the
Shareholder in connection with the Offer, or if the consideration is other than
cash or partly in cash and partly in the form of other consideration, the nature
of the other consideration to be received (with a reasonable description
thereof) and the other material terms and conditions of such proposed Sale; and
(4) the address of the Shareholder at which the Investor may give
any notice required herein.
1.4 The Investor shall have fifteen (15) days after receipt of the
Notice to notify the Shareholder as to its decision to exercise rights of co-
sale hereunder (the "Acceptance Period"). The Investor will include in such
notice the number of Securities that the Investor wishes to Sell in the Sale
contemplated by the Offer (the "Sale Transaction").
(1) Upon receiving notice that the Investor has opted to exercise
its rights of co-sale hereunder, the Shareholder shall use his best efforts to
interest the Offeror in purchasing all of the Securities designated by the
Investor as well as those proposed to be Sold by the Shareholder. If the Offeror
does not wish to purchase all of the Securities with respect to which the
Investor has exercised rights of co-sale, Section 1.4(b) hereof shall govern.
-2-
<PAGE>
(2) If the Offeror does not wish to purchase all of the
Securities with respect to which the Investor has exercised rights of co-sale
hereunder, the Investor may participate in the Sale Transaction by selling all
or part of its pro-rata share of Securities to the proposed purchaser (the
"Participating Shares") on the terms contemplated by the Offer, along with the
pro-rata share of the Shareholder's Securities. For purposes of this Section, a
party's pro-rata share means, with respect to each party participating in the
Sale Transaction, the proportion (expressed as a percentage) that its ownership
of Securities (calculated, in the case of Preferred Stock, with respect to the
number of shares of Common Stock into which the Preferred Stock may be
converted) bears to the aggregate number of Securities (calculated, in the case
of Preferred Stock, with respect to the number of shares of Common Stock into
which the Preferred Stock may be converted) that the Shareholder and Investor
desire to Sell in the Sale Transaction.
SECTION 2. Certain Exempt Transactions.
2.1 The rights of the Investor under Section 1 hereof shall not apply
to any Sale of the Shareholder's Securities which does not involve at least:
(1) fifty percent (50%) of the Securities owned by the
Shareholder; and
(2) more than fifty percent (50%) of the outstanding Securities
of the Company, calculated by taking into consideration the number of shares of
Common Stock into which any outstanding Preferred Stock may be converted.
IN WITNESS WHEREOF, signed as of the date first written above.
INVESTOR:
ENRON CAPITAL & TRADE
RESOURCES CORP.
By: /s/ J. Kevin McConville
-------------------------------
Name: J. Kevin McConville
-------------------------------
Title: Vice President
-------------------------------
SHAREHOLDER:
/s/ Jay Mealey
-----------------------------------
Jay Mealey
-3-
