SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CROWN ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
(same)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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: n/a
5) Total fee paid: n/a
__________________
(1) Set 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:
<P>
CROWN ENERGY CORPORATION
215 South State, Suite 650
Salt Lake City, Utah 84111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 18, 1998
TO THE SHAREHOLDERS OF CROWN ENERGY CORPORATION:
The 1998 Annual Meeting of Shareholders of Crown Energy
Corporation, a Utah corporation (the "Company"), will be held on
Wednesday, November 18, 1998, at 2:00 p.m., Mountain Standard
Time, in the Sun Valley Room of the Little America Hotel, 500
South Main Street, Salt Lake City, Utah, for the following
purposes:
1. To elect a Board of Directors, comprised of three persons
to serve until the next Annual Meeting of Shareholders or
until their respective successors shall be duly elected or
appointed.
2. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the 1998 fiscal year.
3. To transact such other business as may properly come
before the Annual Meeting or any adjournment or postponement
thereof.
Only shareholders of record at the close of business on
October 20, 1998, 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 Annual
Meeting will be available for examination at the offices of the
Company, 215 South State Street, Suite 650, Salt Lake City, Utah
84111, for 10 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 the Annual Meeting in
person, to assure that your shares will be represented, please
immediately complete, date, sign and return the enclosed proxy in
the enclosed envelope. No postage is required if the proxy is
placed in the enclosed envelope and mailed in the United States.
Your proxy may be revoked by you at any time before it is voted.
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.
Date: October 30, 1998 By Order of the Board of Directors
Richard S. Rawdin
Secretary
<P>
CROWN ENERGY CORPORATION
215 South State, Suite 650
Salt Lake City, Utah 84111
___________________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 1998
___________________________________
GENERAL INFORMATION
This Proxy Statement is being furnished to shareholders of
Crown Energy Corporation, a Utah corporation (the "Company"), in
connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of
Shareholders to be held on Wednesday, November 18, 1998, at 2:00
p.m., Mountain Standard Time, in the Sun Valley Room of the Little
America Hotel, 500 South Main Street, Salt Lake City, Utah (the
"Annual Meeting"). At the Annual Meeting, holders of the Company's
Common Stock will elect three directors, consider ratification of
Deloitte & Touche LLP as the Company's independent accountants and
consider such other matters as properly come before the Annual
Meeting. This Proxy Statement, the Notice of Annual Meeting of
Shareholders and the accompanying form of proxy are first being
mailed to shareholders of the Company on or about October 30, 1998.
Record Date
The Board of Directors has fixed the close of business on
October 20, 1998 as the Record Date for determination of
Shareholders entitled to notice of and to vote at the Annual Meeting
(the "Record Date"). As of the Record Date, there were issued and
outstanding 12,668,512 shares of Common Stock. The holders of
record of shares of Common Stock on the Record Date which are
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. Accordingly, a total of 12,668,512 votes are entitled to
be cast on each matter submitted to a vote at the Annual Meeting.
Proxies and Solicitation
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 (i) FOR the election of each of the three director
nominees; (ii) FOR the ratification of the appointment by the Board
of Directors of Deloitte & Touche LLP to be the Company's
independent accountants for the fiscal year ending December 31,
1998; and (iii) in the discretion of the proxy holders as to any
other matters which may properly come before the Annual Meeting.
A shareholder who has executed and returned a proxy may revoke
it at any time prior to its exercise at the Annual Meeting by
executing and returning a proxy bearing a later date, by filing with
the Secretary of the Company, at the address set forth above, a
written notice of revocation bearing a later date than the proxy
being revoked, or by voting the Common Stock covered thereby in
person at the Annual Meeting.
The Company will bear all costs and expenses relating to the
solicitation of proxies, including the costs of preparing, printing
and mailing to shareholders this Proxy Statement and accompanying
material. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company, without receiving
additional compensation therefor, may solicit proxies personally or
by telephone. Arrangements will be made with brokerage firms and
other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares of the
Company's Common Stock held by such persons, and the Company will
reimburse such brokerage firms, custodians, nominees and fiduciaries
for reasonable out-of-pocket expenses incurred by them in connection
therewith.
Votes Required
A majority of the outstanding shares of Common Stock entitled
to vote, represented in person or by properly executed proxy, is
required for a quorum. An abstention will be counted as
"represented" for the purpose of determining the presence or absence
of a quorum. A broker non-vote, which is an indication by a broker
that it does not have discretionary authority to vote on a
particular matter, will not be treated as "represented" for quorum
purposes. Under Utah corporate law, once a quorum is established,
shareholder approval with respect to a particular proposal is
generally obtained when the votes cast in favor of the proposal
exceed the votes cast against such proposal. Accordingly
abstentions and broker non-votes will not have the effect of being
considered as votes cast against any matter considered at the Annual
Meeting.
With respect to the election of directors, the three (3)
nominees receiving the highest number of votes will be elected to
serve as directors of the Company until next annual meeting of
shareholders and until their successors are duly elected and
qualified. The Company's Articles of Incorporation do not provide
for cumulative voting for the election of directors. For approval
of the proposed ratification of the independent accountants, the
votes cast in favor of the proposal must exceed the votes cast
against the proposal.
ELECTION OF DIRECTORS
The Bylaws of the Company and Utah law provide that the Company
shall have a minimum of three (3) directors. At the 1997 Annual
Meeting, shareholders elected four (4) directors. One of the
directors, Mr. Thomas W. Bachtell, has resigned since last year's
election of the members of the Board of Directors. In accordance
with the Bylaws of the Company, the remaining directors resolved not
to replace Mr. Bachtell as a director, but to eliminate the vacant
position on the Board. Accordingly, at this Annual Meeting, three
(3) directors of the Company (constituting the entire Board of
Directors) are to be elected to serve until the next annual meeting
of shareholders and until their successors shall be duly elected and
qualified. Each of the nominees for director identified below is
currently a director of the Company. The Board of Directors has no
reason to believe that any nominee will be unwilling or unable to
serve as a director. However, in the event that any nominee is
unwilling or unable to serve as a director, the proxies solicited
hereby will be voted for such other persons as shall be designated
by the present Board of Directors. The three (3) nominees receiving
the highest number of votes at the Annual Meeting will be elected.
Nominees for Election of Directors
Certain information with respect to each nominee, including
their ages, positions with the Company and any other positions are
set forth below:
James A. Middleton, 62, is the Chief Executive
Officer and Chairman of the Board of Directors of the
Company. Mr. Middleton has served as Chief Executive
Officer and a director since February 1996 and will serve
as Chief Executive Officer and director until a new
officer and director, respectively, are duly elected and
qualified. Mr. Middleton was an Executive Vice President
and director of Atlantic Richfield Co. from October 1987
to September 1994 and is presently a director of Texas
Utilities Co. and Berry Petroleum Co.
Jay Mealey, 42, is the President, Chief
Operating Officer, Treasurer, and a director of the
Company. Mr. Mealey has served as President and Chief
Operating Officer and as a director of the Company since
1991 and will serve as President, Chief Operating Officer
and Treasurer and as a director, until a new officer and
director, respectively, are elected and qualified. Mr.
Mealey has been actively involved in the oil and gas
exploration and production business since 1978. Prior to
employment with the Company, Mr. Mealey served as Vice
President of Ambra Oil and Gas Company and prior to that
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.
Richard S. Rawdin, 40, is the Vice President,
Secretary and a director of the Company. Mr. Rawdin has
served as a Vice President and Secretary and as a director
of the Company since 1991 and will serve as Vice-President
and Secretary and as a director, until a new officer and
director, respectively, are elected and qualified. From
February, 1986, to September, 1991, Mr. Rawdin served as
Controller and Vice President of Finance for Kerry
Petroleum Company, Inc. Prior to that, he was employed as
a Senior consultant with Deloitte and Touche. Mr. Rawdin
is a Certified Public Accountant.
The Board of Directors recommends that shareholders vote
FOR each of the above nominees to serve as directors of the
Company until the next annual shareholders meeting and until
their successors are duly elected and qualified.
Information concerning the 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. As presently constituted, the
Board of Directors has no functioning committees assuming any of the
responsibilities of the Board. There are no outside directors
serving or nominated to serve on the Board. There are no family
relationships between any director, executive officer, or person
nominated or chosen by the registrant to become a director or
executive officer.
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. The Board of Directors held three meetings
during 1997 and took action seven times by Unanimous Written
Consent. All directors attended all of the Board meetings.
As disclosed to the Company, the Board of Directors as
presently constituted beneficially own as a group 3,357,007 shares,
or approximately 26% of the Company's outstanding Common Stock as of
the Record Date, including 525,000 option shares exercisable within
60 days of the Record Date but which were unexercised as of the
Record Date.
Director Compensation
The Company does not presently have outside directors and
therefore does not presently offer any compensation to its directors
for their service as members of the Company's Board of Directors.
Directors, however, are reimbursed for their expenses in attending
Board meetings and are not precluded from serving the Company in any
other capacity and receiving compensation therefor.
EXECUTIVE COMPENSATION
The compensation of James A. Middleton, the Company's Chief
Executive Officer and the Company's other executive officers who
were paid at least $100,000 in 1997 (collectively, the "Named
Officers") is discussed in the following tables.
Summary Compensation Table
The following table contains information regarding compensation
paid to the Company's Named Officers for the fiscal years listed.
No other executive officer of the Company earned compensation in
excess of $100,000 in fiscal year 1997.
Annual Compensation Long Term
Compensation
Name and Salary Bonus Other Securities
Principal Year ($) ($) Annual Underlying
Position Compensation Options/SARS
($) (#)
James A. 1997 $0 $0 $0 0
Middleton, 1996 $0 $0 $0 0
Chief 1995(1) * * * *
Executive
Officer
Jay Mealey, 1997 $100,000 $56,250 $0 0 (3)
President and 1996 $78,000 $0 $0 0
Chief 1995 $78,00 $0 $0 0
Operating
Officer
Richard S. 1997 $52,500 $56,250 $0 0 (3)
Rawdin, Vice 1996(2) * * * *
President and 1995(2) * * * *
Secretary
(1) Mr. Middleton was not employed by the Company
prior to February 1996.
(2) Although employed by the Company, Mr. Rawdin did
not earn compensation in excess of $100,000 in either 1996
or 1995.
(3) Does not include 148,148 options to purchase
Common Stock of the Company at the purchase price of
$.5625 per share which were previously granted to both
Mr. Mealey and Mr. Rawdin in May 1995. Such options
became exercisable upon satisfaction of a condition
precedent to vesting and exercise, namely, the receipt and
completion of financing on the Company's Asphalt Ridge
project, and were in fact exercised during January of the
current year.
Option/SAR Grants Table
The following table sets forth information with respect to
individual grants of stock options made by the Company to the Named
Officers during the fiscal year ended December 31, 1997. The
Company did not grant any stock appreciation rights during the
fiscal year ended December 31, 1997.
Number of % of Total Exercise Expiratio
Securities Options or Base n Date
Name Underlying Granted to Price for
Options Employees ($/Sh) Option
Granted (#) in Fiscal Term
year
Jay Mealey 150,000 (1) 33 1/3% $1.62 per 11/1/07
150,000 (2) 33 1/3% share 11/1/07
150,000 (3) 33 1/3% $1.62 per 11/1/07
share
$1.62 per
share
(1) Represents the first of three tranches of
options to purchase 150,000 shares of Common Stock granted
as part of a single grant of options to purchase an
aggregate 450,000 shares of Common Stock. This first
tranche of options vested on November 1, 1997, but did not
become exercisable until July 28, 1998, the thirtieth
consecutive day that the average offer price of the
Company's Common Stock equaled or exceeded $2.00 per
share.
(2) Represents the second of three tranches of
options to purchase 150,000 shares of Common Stock granted
as part of a single grant of options to purchase an
aggregate 450,000 shares of Common Stock. This second
tranche of options will vest on November 1, 1998,
provided, with certain exceptions, that Mr. Mealey is
employed by the Company on that date, but will not be
exercisable until the average offer price of the Company's
Common Stock equals or exceeds $3.00 per share for thirty
days.
(3) Represents the third of three tranches of
options to purchase 150,000 shares of Common Stock granted
as part of a single grant of options to purchase an
aggregate 450,000 shares of Common Stock. This third
tranche of options will vest on November 1, 1999,
provided, with certain exceptions, that Mr. Mealey is
employed by the Company on that date, but will not be
exercisable until the average offer price of the Company's
Common Stock equals or exceeds $4.00 per share for thirty
days.
Aggregate Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table
The following table contains information regarding the fiscal
year-end value of unexercised options held by the Named Officers.
The aggregate value of the options was calculated using the average
bid and asked price for the Company's Common Stock on December 31,
1997.
Number of Value of
securities unexercised
underlying in-the-
unexercised money
options/SARs options/SAR
at fiscal years at fiscal
end year end
(#) ($)
Shares Value Exercisable/ Exercisable/
Name Acquired Realized Unexercisable Unexercisable
on ($)
Exercise
(#)
James A. 0 0 300,000 $304,500(1)
Middleton
Jay Mealey 0 0 548,148/450,000(2) $598,565/24,750
Richard S. 0 0 398,148 $437,315
Rawdin
(1) Does not include 75,000 options granted to
Mr. Middleton in October of 1998 pursuant to his
employment agreement with the Company.
(2) Represents three tranches of 150,000 options
granted in a single grant to Mr. Mealey in November of
1997. The first tranche of options vested on November 1,
1997, but did not become exercisable until July 28, 1998,
the thirtieth consecutive day that the average offer price
of the Company's Common Stock equaled or exceeded $2.00
per share. The second tranche of options will vest on
November 1, 1998, provided that Mr. Mealey is employed by
the Company, but will not be exercisable until the average
offer price of the Company's Common Stock equals or
exceeds $3.00 per share for thirty days. The third tranche
of options will vest on November 1, 1999, provided that
Mr. Mealey is employed by the Company, but will not be
exercisable until the average offer price of the Company's
Common Stock equals or exceeds $4.00 per share for thirty
days.
Employment Contracts
On January 26, 1996, the Company entered into an employment
agreement with James A. Middleton, the Chief Executive Officer and
Chairman of the Board of the Company. Mr. Middleton's employment
agreement terminates on February 6, 1999, with the option to extend
its term to February 6, 2001. The agreement provides for a base
salary equal to five percent of the Company's net profits from
operations before depletion, depreciation, tax credits and
amortization, but after interest on debt, with a salary cap of
$1,000,000 per calendar year. The agreement permits Mr. Middleton
to begin drawing up to $10,000 per month following sufficient
capital financing of the Company's operations as determined in the
sole discretion of the Company's Board of Directors. Mr. Middleton
has been granted options to purchase 300,000 shares of the Company's
Common Stock at an exercise price of $.66 per share pursuant to the
employment agreement and will be entitled to additional grants of
options to purchase 75,000 shares of the Company's Common Stock for
each subsequent full year of employment under the agreement now that
the Company's Asphalt Ridge Project has been funded. Mr. Middleton
is also entitled to (i) an additional option to purchase 100,000
shares of Common Stock upon commencement of operations of a facility
capable of producing at least 1,000 barrels of product a day and
(ii) an additional option to purchase 50,000 shares of Common Stock
for each full year of employment completed after February 6, 1999.
Mr. Middleton's employment agreement is terminable by either the
Company or Mr. Middleton for good cause only.
On November 1, 1997, the Company entered into an employment
agreement with Jay Mealey, the Company's President and Treasurer.
Mr. Mealey's employment agreement expires on December 31, 1999, but
will automatically be extended until December 31, 2002, unless the
Company gives written notice of non-renewal during the year 2000, in
which case the agreement will terminate 12 months after delivery of
the written notice of non-renewal. The employment agreement
provides for an initial base salary of $150,000, which amount
increases to $180,000 on November 1, 1999, and to $210,000 on
November 21, 2000. Thereafter, the agreement increases each
subsequent year by 20% per annum effective as of January 1 of each
successive year beginning January 1, 2001. In addition to the base
salary, Mr. Mealey is entitled to compensation bonuses based on (1)
the Company's earnings per share and (2) the price of the Company's
Common Stock. Mr. Mealey is also eligible to receive a
discretionary bonus each fiscal year during the term or renewed
terms of the agreement in amounts determined by the Board of
Directors of the Company in its sole discretion. Under the terms of
the employment agreement, Mr. Mealey was also issued options
pursuant to the Company's Long Term Equity-Based Incentive Plan to
purchase 450,000 shares of the Company's Common Stock at an exercise
price of $1.62 per share. The options vest in three equal tranches.
The first tranche of options to purchase 150,000 shares vested on
November 1, 1997, the second tranche of 150,000 options vests on
November 1, 1998 and the final tranche vests on November 1, 1999.
None of the options, however, can be exercised until the offer price
of the Company's Common Stock, for thirty days, equals or exceeds
$2.00 per share with respect to the first tranche of options, $3.00
per share with respect to the second tranche and $4.00 per share
with respect to the final tranche.
Mr. Mealey's employment agreement is terminable upon his death
or disability, terminable for "cause" and terminable by Mr. Mealey
for Good Reason (as defined in the Employment Agreement) following a
Change of Control (as defined in the Employment Agreement). If
terminated for "cause" as defined in the Employment Agreement,
Mr. Mealey is not entitled to receive compensation or benefits
beyond that which has been earned or has vested on the date of
termination. If terminated by Mr. Mealey's death or disability, Mr.
Mealey's legal representatives or beneficiaries are entitled to
receive continued payments in an amount equal to 70% of his base
salary in effect at the time of his death or disability until the
end of the term of the Employment Agreement or for a period of
twelve months, whichever is longer, plus a prorated amount of any
Bonus payable under the Employment Agreement. In the event of the
termination of Mr. Mealey's employment without cause or upon
termination of employment by Mr. Mealey for Good Reason following a
Change of Control, Mr. Mealey is entitled to payment of his unpaid
base salary, plus a lump sum payment equal to three times the sum of
his base salary and bonuses. Further, all options granted to Mr.
Mealey vest and become fully exercisable and, at Mr. Mealey's
option, can be surrendered to the Company for cash in an amount
equal to the fair market value of a share of the Company's Common
Stock minus the exercise price of the option times the number of
options surrendered. Mr. Mealey is also entitled to receive any and
all fringe benefits offered to employees of the Company for a
certain period of time. In addition, if the benefit payments are
subject to excise taxes, the Company is required to pay Mr. Mealey
an amount sufficient to cover such taxes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect
to beneficial ownership of the Company's Common Stock as of October
20, 1998 for (i) each executive officer of the Company, (ii) each
director of the Company, (iii) each person known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of
any class of the Company's stock, and (iv) all directors and
officers as a group.
Name and Address (1) Number of Percentage
Shares of Class (2)
Beneficially
Owned
Common Stock
Enron Capital & 4,250,000(4) 25.12%
Trade Resources
Corp. (3)
Jay Mealey 2,337,699(5) 18.24%
Thomas W. Bachtell 2,124,100(6) 16.07%
Richard S. Rawdin 589,308 4.65%
James A. Middleton 430,000(7) 3.30%
Executive Officers 3,357,007(8) 25.44%
and Directors as
Group (3 persons)
(1) The address for Enron Capital & Trade Resources Corp.
("ECT") is 1400 Smith Street, Houston, Texas, 77002.
The address for Messrs. Middleton, Mealey and Rawdin
is c/o Crown Energy Corporation, 215 South State
Suite 650, Salt Lake City, Utah 84111. The address
for Mr. Bachtell is 3245 Big Spruce Way, Park City,
Utah 84060.
(2) Based on 12,668,512 shares of the Company's
Common Stock issued and outstanding on October 20,
1998. Common shares which a beneficial owner had a
right to acquire within 60 days of October 20, 1998,
are treated as outstanding for the purpose of
computing the percentage ownership of each beneficial
owner.
(3) ECT is a wholly-owned subsidiary of Enron Corp.,
an Oregon corporation. Because of its ownership of
ECT, Enron Corp. may be deemed to be the beneficial
owner of all securities of the Company beneficially
owned by ECT. However, Enron Corp. disclaims
beneficial ownership of all such securities of the
Company.
(4) Represents 500,000 shares of the Company's $10
Class A Convertible Preferred Stock (the "Preferred
Stock") which is convertible into shares of the
Company's Common Stock at the rate of 8.57 shares of
Common Stock for each share of Preferred Stock,
subject to adjustment as set forth in the Certificate
of Designations of the Preferred Stock.
(5) Includes 150,000 options that are exercisable
within 60 days and 110,000 shares gifted by
Mr. Mealey to Glenn Mealey as custodian for Mr.
Mealey's children, Cameron and Andrew Mealey. Mr.
Mealey expressly disclaims beneficial ownership of
the shares held by Glenn Mealey. Does not include
300,000 Options that have not vested.
(6) Includes 548,148 Options which are
exercisable within 60 days.
(7) Includes 375,000 Options that are
exercisable within 60 days.
(8) Includes 525,000 Options that are exercisable
within 60 days and 110,000 shares gifted by
Mr. Mealey. Does not include 300,000 Options, which
have not vested.
Change in Control Contracts
In November 1997, the Company entered into an Employment
Agreement with Mr. Jay Mealey which contains "change of control"
provisions providing for the payment of compensation and benefits
upon the Company's termination of Mr. Mealey's employment without
cause or termination by Mr. Mealey for Good Reason (as defined in
that agreement). The change of control terms of Mr. Mealey's
contract are more fully discussed above under Executive
Compensation-Employment Contract.
The Company's Long Term Equity-Based Incentive Plan ("Plan")
also contains change-in-control provisions. Specifically, the Plan
provides that upon a change-in-control as defined in the Plan, that
all options issued pursuant to the Plan will automatically vest and
all periods or conditions of restriction will be deemed to have been
completed or fulfilled, as the case may be.
In addition, the Certificate of Designations of Preferred
Stock, which amends the Company's Articles of Incorporation,
prohibits a change in Mr. Mealey's status as President of the
Company without the affirmative vote or the written consent of the
holders of at least seventy-five (75%) of the outstanding shares of
Preferred Stock, voting as a class, so long as any shares of
Preferred Stock are outstanding.
Finally, Jay Mealey, the Company's President has entered into a
Right to Co-Sale Agreement (the "Co-Sale Agreement") with ECT
wherein he agreed not to sell any securities of the Company which he
owns, or any interests in such securities, to any person for a
period of five years except in accordance with the terms of the Co-
Sale Agreement which generally requires that upon receipt of a bona
fide offer to purchase more than 50% of the shares of the Company's
stock held by Mr. Mealey or more than 50% of the outstanding
securities of the Company, Mr. Mealey shall give ECT notice of the
offer and an opportunity to sell all or a pro-rata portion of the
shares of the Company's stock held by ECT. The sale of 50% or more
of the shares held by Mr. Mealey together with the sale of a similar
number of the shares held by ECT could result in a change in control
of the Company.
Compliance With Section 16(a) Of The Securities And Exchange
Act Of 1934
Section 16(a) of the Securities and Exchange Act of 1934 (the
"Exchange Act") requires the Company's executive officers and
directors and certain shareholders to file initial reports of
ownership and reports of changes in ownership with the Securities
and Exchange Commission (the "Commission"). Such persons are
required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and
directors, the Company notes the following:
(1) Thomas W. Bachtell, the holder of record of more than 10%
of the shares of the Company's issued and outstanding Common Stock,
has not reported pursuant to Section 16(a) the acquisition of
options to purchase 148,148 shares of Common Stock of the Company.
The options were granted in May 1995 to Mr. Bachtell while he was an
officer and director of the Company but did not become exercisable
until the Company completed financing of its Asphalt Ridge project
in November of 1997. If the foregoing condition of financing had
not been satisfied prior to May 31, 2000, the options would have
expired without becoming exercisable.
(2) Jay Mealey, the Company's President and a 10% Shareholder
was late in reporting the transfer of 12,500 shares of Common Stock
of the Company to Thomas W. Bachtell pursuant to Section 16(a) of
the Exchange Act. Mr. Mealey transferred 12,500 shares of Common
Stock to Thomas W. Bachtell on or about June 18, 1992 by executing
the assignment form on the back of the stock certificate
representing such shares and by delivering the endorsed stock
certificate to Mr. Bachtell. Mr. Mealey then overlooked the
transfer of shares until Mr. Bachtell recently presented the
endorsed certificate representing the shares to the Company and its
transfer agent to have such shares registered in his name on the
Company's stock records. Mr. Mealey then made the appropriate
filings on or about October 21, 1998. To the best of the Company's
knowledge, Mr. Bachtell has not reported the receipt of such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November of 1997, the Company also paid in full two
promissory notes to Thomas W. Bachtell, a former officer and
director of the Company and the holder of more than 10% of the
outstanding shares of the Company's Common Stock. The first note
was executed during the year ended December 31, 1995, to convert
deferred salaries payable to Mr. Bachtell in the amount of $34,000,
plus accrued interest of $3,521, into a long-term obligation of the
Company bearing interest at the rate of 9% per annum. This note
matured July 1, 1997. The second note also accrued interest at the
rate of 9% per annum and was executed during the year ended
December 31, 1995. The principal amount of the second note was
$19,411. Mr. Bachtell is also a partner of a law firm, Pruitt,
Gushee & Bachtell, which previously rendered legal services to the
Company. Legal fees and expenses paid to Pruitt, Gushee & Bachtell
for the fiscal years ended December 31, 1997 and 1996 totaled $635
and $27,429, respectively. In addition, during fiscal year ended
1995, the Company issued 47,273 shares of Common Stock in
satisfaction of an account payable to Pruitt, Gushee & Bachtell of
$33,092.
In November of 1997, the Company paid in full a promissory note
to Mr. Mealey in the principal amount of $53,240 dollars plus
accrued interest of $4,125 and $4,956 for the years ended December
31, 1997 and 1996, respectively. The note, which, accrued interest
at the rate of 9% per annum, was executed in 1995 for a loan made to
the Company by Mr. Mealey during fiscal year 1993. By its terms,
the note matured July 1, 1997.
Effective as of January 2, 1998, the President and Treasurer of
the Company, Jay Mealey, and the Vice President and Secretary of the
Company, Richard Rawdin, both of whom are also directors of the
Company, executed Promissory Notes in the amounts of $319,583 and
$229,583, respectively, as consideration for the purchase of shares
of Common Stock of the Company through the exercise of options
previously granted to each of them. The notes bear interest at an
adjustable rate of interest equal to the prime rate of interest as
published by the Wall Street Journal on the first business day of
each calendar quarter. The notes are secured by respective stock
pledge agreements granting the Company a security interest in the
shares of stock purchased upon the exercise of the options. Each
note is payable on a pro rata basis upon the sale of the underlying
stock securing repayment thereof or January 2, 2003, whichever
occurs first. The Company has agreed to permit Mr. Bachtell to
exercise options previously granted to him on the same terms. Mr.
Bachtell has not yet exercised such options.
Pursuant to a Stock Purchase Agreement dated September 25,
1997, the Company paid a structuring fee of $150,000 to ECT
Securities Corp., an affiliate of ECT, a shareholder of the Company,
in connection with the purchase by ECT of 500,000 shares of the
Company's Preferred Stock.
RATIFICATION OF SELECTION OF ACCOUNTANTS
At the Annual Meeting, the shareholders of the Company will be
asked to approve the Board's selection of Deloitte & Touche LLP
("Deloitte") as the Company's independent public accountants to
audit the Company's financial statements for the 1998 fiscal year.
Deloitte was engaged to be the independent accountants to audit and
report on the financial statements of the Company for the fiscal
year ended December 31, 1998, effective as of June 2, 1998. Prior
to June 2, 1998, Pritchett, Siler & Hardy, P.C. ("Pritchett") served
as the Company's independent accountants and performed the audit of
and reported on the Company's fiscal year ended December 31, 1997.
Pritchett's report on the financial statements of the Company
for the fiscal year ended December 31, 1997, did not contain an
adverse opinion or a disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
The Pritchett report for the fiscal year ended December 31, 1996,
contained a statement as the ability of the Company to continue as a
going concern. Other than the foregoing, there were no adverse
opinions or disclaimers of opinion, or qualifications or
modifications as to uncertainty, audit scope or accounting
principles.
The decision to change accountants was approved by the
Company's Board of Directors.
During the fiscal years ended December 31, 1997, 1996 and 1995,
and the period January 1, 1998 through June 2, 1998, thee were no
disagreements with Pritchett on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedures or any reportable events.
Prior to engaging Deloitte, neither the Company nor anyone
acting on its behalf consulted with Deloitte regarding the
application of accounting principles to any specified transaction or
the type of audit opinion that might be rendered on the Company's
financial statements. In addition, during the Company's fiscal
years ended December 31, 1997 and 1996, and during the period
January 1, 1998 through June 2, 1998, neither the Company nor anyone
acting on its behalf consulted with Deloitte with respect to any
matters that were the subject of a disagreement (as defined in item
304(a)(1)(iv) of Regulation S-K) or a reportable event (as described
in Item 304 (a)(1)(v) of Regulation S-K).
The Company does not anticipate that any representatives of
Pritchett or Deloitte will be present at the Annual Meeting.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's 1999 proxy
materials, a shareholder proposal must be received in writing by the
Company, at its principal office, no later than April 1, 1999 or if
the date of the 1999 Annual Meeting, contemplated at the time of
this proxy statement, is changed by more than 30 calendar days,
within a reasonable period of time prior to the solicitation of
proxies for such meeting. Further, unless written notice of a
shareholder proposal is received at the Company's principal office
on or before September 8, 1999, proxies solicited for the 1999
Annual Meeting may confer discretionary authority to vote on any
matter not included in next year's Proxy Statement; provided that if
the Board of Directors calls the annual meeting for a date that is
not within 30 days of the anniversary date of the immediately
preceding annual meeting the Company proxies may exercise
discretionary voting authority only if the Company did not receive
written notice within a reasonable time before the 1999 proxy
materials are mailed. All such proposals should be transmitted to
the Company by Certified United States Mail, with return receipt
requested.
OTHER MATTERS
The Company knows of no other matters that will be presented at
the 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.
ADDITIONAL INFORMATION
With this Proxy Statement, the Company is providing a copy of its
1997 Annual Report on Form 10-K to persons from whom a Proxy is
solicited. The Company will provide without charge to any person
from whom a Proxy is solicited by the Board of Directors, upon the
written request of such person, a copy of the Company's Amendment to
the 1997 Annual Report on Form 10-K, which contains the information
required by Part III of Form 10-K. If specifically requested, the
Company will also provide such persons with a copy of any or all
exhibits to the Form 10-K and the amendment thereto, upon payment of
the Company's reasonable expenses incurred in furnishing such
exhibits. Written requests for such information should be directed
to the Corporate Secretary of the Company.
<P>
PROXY
CROWN ENERGY CORPORATION
215 South State Street, Suite 650, 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 the Chairman of the Board 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 Wednesday, November 18,
1998, at 2:00 p.m., Mountain Standard Time, in the Sun Valley Room
of the Little America Hotel, 500 South Main Street, 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
directions indicated below.
PROPOSAL 1 -- Election of Directors:
(__) FOR all three nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all three nominees for
director listed below.
(__) FOR all three 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, Richard S. Rawdin
PROPOSAL 2 -- Appointment of Deloitte & Touche LLP as the
Independent Accountants for the Company.
(__) FOR (__) AGAINST (__) ABSTAIN
PROPOSAL 3 - In their discretion, the proxies are authorized to vote
upon such other matters as may properly come before the meeting, or
any adjournments or postponements of such meeting.
<P>
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:________________, 1998
(Complete Date)
(Stockholder's Signature)
(Stockholder's Signature)
NOTE: Please mark, date and
sign this proxy card and
return it in the enclosed
envelope to the address on the
reverse side of this card.
Please sign your name as it
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.
