- --------------------------------------------------------------------------------
AMENDMENT TO FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 For the fiscal year ended December 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From _________ to ___________
Commission File Number 0-19365
CROWN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 87-0368981
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 South State, Suite 550
Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 537-5610
Securities registered pursuant to Section 12 (b) of the Act:
(None)
Securities registered pursuant to Section 12 (g) of the Act:
$0.02 PAR VALUE COMMON STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock, Par Value $0.02 per share held
by non-affiliates of the Registrant on April 22, 1998, was $12,372,079.50 using
the average bid and asked price for Registrant's Common Stock. As of April 22,
1998, Registrant had 12,668,512 shares of its $0.02 par value Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one)
YES [ ] NO [X]
- --------------------------------------------------------------------------------
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company, their ages and
their positions are set forth below:
NAME AGE POSITION
James A. Middleton 62 Chief Executive Officer,
Chairman of the Board of Directors
Jay Mealey 41 President, Treasurer, Director
Richard S. Rawdin 39 Vice President, Secretary, Director
James A. 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 ARCO Chemical
Co., Texas Utilities Co. and Berry Petroleum Co.
Jay Mealey has served as President and Chief Operation Officer and as a
director of the Company since 1991 and will serve as President 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 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.
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 that 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.
ITEM 11. EXECUTIVE COMPENSATION
The compensation of James A. Middleton, the Company's Chief Executive
Officer and the Company's two highly paid executive officers (collectively, the
"Named Officers") is discussed in the following tables.
2
<PAGE>
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 $100,000 in fiscal year
1997.
<TABLE>
<CAPTION>
================================================================================================================================
Annual Compensation Long Term
Compensation
================================================================================================================================
================================================================================================================================
Name and Principal Salary Bonus Other Annual Securities Underlying
Position Year ($) ($) Compensation ($) Options/SARS (#)
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
<S> <C> <C> <C> <C> <C>
James A. Middleton, 1997 $0 $0 $0 0
Chief Executive Officer 1996 $0 $0 $0 0
1995(1) * * * *
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Jay Mealey, President 1997 $100,000 $56,250 $0 0 (3)
1996 $78,000 $0 $0 0
1995 $78,000 $0 $0 0
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Richard S. Rawdin, Vice 1997 $52,500 $56,250 $0 0 (3)
President and Secretary 1996(2) * * * *
1995(2) * * * *
================================================================================================================================
</TABLE>
(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 $.5625 per share which were previously granted
to both Mr. Mealey and Mr. Rawdin in May 1995 and which became exercisable upon
satisfaction of a condition precedent to vesting and exercise, namely, the
receipt and completion of financing on the Company's Asphalt Ridge project.
Option/SAR Grants Table
The following table sets forth information with respect to individual
grants of stock options made by the Company to the Named Officers during the
fiscal year ended December 31, 1997. The Company did not grant any stock
appreciation rights during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
============================================================================================================================
Number of % of Total Exercise or Base Expiration
Securities Options Granted Price ($/Sh) Date for
Name Underlying Options to Employees in Option Term
Granted (#) Fiscal year
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jay Mealey 150,000 (1) 33 1/3% $1.62 per share 11/1/07
150,000 (2) 33 1/3% $1.62 per share 11/1/07
150,000 (3) 33 1/3% $1.62 per share 11/1/07
============================================================================================================================
</TABLE>
(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 is not exercisable until the average
offer price of the Company's Common Stock equals or exceeds $2.00 per share for
thirty days.
3
<PAGE>
(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
$4.00 per share for thirty days.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
The following table contains information regarding the fiscal year-end
value of unexercised options held by the Named Officers. The aggregate value of
the options was calculated using the average bid and asked price for the
Company's Common Stock on December 31, 1997.
<TABLE>
<CAPTION>
=================================================================================================================================
Number of securities Value of
underlying unexercised in-
unexercised the-money
options/SARs at fiscal options/SARs at
year end fiscal year end
(#) ($)
-------------------------------------------------------
-------------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
=================================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James A. Middleton 0 0 300,000 $304,500
Jay Mealey 0 0 548,148/450,000 (1) $598,565/24,750
Richard S. Rawdin 0 0 398,148 $437,315
=================================================================================================================================
</TABLE>
(1) 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 is not exercisable until the average offer price of the
Company's Common Stock equals or exceeds $2.00 per share for thirty days. 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.
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.
4
<PAGE>
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 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.
5
<PAGE>
ITEM 12. 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 April 22, 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 Shares Percentage of Class
Beneficially Owned (2)
Common Stock
Enron Capital & Trade Resources 4,250,000(4) 25.12%
Corp. (3)
Jay Mealey 2,200,199(5) 17.37%
Thomas W. Bachtell 2,124,100(6) 16.07%
Richard S. Rawdin 589,308 4.65%
James A. Middleton 355,000(7) 2.74%
Executive Officers and Directors 3,144,507(8) 24.25%
as Group (3 persons)
==============================================================================
(1) The address for Enron Capital & Trade Resources Corp. is 1400
Smith, Houston, Texas, 77002. The address for Messrs.
Middleton, Mealey and Rawdin is c/o Crown Energy Corporation,
215 South State Suite 550, 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 April 22, 1998. Common shares which
a beneficial owner had a right to acquire within 60 days of
April 22, 1998, are treated as outstanding for the purpose of
computing the percentage ownership of each beneficial owner.
(3) Enron Capital & Trade Resources Corp. ("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 Class A Preferred Stock.
(5) Includes 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 450,000
Options, 150,000 of which vested on November 1, 1997, but are
not exercisable until the price of the Company's Common Stock
equals or exceeds $2.00 per share for thirty days, and the
remaining 300,000 not being vested.
(6) Includes 548,148 Options which are exercisable within 60 days.
(7) Includes 300,000 Options which are exercisable within 60 days.
6
<PAGE>
(8) Includes 300,000 Options which are exercisable within 60 days
and 110,000 shares gifted by Mr. Mealey. Does not include
450,000 Options, 150,000 of which vested on November 1, 1997,
but are not exercisable until the price of the Company's
Common Stock equals or exceeds $2.00 per share for thirty
days, and the remaining 300,000 not being 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 in Item 11. "Executive
Compensation--Employment Contracts." 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, 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.
ITEM 13. 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.
7
<PAGE>
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.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
(1) The Company's consolidated balance sheet and statement of
income and cash flows for the period ended December 31, 1997
are incorporated by reference from the original Form 10-K
filed with the Commission on or about March 30, 1998, bearing
Commission file number 0-19365.
(2) EXHIBITS:
EXHIBIT NO. DOCUMENT
----------- --------
3.1 Articles of Incorporation (5)
3.2 Certificate of Voting Powers, etc. of the Company's Preferred
Stock (9)
3.3 Amended By-Laws (1)
4.1 Convertible Debenture - Agreement dated May 6, 1997, between
Crown Energy Corporation and Oriental New Investments, Ltd.
(6)
4.2 Warrant with Encap Investments, L.C. (11)
4.3 Form of Stock Option Agreements between the Company and (i)
Jay Mealey, (ii) Richard Rawdin and (iii) Thomas Bachtell.
(11)
4.4 The Crown Energy Long Term Equity-Based Incentive Plan
4.5 Common Stock Purchase Warrant dated November 4, 1997 issued to
Enron Capital & Trade Resources Corp. (9)
10.1 License Agreements with Park Guymon Enterprises, Inc., dated
January 20, 1989, June 1, 1990 and June 1, 1990 (2)
10.2 Amendment to License Agreement with Park Guymon Enterprises,
Inc. (5)
10.3 Executive Employment Agreement with James A. Middleton (5)
10.4 Employment Agreement with Jay Mealey (11)
10.5 Consulting Agreement with IBEX Group, Inc. and Hoffman
Partners, Inc. (5)
10.6 Promissory Note issued to Jay Mealey 12/31/95 (5)
10.7 Promissory Note issued to Thomas W. Bachtell 12/31/95 (5)
10.8 Promissory Note issued to Thomas W. Bachtell 12/31/95 (5)
10.9 Oil and Gas Minerals Lease, dated September 1, 1991 with
Wembco, Inc. (3)
10.10 Crown Office Space Lease (4)
10.11 First Amendment to Crown Office Space Lease (11)
10.12 Investment Banking Agreement with Fortress Financial Group,
Ltd. (11)
10.13 Promissory Note from Jay Mealey (11)
10.14 Promissory Note from Rich Rawdin (11)
10.15 Stock Pledge Agreement with Jay Mealey (11)
10.16 Stock Pledge Agreement with Rich Rawdin (11)
10.17 Assignment of Assets to Crown Asphalt Ridge, L.L.C. by Crown
Asphalt Corporation (11)
10.18 Assignment to Crown Asphalt Ridge, L.L.C. by Crown Asphalt
Corporation (11)
10.19 Asphalt Ridge Project Operating and Management Agreement with
Crown Asphalt Ridge L.L.C., dated August 1, 1997 (11)
10.20 Sublicense and Agreement between Crown Asphalt Ridge, L.L.C.
and Crown Asphalt Corporation (11)
10.21 Stock Purchase Agreement with Enron Capital & Trade Resources
Corp. (9)
10.22 Engineering, Construction and Procurement Agreement with
CENTRY Constructors & Engineers, LLC (11)
8
<PAGE>
10.23 Revised Right of Co-Sale Agreement between Jay Mealey and
Enron Capital & Trade Resources Corp. (10)
10.24 Guaranty Agreement in favor of MCNIC Pipeline & Processing
Company (11)
10.25 Crown Office Space Sublease (11)
10.26 Stock Purchase Agreement dated July 2, 1997, between Crown
Energy Corporation and Road Runner Oil, Inc. (7)
10.27 Letter Agreement with EnCap Investments L.C. (11)
10.28 Operating Agreement for Crown Asphalt Ridge L.L.C. (8)
10.29 Tar Sands Supply and Mining Agreement dated May 15, 1996
between Crown Asphalt Corporation and Uintah County
10.30 Participation Agreement dated March 28, 1994 between Crown
Asphalt Corporation and Asphalt Ridge Limited Partnership
21 Subsidiaries of the Company (11)
27 Financial Data Schedule (11)
- ------------------------
(1) Incorporated by reference from the Company's Registration Statement
on Form 10 filed with the Commission on July 1, 1991, amended August
30, 1991 and bearing Commission file number 0-19365.
(2) Incorporated by reference from the Company's Report on Form 8-K
filed with the Commission on or about September 30, 1992, bearing
Commission file number 0-19365.
(3) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1992, bearing Commission file
number 0-19365.
(4) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1992, bearing Commission file
number 0-19365.
(5) Incorporated by reference from the Company's Registration Statement
on Form S-1 filed with the Commission on or about March 13, 1996,
bearing Commission file number 0-19365.
(6) Incorporated by reference from the Company's Form 8-K filed with
the Commission on or about June 12, 1997, bearing Commission file
number 0-19365.
(7) Incorporated by reference from the Company's Form 8-K filed with
the Commission on or about July 21, 1997, bearing Commission file
number 0-19365.
(8) Incorporated by reference from the Company's Form 8-K filed with
the Commission on or about November 18, 1997, bearing Commission file
number 0-19365.
(9) Incorporated by reference from Enron Capital & Trade Resources
Corp. Form 13D filed with the Commission on or about October 10, 1997.
(10) Incorporated by reference from Enron Capital & Trade Resources
Corp. Form 13D/A filed with the Commission on or about November 12,
1997.
(11) Incorporated by reference from Form 10-K filed with the Commission
on or about March 30, 1998, bearing Commission file number 0-19365.
(b) During the quarter ended December 31, 1997, the Company filed a Form
8-K on November 18, 1997 to report (1) the disposition of assets by its
wholly-owned subsidiary, Crown Asphalt Corporation, to a newly formed limited
liability company jointly organized and owned by one of the Company's subsidiary
and a third-party; and (2) The sale of 500,000 shares of the Company's Preferred
Stock, $.005 par value, pursuant to a Stock Purchase Agreement dated September
25, 1997 for an aggregate sales price of $5 million.
9
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
CROWN ENERGY CORPORATION
(Registrant)
By: James A. Middleton
Chief Executive Officer,
Chairman of the Board of Directors
Date: April 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Jay Mealey
President, Treasurer and Director
Date: April 30, 1998
Richard S. Rawdin
Vice President, Director and Secretary
Date: April 30, 1998
10
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, directors and other key employees essential to
the success of the Company; (ii) motivation of executive officers, directors 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 and directors 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.
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
<PAGE>
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 "Directors" means any member of the Board or of any Subsidiary of the
Company, regardless of whether he is an Executive Officer or Key
Employee of the Company.
2.14 "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 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.
2.15 "Divestiture" means the sale of, or closing by, the Company of the
business operations in which the Participant is employed.
2.16 "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.
2.17 "Executive Officer" means any employee considered by the Board to be an
Executive Officer.
2.18 "Fair Market Value" means, on any given date, the closing price of
Stock as reported on the Electronic Bulletin Board.
2.19 "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.
2.20 "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.
2.21 "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.
2.22 "Option" means a Nonqualified Stock Option.
2.23 "Participant' means a Key Employee or Director who has been granted an
Award under the Plan.
2
<PAGE>
2.24 "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.
2.25 "Performance Period" means the period of time established by the Board
for the achievement of the Performance Criteria.
2.26 "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).
2.27 "Plan" means the Crown Energy Corporation Long-Term Incentive Plan as
herein established and as hereafter amended from time to time.
2.28 "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.
2.29 "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.
2.30 "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.
2.31 "Stock" or "Shares" means the Common Stock of the Company.
2.32 "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. Consistent with the terms and conditions set forth herein, 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.
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
3
<PAGE>
The Board shall have sole and complete discretion in determining those Key
Employees or Directors who shall participate in the Plan. The Board may request
recommendations for individual awards from the Company's Chief Executive
Officer.
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 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.
5.5 Award Limitations. The maximum aggregate number of Shares that may be
awarded during any calendar year under this Plan shall not exceed 400,000,
provided, that not more than 300,000 such Shares may be awarded to Key
Employees or Directors who have served in such capacities for more than
4
<PAGE>
six months prior to such Award. Awards of Shares which are not exercisable
within the year in which they are Awarded shall not be counted against the
aforementioned caps but rather shall be counted against the caps in the
year in which such Awards vest.
(b) No one Key Employee or Director may be awarded more than 500,000 Shares or
Options under this Plan.
(c) The limitations on Awards set forth in this Section 5.5 shall all be
subject to adjustment for recapitalizations and similar events as set
forth in Section 5.4.
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 Participants as it shall determine. Subject to the
limitations on Awards set forth in Sections 5.5(a) and (b), 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.
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
5
<PAGE>
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.
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, retirement or other termination of
employment or resignation from the Board of the Participant on the Award.
7.4 Nontransferability. Except with respect to Nonqualified Stock Options, 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. This Plan shall not be construed or interpreted as affecting in
any manner the Employment Agreement dated January 29, 1996 between James
A. Middleton and the Company. Options awarded to Mr. Middleton under this
Plan shall be in addition to shares to Options granted under the foregoing
Employment Agreement.
7.8 Amendment of Plan. The Board or the Board of Directors may not amend
without prior Shareholder approval this Plan but may suspend, or terminate
the Plan or any portion thereof at any time.
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.
6
<PAGE>
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:____________________________
7
TAR SANDS SUPPLY AND MINING AGREEMENT
This Tar Sands Supply and Mining Agreement ("Agreement") is entered into
effective this 15th day of May, 1996, by and between BUENAVENTURA RESOURCES
CORPORATION, a Utah corporation, 215 South State Street, Suite 550, Salt Lake
City, Utah 84111 ("BVRC"), UINTAH COUNTY, a body politic of the State of Utah,
147 East Main, Vernal, Utah 84078, and WEMBCO, INC., 727 Orange Grove, #7,
Pasadena, California 91105 ("Wembco").
R E C I T A L S
WHEREAS, Uintah County operates an existing mine in the SE1/4 of Section 30 of
Township 4 South, Range 21 East, SLM, to mine and produce tar sands for the
construction and maintenance of its roads;
WHEREAS, BVRC leases and operates an existing mine in the NE1/4 of Section 31
of Township 4 South, Range 21 East, SLM, to mine and produce tar sands for the
construction and maintenance of roads;
WHEREAS, BVRC intends to expand its existing tar sands mine to mine and produce
tar sands and to further process the tar sands for separation of bitumen
therefrom and for the production of other by-products from tar sands;
WHEREAS, Wembco owns the surface and mineral rights of the lands involving the
Uintah County and BVRC tar sands mines, subject to certain rights of Uintah
County and BVRC to conduct their operations as those rights are established and
set forth in documents contained in the records of the Uintah County Recorder;
WHEREAS, Uintah County has expressed a desire to expand its existing mine
operations on lands under lease to BVRC by Wembco, and BVRC has agreed to such
expansion under certain negotiated terms and conditions; and
WHEREAS, Wembco has agreed to the expansion of the Uintah County tar sands mine
within the NE1/4 of Section 31 of Township 4 South, Range 21 East, SLM as set
forth herein.
NOW THEREFORE, for a good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties subscribing hereto,
and in consideration of the mutual covenants contained herein, the parties agree
as follows:
1. There is hereby dedicated to the exclusive use and benefit of Uintah County
for county road purposes, 300,000 tons of tar sands ore on lands owned by Wembco
in the NE1/4 of Section 31 of Township 4 South, Range 21 East, SLM. For purposes
of this Agreement, tar sands ore is defined as tar sands having an oil content
of not less than eight percent (8%) by weight and which is suitable for use in
the construction of county roads, as those roads have been and are being
constructed in Uintah County.
2. As soon as reasonably practicable and upon receiving the necessary
governmental approvals, Uintah County shall expand its tar sands mine by
approximately ten (10) acres on lands within the NE1/4 of Section 31 of Township
4 South, Range 21 East, SLM, more exactly described and depicted on Exhibit "A"
attached hereto, and by this reference incorporated herein.
3. Uintah County shall remove all top soil and overburden from the lands
depicted on Exhibit "A" and stockpile or otherwise utilize the top soil and
overburden as approved by the Utah Division of Oil, Gas and Mining, and BVRC.
4. Uintah County shall have the exclusive right to mine tar sands from the
lands described on Exhibit "A" until such time as it has mined and removed
300,000 tons of tar sands ore, or until BVRC makes its written election to
assume all operations on these lands, whichever first occurs. BVRC's written
election shall be deemed effective two (2) weeks after its delivery to the
offices of the Uintah County Commission.
5. For all tar sands ore mined, removed and delivered to Uintah County for the
lands described in paragraph 1 above, it shall pay a royalty to BVRC of $1.50
per ton; provided, however that Uintah County shall have a credit of $1.00 per
ton of tar sands ore for each $1.00 it reasonably and actually spends on mining
and removing the overburden from these lands. For example, if Uintah County
spends a total of $50,000 for mining and removing the overburden, it shall pay
to BVRC for all tar sands ore mined and removed from the lands a royalty of $.50
<PAGE>
for the first 50,000 tons, and thereafter a royalty of $1.50 per ton for all
tons of tar sands ore mined or removed from said lands.
6. Upon BVRC exercising its election to assume operations as set forth in
paragraph 4 above, Uintah County shall be relieved of all reclamation
responsibilities, and BVRC shall assume all reclamation responsibilities for the
lands which are the subject of this Agreement. Further, BVRC shall thereafter
have the exclusive right to mine tar sands from these lands and occupy the same;
provided, however, that it shall deliver mined tar sands ore to Uintah County
until its 300,000 ton entitlement as established under this Agreement has been
satisfied. BVRC shall deliver tar sands ore to Uintah County at the mine site at
a cost equal to its actual mining costs plus fifteen percent (15%) and the
royalties provided for in paragraph 5 above, but not to exceed a total delivery
cost of $5.00 per ton inclusive of royalty (adjusted for inflation on a yearly
basis after the third anniversary date of this Agreement). If, for any reason,
BVRC is unable to deliver tar sands ore to Uintah County at the cost not
exceeding the $5.00 per ton (as adjusted for inflation), Uintah County shall
have the right to reasonably enter upon the land, and use so much thereof as may
be reasonably necessary to mine and remove tar sands ore until it has satisfied
its 300,000 ton entitlement.
7. In conducting any operations on the lands described in paragraph 1 above,
Uintah County shall be responsible for all costs associated with its operations,
and shall not allow any lien to be recorded against the land. Further, Uintah
County shall conduct all of its activities in a workmanlike manner, carry
adequate insurance to pay personal injury or property claims for judgment which
may result from its operations, and shall maintain accurate records of tar sands
ore removed from the land. BVRC and Wembco shall be allowed to review the
records of tar sands ore removal upon providing Uintah County at least five (5)
days advance written notice. The notice shall be deemed effective when delivered
to the offices of the Uintah County Commission.
8. This Agreement shall not create a partnership nor agency relationship among
the parties hereto. At no time shall any party be deemed the contractor,
subcontractor, agent, or employee of the other in exercising its rights and in
performing its obligations hereunder.
9. This Agreement may not be amended or modified except in writing.
10. This Agreement shall not restrict or otherwise limit any rights the
parties, or any of them, have or may have with respect to the lands described
herein, and shall not in any way be construed in derogation of any such rights.
DATED effective the day and year first above written.
UINTAH COUNTY
Dated: By:
----------------------- -----------------------------------
BUENAVENTURA RESOURCES CORPORATION
Dated: By:
----------------------- -----------------------------------
Thomas W. Bachtell, President
WEMBCO, INC.
Dated: By:
----------------------- -----------------------------------
James L. Barnes, Vice President
2
PARTICIPATION AGREEMENT
This Participation Agreement is entered into this 28th day of March, 1994, by
and between BuenaVentura Resources Corporation, a Utah corporation, of 215 South
State Street, Suite 550, Salt Lake City, Utah 84111 ("BVRC"), and Asphalt Ridge
Limited Partnership, a Texas limited partnership (the "Participant").
WITNESSETH
WHEREAS, BVRC has entered into a Letter of Understanding for Tar Sands Project
dated November 24, 1993 with Swaco Geolograph ("Swaco"), Richey Petroleum
Corporation and Post Petroleum Company (collectively, the "Joint Venture"), a
copy of which is attached hereto as Exhibit "A" and by this reference
incorporated herein (the "Letter Agreement").
WHEREAS, under paragraph 5 of the Letter Agreement, it is acknowledged that
BVRC may relinquish up to 2 1/2% of its interest in the proposed tar sands
project within the area of mutual interest to any investors who fund the Initial
Production Facility ("IPF"). The area of mutual interest under the Letter
Agreement is the Uintah Basin, Utah.
WHEREAS, Participant has expressed its intent to contribute $250,000 to
partially fund the IPF under certain conditions which conditions have been
agreed to by BVRC.
NOW, THEREFORE, for ten dollars, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by all parties, it is
agreed that:
1. Upon:
(a)Swaco providing its written acknowledgment to BVRC confirming its
unqualified intention to proceed with the IPF in accordance with its
turnkey proposal,
(b)a determination by BVRC in good faith that all other material
preconditions necessary to proceed with the IPF project have been
satisfied, including receipt by BVRC of written notification from Swaco
of its receipt of cash (or equivalent irrevocable letter of credit in
enforceable form) aggregating at least $250,000 from Richey and/or Post,
to fund a portion of the IPF.
Participant shall contribute $250,000 in cash or by a letter of credit (in
customary form reasonably acceptable to Swaco) to partially fund the IPF
operations as contemplated under the Letter Agreement. BVRC shall hold such cash
or letter of credit in escrow (subject to an obligation to immediately refund
same to Participant without deduction in the event the foregoing conditions are
not fully satisfied) until the requirements of this paragraph have been
satisfied. Participant shall have no further or continuing obligation to provide
funding for the IPF over and above the $250,000.
2. Upon contributing the $250,000 funding for the IPF, Participant will be
entitled to the following:
(a)An economic interest in the first "Commercial Facility" (as that term is
used in the Letter Agreement) which interest shall be a percentage of the
"Net Proceeds" as that term will be defined in the Mining Joint Venture
Agreement contemplated in paragraph 5 of the Letter Agreement utilizing
the Rocky Mountain Mineral Law Foundation Form 5 Mining Venture Agreement
("MVA"). A copy of Exhibit "D" entitled "Net Proceeds Calculation" to the
Form 5 MVA is attached hereto as Exhibit "B" for illustrative purposes
only, it being understood that the final form may require modification
depending on the operational and other circumstances surrounding the
project. It is the intent of the parties hereto, however, that "Net
Proceeds" shall be defined the same for Participant as that term is
defined for BVRC under the MVA, that Net Proceeds shall include, without
limitation, a percentage of the Net Proceeds from the production of crude
oil produced from that certain real property referred to on Exhibit "C"
attached hereto, that BVRC shall give fair consideration to the interests
of Participant in such negotiations, and that BVRC shall seek the consent
of Participant to the MVA before signing, which consent shall not be
unreasonably withheld and is not required as a precondition of BVRC
<PAGE>
signing the MVA. Additionally, BVRC shall not seek to diminish the
economic interest of Participant by manipulating the definition of Net
Proceeds so as to enhance other fees, compensation or returns that BVRC or
its affiliates may be entitled to receive from the Commercial Facility.
Further, the definition of Net Proceeds shall not be interpreted to impose
any double deduction for capital costs or operating expenses that have
already been paid for by the investments in the Commercial Facility made
by Participant and the Joint Venturers.
Participant's Net Proceeds Interest in the first Commercial Facility shall
be two and one-half percent (2 1/2%) of 8/8ths of the Net Proceeds
realized from commercial activity or production from the first Commercial
Facility, subject to the following provisions.
If (1) the cost (excluding any fees or other compensation paid to BVRC and
its affiliates) to place the first Commercial Facility into commercial
operation (the "Initial Cost") exceeds $12 million, or (2) the first
Commercial Facility is subsequently expanded and the cost (excluding any
fees or other compensation paid to BVRC and its affiliates) for placing
the expanded facility into commercial operation, when added to the Initial
Cost, exceeds $12 million (the excess cost above $12 million being in each
instance referred to as the "Excess Cost", and the Initial Cost plus the
Excess Cost equalling the "Total Cost"), Participant shall be notified in
writing with a full accounting and explanation, and shall have the
election to:
(i) Maintain their 2 1/2% of 8/8ths Net Proceeds Interest by timely
contributing, as provided in the MVA, 2 1/2% of the Excess Cost; or
(ii) Make no additional contribution and continue to own a Net Profits
Interest in the first Commercial Facility equal to a percentage that
is proportionately reduced by the Excess Cost. The formula for
determining such proportionate reduction shall be as follows:
multiply 2 and 1/2% by 12,000,000 and divide the product by the
Total Cost. The result thus derived is the proportionately reduced
interest.
(b)The option to participate in each additional tar sands project of BVRC
under an MVA (or any amendment thereto), including any other tar sands
operations or facilities proposed under an MVA within the Uintah Basin,
to the extent of a 2 1/2% of 8/8ths Net Proceeds Interest, which shall be
exercised under the same time frame (and with full access to all
information) in which the other parties make their election(s) under such
MVA and based upon an investment proportional to the interest. In the
event Participant (or if Participant is dissolved, all or some of its
partners acting collectively) does not elect to participate for the full
2 1/2% interest in a subsequent tar sands project, Participant shall
thereafter have no further interest in the particular project for which
such option terminated.
3. Participant shall not be a party to the MVA, but shall be expressly
acknowledged therein as being entitled to the Net Proceeds Interest, and the MVA
shall contain appropriate language to assure that Participant's share of the Net
Proceeds is appropriately and timely paid. Furthermore, to assure that
Participant's option to participate in future projects is protected even in the
event BVRC elects not to participate in such future projects for its own
interest under the MVA, BVRC shall reserve, on Participant's behalf, an express
right for Participant to make a separate election for its own interest in all
future projects attributable to Participant's option in accordance with
paragraph 2(b) above.
4. BVRC shall have the right of first refusal to purchase the interest, or any
part thereof, of Participant granted and earned under this Agreement by matching
any bona fide cash offer that Participant desires to accept, with cash, or with
the equivalent value of common stock in Crown Energy Corporation registered on a
nationally recognized securities exchange, such as NASDAQ, the American Stock
Exchange or the New York Stock Exchange, consisting of a number of shares having
a total value based on the bid price on the day of closing equal to such cash
offer. Participant shall not sell, or otherwise transfer, or offer to sell or
transfer, any interest except for cash in U.S. Dollars or securities registered
on a nationally recognized securities exchange, such as NASDAQ, the American
Stock Exchange or the New York Stock Exchange, having an aggregate bid price on
the day of closing equal to such cash offer. BVRC shall have thirty-three (33)
days after receipt of written notice from Participant to make its election.
Participant's notice to BVRC shall set forth in reasonable detail all material
aspects of the bona fide offer to enable BVRC to make an informed business
decision concerning its election. BVRC shall make its election to exercise its
first right of refusal in writing, delivered to the Participant at the address
specified in the notice. BVRC's election shall be deemed delivered three (3)
2
<PAGE>
days after being mailed to Participant at the specified address, properly
addressed, postage prepaid, by certified mail, return receipt requested.
5. BVRC will consult with a representative appointed by Participant in
negotiating the MVA contemplated in the Letter Agreement; provided, however,
that all final decisions respecting the MVA, or any part or aspect thereof, are,
subject to the terms set forth above, expressly reserved by, and shall be at the
sole discretion of, BVRC.
6. It is recognized that Participant is a Texas Limited Partnership. In the
event Participant dissolves, the limited partners to whom undivided interests in
the Limited Partnership are distributed in connection with such dissolution
shall be deemed Participants hereunder, provided that (a) as to any decisions
required to be made by Participant under this Agreement, the individuals shall
designate one common representative and all actions shall be determined by a
majority in interest of the Participants, and (b) as to the elections available
to the Participant hereunder, if fewer than all of the distributees desire to
make such elections, such elections may nonetheless be effectively made by fewer
than all of the individual distributees as long as the electing distributees (in
the aggregate) commit all of the funds and take all of the actions required to
be taken on the part of the Participant hereunder within the timeframe allowed
to the Participant.
7. This Agreement constitutes the entire agreement between the parties hereto.
No amendment or modification shall be binding on any party unless made in
writing and duly executed.
8. Failure of any party to enforce any provision hereof at any time shall not
be construed as a waiver of such provision or any other provisions hereof.
9. This Agreement shall be interpreted and governed by the laws of the State of
Utah. If any provision hereof is, for any reason, declared to be invalid or
unenforceable, the validity of the remaining portion shall not be affected
thereby.
10. This Agreement may be signed in counterpart originals, each of which, or a
copy or legible facsimile thereof, shall be deemed an original for all purposes.
11. A memorandum of this Agreement will be executed by the parties and may be
recorded in the real property records of Uintah County, Utah.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the day and year first above written.
BUENAVENTURA RESOURCES CORPORATION
-----------------------------------------------
Thomas W. Bachtell
President
ASPHALT RIDGE LIMITED PARTNERSHIP
By: ASPHALT RIDGE DEVELOPMENT COMPANY, its
General Partner
By:
--------------------------------------------
David M. Mitchell, President
3
