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 ss. 240.14a-11(c) or ss. 240.14a-12
CROWN ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
(same)
(Name of Person(s) Filing Proxy Statement, 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:
<PAGE>
CROWN ENERGY CORPORATION
215 South State, Suite 650
Salt Lake City, Utah 84111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 27, 1999
TO THE SHAREHOLDERS OF CROWN ENERGY CORPORATION:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders (the "Annual Meeting") of Crown Energy Corporation, a Utah
corporation (the "Company"). The Annual Meeting will be held at the following
date, time and location:
DATE: Wednesday, October 27, 1999
TIME: 2:00 p.m., Mountain Standard Time
LOCATION: Bombay Room, Hotel Monaco
15 West 200 South, Salt Lake City, Utah 84101
At the Annual Meeting, you will be asked to vote:
1. To elect four (4) persons to serve on the Board of Directors;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 1999 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 September 22,
1999 are entitled to notice of, and to vote at, the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON,
PLEASE IMMEDIATELY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE. IF A MAJORITY OF OUTSTANDING SHARES ARE NOT PRESENT AT THE
ANNUAL MEETING, EITHER IN PERSON OR BY PROXY, THE ANNUAL MEETING MUST BE
ADJOURNED WITHOUT CONDUCTING BUSINESS. RETURNING THE ENCLOSED PROXY WILL NOT
AFFECT YOUR RIGHT TO ATTEND THE ANNUAL MEETING AND VOTE. YOUR PROXY MAY BE
REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED.
Date: September 24, 1999 By Order of the Board of Directors
/s/ Richard S. Rawdin
-----------------------------------
Richard S. Rawdin, Secretary
<PAGE>
CROWN ENERGY CORPORATION
215 South State, Suite 650
Salt Lake City, Utah 84111
-----------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 27, 1999
-----------------------------------
INFORMATION ABOUT THIS PROXY STATEMENT
AND VOTING AT THE ANNUAL MEETING
About This Proxy Statement
This Proxy Statement is being furnished to holders of shares of Common
Stock of Crown Energy Corporation, a Utah corporation (the "Company"), by the
Board of Directors of the Company. The Board of Directors is soliciting your
proxy for use at the Annual Meeting of Shareholders to be held on Wednesday,
October 27, 1999, at 2:00 p.m., Mountain Standard Time, in the Bombay Room of
the Hotel Monaco, 15 West 200 South, Salt Lake City, Utah 84101 (including any
adjournment or postponement thereof, the "Annual Meeting").
This Proxy Statement sets forth information which you may wish to
consider in order to vote intelligently at the Annual Meeting. However, you need
not attend the Annual Meeting in order to vote your shares. You may instead
simply complete, sign and return the enclosed Proxy Card to vote your shares of
Common Stock. Returning the Proxy Card will not affect your right to attend the
Annual Meeting and vote since you may revoke the proxy at any time as described
below.
This Proxy Statement, the Notice of Annual Meeting of Shareholders, the
Annual Report to Shareholders and the accompanying Proxy Card are first being
mailed to shareholders of the Company on or about September 24, 1999.
Voting by Proxy
Shares of Common Stock which are entitled to be voted at the Annual
Meeting and which are represented by properly executed Proxy Cards will be voted
in accordance with the instructions indicated on such Proxy Cards. If no
instructions are indicated, such shares will be voted:
(1) FOR the election of each of the four director nominees;
<PAGE>
(2) 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, 1999; and
(3) in the discretion of the proxy holders as to any other matters
which may properly come before the Annual Meeting.
Revocability of Proxies
Completing and returning the enclosed Proxy Card will not affect your
right to attend the Annual Meeting or to vote at the Annual Meeting. A
shareholder who has executed and returned a Proxy Card, or otherwise granted 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.
Record Date and Outstanding Shares
The Board of Directors has fixed the close of business on September 22,
1999 as the record date for determination of shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). Only shareholders of
record on the Record Date are entitled to notice of and to attend and vote at
the Annual Meeting. As of the Record Date, there were issued and outstanding
13,285,581 shares of Common Stock and 500,000 shares of $10 Class A Convertible
Preferred Stock ("Preferred Stock").
Solicitation by the Board of Directors
This Proxy Statement is furnished, and solicitation of proxies
hereunder is made, by the Board of Directors on behalf of the Company. Proxies
are being solicited from the holders of the Company's Common Stock. The Proxy
Cards accompanying this Proxy Statement, once completed, signed and returned,
appoint the Chief Executive Officer and Secretary of the Company, or either of
them, as proxies to vote all of the shares of Common Stock held by the
shareholder. The Chief Executive Officer and Secretary of the Company both
currently serve on the Board of Directors and are nominees for election to the
Board of Directors 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 Proxy Card and other
materials. 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 upon request the Company will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
2
<PAGE>
Quorum Requirement
A quorum is required to conduct any business at the Annual Meeting. 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. A Proxy Card
submitted to the Company indicating 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.
Votes Required
The holders of record of shares of Common Stock on the Record Date are
entitled to cast one vote per share on each matter submitted to a vote at the
Annual Meeting. 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 be treated as
votes cast against any matter considered at the Annual Meeting.
With respect to the election of directors (Proposal #1), the Company's
Articles of Incorporation do not provide for cumulative voting for the election
of directors. Accordingly, the four (4) nominees receiving the highest number of
votes at the Annual Meeting will be elected to the Board of Directors.
With respect to the ratification of the Company's independent
accountants (Proposal #2), the votes cast in favor of the proposal must exceed
the votes cast against the proposal.
PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING
The Board of Directors is soliciting your vote with respect to each of
the following proposals. The Company does not expect any other matters to be
presented to shareholders at the Annual Meeting; however, if other matters are
presented to shareholders and voted upon, your proxy will vote your shares with
his best judgment. The Board of Directors recommends that you vote "FOR" each of
the following proposals:
PROPOSAL #1
ELECTION OF DIRECTORS
Number and Election Procedure
At the Annual Meeting, four (4) directors of the Company (constituting
the entire Board of Directors) will be elected to serve until the next annual
meeting of shareholders and until their successors shall be duly elected and
qualified, or until their earlier resignation or removal.
3
<PAGE>
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 four (4) nominees receiving the highest number of votes at the
Annual Meeting will be elected to the Board of Directors.
Nominees for Election as Directors
Certain information with respect to each nominee, including their ages,
positions with the Company and any other positions, is set forth below:
James A. Middleton, 63, currently serves as Chairman of the Board of
Directors and has served as a director since February 1996. Mr. Middleton also
served as Chief Executive Officer from December 1996 until he resigned from that
position on April 16, 1999. 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.
Jay Mealey, 43, has served as President and Chief Operating Officer and
as a director of the Company since 1991. Mr. Mealey was appointed as Chief
Executive Officer on April 16, 1999 and currently serves as Chief Executive
Officer, President and Treasurer and as a director. 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.
Alexander L. Searl, 56, was appointed as Chief Operating Officer and
Chief Financial Officer of the Company on June 4, 1999. The Board of Directors
nominated and elected Mr. Searl to fill a vacancy on the Board of Directors on
July 20, 1999. Prior to joining the Company, Mr. Searl was Senior Vice President
and Chief Financial Officer of TheraTech, Inc., a publicly-held pharmaceutical
drug delivery company. Prior to joining TheraTech, Mr. Searl was employed by
American Stores Company, one of the nation's leading food and drug retailers,
where he was Executive Vice President and Treasurer. He previously served 21
years in management positions of increasing responsibility with Hercules
Incorporated, including several years as the international chemical
manufacturer's corporate Vice President and Treasurer.
Richard S. Rawdin, 41, has served as a Vice President and Secretary and
as a director of the Company since 1991. 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.
4
<PAGE>
The Board of Directors recommends that shareholders vote FOR each of
the above nominees to serve as directors of the Company.
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. Thus, the Company
has no standing audit, nominating or compensation committees of the Board of
Directors or committees performing similar functions. James A. Middleton is the
only outside director 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 require Board action between scheduled meetings. The Board of Directors
held three (3) meetings during 1998 and took action four (4) times by Unanimous
Written Consent. All directors attended all of the Board meetings.
The Company has one outside director, James A. Middleton. All other
directors are officers of the Company. Assuming shareholder approval and
election of the slate of directors identified in Proposal #1, the Company's
Board of Directors will continue to have one outside director, James A.
Middleton, and three directors, Messrs. Mealey, Searl and Rawdin, who also serve
as officers of the Company.
The holder of the Company's Preferred Stock, in its discretion, is
entitled to appoint 20% of the members of the Board of Directors. Additionally,
the holder of the Company's Preferred Stock is entitled to appoint a non-voting,
advisory director who may attend and be heard at Board of Directors meetings. As
of the date of this Proxy Statement, the holder of the Company's Preferred Stock
has not exercised either of such rights. In the event the holder of the
Company's Preferred Stock determines to appoint a member of the Board of
Directors, that person will serve as the fifth member of the Board of Directors
with the four (4) nominees receiving the highest number of votes cast by the
holders of Common Stock at the Annual Meeting.
The Company does not presently offer any compensation to its directors
for their service as members of the Company's Board of Directors (in other
words, the Company does not pay an annual retainer, meeting fees or similar
compensation to its 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.
As disclosed to the Company, members of the Board of Directors, as
presently constituted, beneficially own as a group 3,432,007 shares, or
5
<PAGE>
approximately 24.52% of the Company's outstanding Common Stock as of the Record
Date, as determined in accordance with Rule 13d-3 of the Exchange Act.
Accordingly, the beneficial ownership of the Board of Directors for purposes of
the foregoing calculations includes 710,000 option shares exercisable within 60
days of the Record Date but which were unexercised as of the Record Date. See
"Security Ownership of Certain Beneficial Owners and Management."
Further information about the nominees for election to the Company's
Board of Directors may be found below in the section captioned "Additional
Information About the Company and its Management."
PROPOSAL #2
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 1999 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.
Deloitte's report on the financial statements of the Company for the
fiscal year ended December 31, 1998 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.
Prior to June 2, 1999, 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. During the fiscal year ended December 31, 1997, and the
period January 1, 1998 through June 2, 1998, there 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.
The decision to change accountants was approved by the Company's Board
of Directors and Pritchett was dismissed effective as of June 2, 1998.
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 year ended December 31, 1997, 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).
6
<PAGE>
The Company does not anticipate that any representatives of Pritchett
or Deloitte will be present at the Annual Meeting.
While the Company is not legally required to submit its choice of
independent auditors to shareholders for approval, the independent auditors
fulfill an important function on behalf of the Company's shareholders by opining
as to whether or not the Company's financial statements are prepared in
accordance with generally accepted accounting principles and fairly present the
Company's financial condition and results of operations. For that reason, the
Board of Directors considers it important that its choice of independent
auditors is presented to shareholders for ratification and the Board of
Directors recommends that shareholders vote FOR the ratification of Deloitte as
the Company's independent auditors. In the event shareholders do not vote to
ratify the selection of Deloitte as the Company's independent auditors, the
Board of Directors will consider whether to, and when, to engage new auditors,
taking into account the vote of shareholders, the costs of such a change, the
effect on the Company's operations, the familiarity with the Company's
operations of Deloitte and any proposed replacement auditors, and such other
factors it deems relevant.
The Board of Directors recommends that shareholders vote FOR the
ratification of Deloitte as the Company's independent auditors for the 1999
fiscal year.
ADDITIONAL INFORMATION ABOUT
THE COMPANY AND ITS MANAGEMENT
Executive Compensation
The compensation of (1) James A. Middleton, who is currently the
Chairman of the Board of Directors and previously served as Chief Executive
Officer of the Company, (2) Jay Mealey, the current Chief Executive Officer,
President and Treasurer of the Company, and (3) Richard S. Rawdin, the
Vice-President and Secretary of the Company (collectively, the "Named
Officers"), is discussed in the following tables. No other executive officer of
the Company earned compensation in excess of $100,000 in fiscal year 1998.
[Balance of page intentionally left blank]
7
<PAGE>
Summary Compensation Table
The following table contains information regarding compensation paid to
the Company's Named Officers for the fiscal years listed.
<TABLE>
<CAPTION>
=============================== ===================================================== ========================================
Annual Compensation Long Term Compensation
=============================== ===================================================== ========================================
Name and Principal Position Salary Bonus ($) Other Annual Securities All Other
Year ($) Compensation ($) Underlying Compensation ($)
Options/SARS (#)
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James A. Middleton, Chief 1998 $0 $0 $0 0 0
Executive Officer(1) 1997 $0 $0 $0 0 0
1996(1) $0 $0 $0 0 0
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
Jay Mealey, President and 1998 $155,000 $0 $48,539(5) 0 $539(6)
Chief Executive Officer(2) 1997 $100,000 $56,250 $0 450,000 (4) 0
1996 $78,000 $0 $0 0 0
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
Richard S. Rawdin, Vice 1998 $78,000 $0 $31,672(5) 0 0
President and Secretary 1997 $52,500 $56,250 $0 0(4) 0
1996(3) * * * * *
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
</TABLE>
(1) Mr. Middleton, who currently serves as Chairman of the Board of Directors,
resigned as Chief Executive Officer on April 16, 1999.
(2) Mr. Mealey was appointed as Chief Executive Officer on April 16, 1999.
(3) Although employed by the Company, Mr. Rawdin did not earn compensation in
excess of $100,000 in 1996.
(4) 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.
(5) Includes non-cash compensation expense in the amounts of $40,139 and $31,672
for Mr. Mealey and Mr. Rawdin, respectively, recorded by the Company in
connection with their exercise of options to acquire Company common stock. The
foregoing sums represent the value of such options, generally determined by the
difference between the fair market value of the stock subject to the options and
the exercise price paid for the common stock. Mr. Mealey's amount also includes
a car allowance of $8,400.
(6) Represents life insurance paid for Mr. Mealey.
[Balance of page intentionally left blank]
8
<PAGE>
Option/SAR Grants Table
The following table sets forth information with respect to individual
grants of stock options made by the Company to the Named Officers during the
fiscal year ended December 31, 1998. The Company did not grant any stock
appreciation rights during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
============================ ============== =================== =================== ============== ===========================
Number of % of Total Options Exercise or Base Expiration Potential Realizable Value
Securities Granted to Price ($/Sh) Date for at Assumed Annual Rates of
Name Underlying Employees in Option Term Stock Price Appreciation
Options Fiscal year for Option Term
Granted (#)
============================ ============== =================== =================== ============== ===========================
<S> <C> <C> <C> <C> <C>
James A. Middleton (1) 75,000 100% $1.50 per share 1/29/03 $22,500
Jay Mealey 0 N/A N/A N/A N/A
Richard S. Rawdin 0 N/A N/A N/A N/A
============================ ============== =================== =================== ============== ===========================
</TABLE>
(1) Granted as of February 6, 1998 under Mr. Middleton's Employment Agreement
dated January 26, 1996, which obligated the Company to grant such options as
additional compensation for services during the period February 6, 1997 -
February 6, 1998.
On June 4, 1999, subsequent to the 1998 calendar year reported on
above, the Company granted options to acquire 250,000 shares to Alexander L.
Searl. See "Certain Relationships and Related Transactions" below.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
The following table contains information regarding the fiscal year-end
value of unexercised options held by the Named Officers. The aggregate value of
the options was calculated using the average bid and asked price for the
Company's Common Stock on December 31, 1998.
<TABLE>
<CAPTION>
========================= ================= =============== ================================== ==================================
Number of securities underlying Value of unexercised in-the-money
unexercised options/SARs at options/SARs at fiscal year end
fiscal year end ($)
(#)
---------------------------------- ----------------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($)
Exercisable Unexercisable Exercisable Unexercisable
========================= ================= =============== ================================== ==================================
<S> <C> <C> <C> <C> <C> <C>
James A. Middleton 0 0 450,000 0 $0 $0
Jay Mealey 548,148 $40,139(1) 0 450,000 (2) $0 $0
Richard S. Rawdin 398,148 $31,672(1) 0 398,148 $0 $0
========================= ================= =============== ================================== ==================================
</TABLE>
9
<PAGE>
(1) Includes non-cash compensation expense in the amounts of $40,139 and $31,672
for Mr. Mealey and Mr. Rawdin, respectively, recorded by the Company in
connection with their exercise of options to acquire Company common stock. The
foregoing sums represent the value of such options, generally determined by the
difference between the fair market value of the stock subject to the options and
the exercise price paid for the common stock.
(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 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 vested in 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, who currently serves as the Chairman of the Board of
the Company and formerly served as its former Chief Executive Officer. Mr.
Middleton's employment agreement terminated on February 6, 1999. The agreement
provided 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.
Under his employment agreement, Mr. Middleton was 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. Mr. Middleton was also granted, on
February 6, 1998 and 1999, additional options to purchase 75,000 shares of the
Company's Common Stock (when combined, these options allow Mr. Middleton to
acquire 150,000 shares of Common Stock).
On November 1, 1997, the Company entered into an employment agreement
with Jay Mealey, the Company's Chief Executive Officer, President and Treasurer.
Mr. Mealey's employment agreement expires on December 31, 2000, 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 Board has approved amending Mr. Mealey's employment agreement and extending
its term until December 31, 2003. The employment agreement provided for an
initial base salary of $150,000, which amount was increased to $180,000 on
November 1, 1998 and will be further increased to $210,000 on November 21, 1999.
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
10
<PAGE>
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 vested 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 September 14, 1999, to
the extent known to the Company, (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.
[Balance of page intentionally left blank]
11
<PAGE>
<TABLE>
<CAPTION>
Name and Address (1) Number of Shares Percentage of Class (2)
Beneficially Owned
<S> <C> <C>
Common Stock
Sundance Assets, L.P. (3) 4,602,069(4) 26.19%
Jay Mealey 2,337,699(5) 17.26%
Richard S. Rawdin 589,308 4.44%
James A. Middleton 505,000(6) 3.68%
Alexander L. Searl 0 (7) 0%
Executive Officers and Directors as Group
(Mesrs. Mealey, Rawdin, Middleton and Searl) 3,432,007 24.52%
============================================= ===================== =========================
</TABLE>
(1) The address for Sundance Assets, L.P. is 1400 Smith, Houston,
Texas, 77002. The address for Messrs. Middleton, Mealey, Rawdin and Searl 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 13,285,581 shares of the Company's Common Stock issued and
outstanding on September 14, 1999. Under Rule 13d-3 of the Exchange Act, shares
are deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to include
the amount of shares beneficially owned by such person (and only such person) by
reason of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect the
person's actual ownership or voting power with respect to the number of shares
of Common Stock actually outstanding.
(3) Sundance Assets, L.P., a Delaware limited partnership ("Sundance"),
is a controlled affiliate of Enron Corp., an Oregon corporation. The general
partner of Sundance is Ponderosa Assets, L.P., a Delaware limited partnership
("Ponderosa") and wholly-owned subsidiary of Enron Corp. and certain of it
subsidiaries. The general partner of Ponderosa is Enron Ponderosa Management
Holdings, Inc., a Delaware corporation ("EPMH") and wholly-owned subsidiary of
Enron Corp. Because of its control of Ponderosa, EPMH and Sundance, Enron Corp.
may be deemed to be the beneficial owner of all securities of the Company
beneficially owned by Sundance. However, Enron Corp., Ponderosa and EPMH
disclaim beneficial ownership of all such securities of the Company.
(4) Includes 317,069 shares of Company common stock issued to Sundance
on February 2, 1999, and 4,285,000 common stock shares issuable upon exercise of
500,000 shares of the Company's $10 Class A Convertible Preferred Stock (which
are convertible into shares of the Company's Common Stock at the rate of 8.57
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<PAGE>
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 2,077,699 shares owned directly by Mr. Mealey, 150,000
shares underlying options to acquire common stock 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.
(6) Includes 450,000 shares underlying options to acquire common stock
which are exercisable within 60 days.
(7) Mr. Searl holds options to acquire 250,000 shares of common stock.
See "Certain Relationships and Related Transactions." However, these options are
not exercisable within 60 days and therefore Mr. Searl is not deemed the
beneficial owner of the underlying common stock shares for purposes of Rule
13d-3 of the Exchange Act or this table.
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 Chief Executive Officer and
President, has entered into a Right to Co-Sale Agreement (the "Co-Sale
Agreement") with Enron Capital and Trade Resources Corp. ("ECT"), a subsidiary
of Enron Corp., which is affiliated with and controls Sundance, the holder of
the Company's Preferred Stock. Under the Co-Sale Agreement, Mr. Mealey 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
13
<PAGE>
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 James A.
Middleton, the current Chairman of the Board of Directors and its former Chief
Executive Officer, was late in reporting that he was granted, on February 6,
1998, options to acquire 75,000 shares of Company common stock at an exercise
price of $1.50 per share. Mr. Middleton filed a Form 5 on February 16, 1999
reporting the grant of such options.
Certain Relationships and Related Transactions
Effective as of January 2, 1998, the Chief Executive Officer, 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 non-recourse 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 accrue 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, although interest payments are not required under the
notes until such time as principal is due and payable. 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 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.
The Company owns a minority interest in Crown Asphalt Ridge, L.L.C., a
Utah limited liability company ("Crown Ridge"), which is developing an asphalt
oil-sand production facility at Asphalt Ridge near Vernal, Utah. Crown Asphalt
Corporation, a wholly-owned subsidiary of the Company, manages, supervises and
conducts the operations of Crown Ridge pursuant to an Operating and Management
Agreement. Jay Mealey, the Company's Chief Executive Officer, President and
Treasurer, serves on the Management Committee of Crown Ridge. Mr. Mealey is
compensated by the Company as described elsewhere herein and is not compensated
by Crown Ridge for such services.
The Company owns a majority interest in Crown Asphalt Distribution,
L.L.C., a Utah limited liability company ("Crown Distribution") which owns
certain asphalt terminals through which it produces, processes, markets,
distributes and sells asphalt products. Crown Asphalt Products Company, a
wholly-owned subsidiary of the Company, manages, supervises and conducts the
operations of Crown Distribution pursuant to an Operating and Management
Agreement. Jay Mealey, the Company's Chief Executive Officer, President and
Treasurer and a director of the Company, and Alexander L. Searl, the Company's
Chief Operating Officer, Chief Financial Officer and a director, both serve on
the Management Committee of Crown Distribution. Messrs. Mealey and Searl are
compensated by the Company as described elsewhere herein and are not compensated
by Crown Distribution for such services.
During 1998, the Company issued 300,000 shares of its common stock at
the price of $1.34 per share to Asphalt Ridge, L.P. as consideration for the
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<PAGE>
Company's purchase of a 2.5% net profits interest in the Asphalt Ridge oil sands
reserves being developed by Crown Ridge. Certain owners of Asphalt Ridge, L.P.
own shares of the Company's common stock, although such interests in the
aggregate are believed to be less than 5%.
Alexander L. Searl was appointed Chief Operating Officer and Chief
Financial Officer on June 4, 1999. Mr. Searl is currently a member of the Board
of Directors and is nominated for election to the Board of Directors at the
Annual Meeting. In connection with his employment, Mr. Searl was granted options
to acquire 250,000 shares of Company common stock at an exercise price of $1.00
per share. The first tranche of options will vest on May 16, 2000 provided that
Mr. Searl is employed by the Company through that date. The second tranche of
options will vest on May 16, 2001; provided that Mr. Searl is employed by the
Company through that date, but will not be exercisable unless the average offer
price of the Company's Common Stock has equaled or exceeded $1.30 per share for
any thirty day period after the date of grant. The third tranche of options will
vest on May 16, 2002; provided that Mr. Searl is employed by the Company through
that date, but will not be exercisable unless the average offer price of the
Company's Common Stock has equaled or exceeded $1.69 per share for any thirty
day period after the date of grant.
SHAREHOLDER PROPOSALS
The Company intends to hold its 2000 Annual Meeting on or around June
21, 2000. To be considered for inclusion in the Company's proxy materials for
its 2000 Annual Meeting, a shareholder proposal, in addition to compliance with
applicable Securities and Exchange Commission rules and regulations, must be
received in writing by the Company, at its principal office, no later than April
14, 2000. Unless written notice of a shareholder proposal is received at the
Company's principal office on or before April 14, 2000, proxies solicited for
the 2000 Annual Meeting may confer discretionary authority to vote on any matter
not included in next year's Proxy Statement. 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
Annual Meeting, it is the intention of the persons named as proxies on the Proxy
Cards to vote all shares of Common Stock 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
Annual Report on Form 10-K for the period ended December 31, 1998 to persons
from whom a Proxy is solicited. If specifically requested, the Company will also
provide such persons with a copy of any or all exhibits to the Form 10-K, upon
payment of the Company's reasonable expenses incurred in furnishing such
exhibits. Written or verbal requests for such information should be directed to
the Corporate Secretary, Crown Energy Corporation, 215 South State, Suite 650,
Salt Lake City, UT 84111, (801) 537-5610.
15
<PAGE>
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 Chief Executive Officer and the Corporate Secretary of Crown
Energy Corporation, or either of them, 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 held by the
undersigned at the annual meeting of stockholders of the Company to be held on
October 27, 1999, at 2:00 p.m., Mountain Standard Time, in the Bombay Room of
the Hotel Monaco, 15 West 200 South, Salt Lake City, Utah 84101, 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. This proxy is
solicited on behalf of the Company's Board of Directors with respect to the
following matters proposed by the Company.
PROPOSAL 1 -- Election of Directors:
(__) FOR all four nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all four nominees for director listed
below.
(__) FOR all four nominees for director listed below, except WITHHOLD
AUTHORITY to vote for the nominee(s) whose name(s) is (are) lined
through.
Nominees: James A. Middleton, Jay Mealey, Alexander L. Searl
and Richard S. Rawdin
PROPOSAL 2 -- Appointment of Deloitte & Touche LLP as the Independent
Accountants for the Company.
(__) FOR (__) AGAINST (__) ABSTAIN
OTHER MATTERS- 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.
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:_________________________________,1999
(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.
