<PAGE>
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 Section 240.14a-11(c) or Section 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
JUNE 21, 2000
TO THE SHAREHOLDERS OF CROWN ENERGY CORPORATION:
You are cordially invited to attend the 2000 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, June 21, 2000
TIME: 2:00 p.m., Mountain Standard Time
LOCATION: Paris A Room, 2nd Floor, Hotel Monaco
15 West 200 South, Salt Lake City, Utah 84101
At the Annual Meeting, you will be asked to vote:
1. To elect three (3) 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 2000 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 May 17, 2000 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: On or about May 22, 2000 By Order of the Board of Directors
/s/ Richard S. Rawdin
--------------------------------------
Corporate Secretary
2
<PAGE>
CROWN ENERGY CORPORATION
215 SOUTH STATE, SUITE 650
SALT LAKE CITY, UTAH 84111
-----------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 21, 2000
-----------------------------------
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,
June 21, 2000, at 2:00 p.m., Mountain Standard Time, in the Paris A Room, 2nd
Floor, 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 May 22, 2000.
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 three 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, 2000; 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 May 17, 2000 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 the Chief Executive Officer is a nominee 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 three (3) 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, three (3) 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 three (3) 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, 64, 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, 57, was appointed as Chief Operating and 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.
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
4
<PAGE>
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 four (4) meetings during 1999 and took action four (4) times by Unanimous
Written Consent. All directors attended all of the Board meetings, either in
person or via telephone conference.
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 two directors, Messrs. Mealey and Searl, 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 fourth member of the Board of Directors
with the three (3) 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 3,815,340 shares, or
approximately 27% 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 983,333 option shares exercisable within 60
days of the Record
5
<PAGE>
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 2000 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, 1999 did not contain an adverse opinion or a disclaimer
of opinion, and were not qualified or modified as to audit scope or accounting
principles. However, Deloitte's report did express substantial doubt as to the
Company's ability to continue its operations as a going concern.
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 2000
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 of the Company, (2) Jay Mealey, the Chief Executive
Officer, President and Treasurer of the Company, (3) Alexander L. Searl, Chief
Operating and Financial Officer of the Company, and (4) David McSwain, a Vice
President of Crown Asphalt Products Company, a wholly-owned subsidiary
(collectively, the "Named Officers"), is discussed in the following tables. No
other executive officer of the Company earned compensation in excess of $100,000
in fiscal year 1999.
SUMMARY COMPENSATION TABLE
The following table contains information regarding compensation paid to the
Company's Named Officers for the fiscal years listed.
<TABLE>
<CAPTION>
=============================== ===================================================== ========================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
=============================== ===================================================== ========================================
NAME AND PRINCIPAL POSITION SALARY BONUS ($) OTHER ANNUAL SECURITIES ALL OTHER
YEAR ($) COMPENSATION ($) UNDERLYING COMPENSATION ($)
OPTIONS/SARS (#)
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James A. Middleton, Chief 1999 $0 $0 $0 75,000 0
Executive Officer(1) 1998 $0 $0 $0 75,000 0
1997 $0 $0 $0 0 0
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
7
<PAGE>
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
Jay Mealey, President and 1999 $207,974 $0 $8,400 (6) 450,000 $539 (5)
Chief Executive Officer(2) 1998 $155,000 $0 $48,539(4) 0 $539(5)
1997 $100,000 $56,250 $0 450,000 0
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
Alexander L. Searl, Chief 1999 $108,687 $0 $0 250,000 0
Operating and Financial 1998 N/A N/A N/A N/A N/A
Officer(3) 1997 N/A N/A N/A N/A N/A
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
David McSwain, Vice President 1999 $105,844 $0 $0 0 0
of Crown Asphalt Products 1998 (7) $0 $0 0 0
Company, a wholly-owned 1997 N/A N/A N/A N/A N/A
subsidiary
- ------------------------------- ---------- ------------ ---------- ------------------ --------------------- ------------------
</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) Mr. Searl was appointed as Chief Operating and Financial Officer on June 4,
1999.
(4) Includes non-cash compensation expense in the amount of $40,139 for Mr.
Mealey recorded by the Company in connection with his 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.
(5) Represents term life insurance paid for Mr. Mealey.
(6) Amount represents a car allowance of $8,400.
(7) Mr. McSwain did not receive compensation in excess of $100,000 in 1998.
OPTION/SAR GRANTS TABLE
The following table sets forth information with respect to individual
grants of stock options made by the Company to the Named Officers during the
fiscal year ended December 31, 1999. The Company did not grant any stock
appreciation rights during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
============================ ============== =================== =================== ============== ===========================
NUMBER OF % OF TOTAL OPTIONS EXERCISE OR BASE EXPIRATION POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED TO PRICE ($/SH) DATE FOR AT ASSUMED ANNUAL RATES OF
NAME UNDERLYING EMPLOYEES IN OPTION TERM STOCK PRICE APPRECIATION
OPTIONS FISCAL YEAR FOR OPTION TERM
GRANTED (#) 5% 10%
============================ ============== =================== =================== ============== ===========================
<S> <C> <C> <C> <C> <C>
James A. Middleton (2) 75,000 10% $1.13 2/06/03 $18,264 $39,332
Jay Mealey 450,000 58% $.38 (1) 10/31/09 $107,541 $272,530
8
<PAGE>
Alexander L. Searl (3) 250,000 32% $1.00 per share 6/3/09 $157,224 $398,436
============================ ============== =================== =================== ============== ===========================
</TABLE>
(1) Effective November 1, 1999 the Company granted options to purchase 450,000
shares to Mr. Mealey as partial consideration for the First Amendment to
Employment Agreement. See "Employment Contracts" below. The exercise price of
$.38 per share was set at the average bid price of the stock for the three
months preceding and following the effective date of the Amendment.
(2) Granted as of February 6, 1999 as required under Mr. Middleton's Employment
Agreement, which terminated on February 6, 1999.
(3) On June 4, 1999, the Company granted options to acquire 250,000 shares to
Alexander L. Searl. See "Certain Relationships and Related Transactions" below.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table contains information regarding the fiscal year-end
value of unexercised options held by the Named Officers. The aggregate value of
the options was calculated using the average bid and asked price for the
Company's Common Stock on December 31, 1999.
<TABLE>
<CAPTION>
========================= ================= =============== ================================== ==================================
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS AT FISCAL YEAR END
FISCAL YEAR END ($)
(#)
================================== ==================================
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 0 0 150,000 750,000(1) $0 $0
Alexander L. Searl 0 0 83,333 166,667(2) $0 $0
========================= ================= =============== ================================== ==================================
</TABLE>
(1) Represents six tranches of 150,000 options granted in two separate grants to
Mr. Mealey in November, 1997 and November, 1999. 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 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 vested 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. The fourth tranche
9
<PAGE>
of options will vest on May 1, 2001, provided that Mr. Mealey is employed by the
Company, but will not be exercisable until the average ask price of the
Company's Common Stock equals or exceeds $1.00 per share for thirty days. The
fifth tranche of options vests on May 1, 2002, provided that Mr. Mealey is
employed by the Company, but will not be exercisable until the average ask price
of the Company's Common Stock equals or exceeds $1.30 per share for thirty days.
The sixth tranche of options vests on May 1, 2003, provided that Mr. Mealey is
employed by the Company, but will not be exercisable until the average ask price
of the Company's Common Stock equals or exceeds $1.69 per share for thirty days.
(2) Represents two tranches of 83,333 options each and one tranche of 83,334
options granted in a single grant to Mr. Searl on June 4, 1999. The first
tranche of options will vest on May 16, 2000. The second tranche of options will
vest on May 16, 2001, provided that Mr. Searl is employed by the Company, but
will not be exercisable until the average offer price of the Company's Common
Stock equals or exceeds $1.30 per share for thirty days. The third tranche of
options will vest on May 16, 2002, provided that Mr. Searl is employed by the
Company, but will not be exercisable until the average offer price of the
Company's Common Stock equals or exceeds $1.69 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 was originally set to expire on December 31, 2000.
However, the Board has approved an amendment of Mr. Mealey's employment
agreement 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 was 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 450,000 shares
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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.
Jay Mealey's employment agreement was amended to extend the term of his
employment until December 31, 2003. Additionally, the amendment provided that
the compensation bonus payable to Mr. Mealey, based upon increases in the
average share price of the Company's common stock over the preceding year's base
price (and, for purposes of such calculation, the base price automatically
increases each year). Additionally, the amendment granted Mr. Mealey additional
options to acquire 450,000 shares of Company common stock at an exercise price
equal to the average bid price for the three months immediately preceding and
immediately following the effective date of the amendment, November 1, 1999. The
exercise price under that formula has been determined to be $.38 per share. The
options vest in three equal tranches: (1) options to acquire 150,000 shares will
vest on May 1, 2001 provided that Mr. Mealey is employed by the Company, but
will not be exercisable until the average ask price of the Company's Common
Stock equals or exceeds $1.00 per share for thirty days; (2) options to acquire
the second tranche of 150,000 shares will vest on May 1, 2002 provided that Mr.
Mealey is employed by the Company, but will not be exercisable until the average
ask price of the Company's Common Stock equals or exceeds $1.30 per share for
thirty days; and (3) options to acquire the third tranche of 150,0000 shares
will vest on May 1, 2003 provided that Mr. Mealey is employed by the Company,
but will not be exercisable until the average ask price of the Company's Common
Stock equals or exceeds $1.69 per share for thirty days.
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,
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<PAGE>
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 April 21, 2000, 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.
<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 2,637,699 (5) 19.20%
Richard S. Rawdin 589,308 4.44%
James A. Middleton 505,000 (6) 3.68%
Alexander L. Searl 83,333 (7) (less then 1%)
Executive Officers and Directors as Group
(Messrs. Mealey, Rawdin, Middleton and Searl) 3,815,340 26.74%
=========================================================== =========================== =========================
</TABLE>
(1) The address for Sundance Assets, L.P. is 1400 Smith Street, 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.
(2) Based on 13,285,581 shares of the Company's Common Stock issued and
outstanding on April 21, 2000. 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
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<PAGE>
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
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, 450,000 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.
However, only 83,333 of the options are exercisable within 60 days and therefore
Mr. Searl is not deemed the beneficial owner of the remaining 166,667 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
13
<PAGE>
opportunity to sell all or a pro-rata portion of the shares of the Company's
stock held by ECT. The sale of 50% or more of the shares held by Mr. Mealey
together with the sale of a similar number of the shares held by ECT could
result in a change in control of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers and directors and certain
shareholders to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "Commission"). Such
persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Company and written representations from
the Company's executive officers and directors, the Company believes that its
executive officers and directors timely filed all required reports except as
follows. The Company's Chief Executive Officer, President and Treasurer of the
Company failed to timely file a report disclosing his financial interest in
options which will be granted by the Company as required pursuant to the
November 1, 1999 amendment to his Employment Agreement. See "Employment
Contracts" above. The Company understands that Mr. Mealey has since filed a
report with the Commission correcting this oversight.
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
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<PAGE>
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 and Financial Officer, both
serve on the Management Committee of Crown Distribution. Messrs. Mealey and
Searl are compensated by the Company 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
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 and 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 vested 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 2001 Annual Meeting on or around June 20,
2001. To be considered for inclusion in the Company's proxy materials for its
2001 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
13, 2001. Unless written notice of a shareholder proposal is received at the
Company's principal office on or before April 13, 2001, information regarding
the proposal will not be included in the Company's proxy materials and the
Company's proxies will have discretionary voting authority regarding any such
proposal. 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.
15
<PAGE>
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, 1999 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.
16
<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
June 21, 2000, at 2:00 p.m., Mountain Standard Time, in the Paris A Room, 2nd
Floor 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 three nominees listed below.
(__) WITHHOLD AUTHORITY to vote for all three nominees for director listed
below.
(__) FOR all three nominees for director listed below, except WITHHOLD
AUTHORITY to vote for the nominee(s) whose name(s) is (are) lined
through.
Nominees: James A. Middleton, Jay Mealey and Alexander L. Searl
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:_________________________________, 2000
(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.
17
