UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 14A
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
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Check the appropriate box:
Preliminary Proxy Statement
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2)
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X Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to ss.240.14a-12
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CRESTED CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[COMPANY LOGO]
CRESTED CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, DECEMBER 16, 2002
We are pleased to give you notice of our Annual Meeting of Shareholders:
Date: Monday, December 16, 2002
Time: 11:00 AM MST
Place: 877 North 8th West, Riverton, Wyoming 82501
Purpose: - Elect three directors to serve until the third succeeding
annual meeting of shareholders, and until their successors
have been duly elected or appointed and qualified;
- Ratify appointment of the independent auditors; and
- Transact any other business that may properly come before
the meeting.
Record Date: October 18, 2002. The stock transfer books will not be closed.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. We appreciate your cooperation.
By Order of the Board of Directors
Dated: October 18, 2002 Daniel P. Svilar, Secretary
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Only shareholders of record on October 18, 2002 may vote at the meeting.
Only shareholders of record, and beneficial owners on the record date, may
attend the meeting. If you plan to attend the meeting, please bring personal
identification and proof of ownership if your shares are held in "street name"
(i.e., your shares are held of record by brokers, banks or other institutions).
Proof of ownership means a letter or statement from your broker showing your
ownership of shares on the record date.
A list of shareholders entitled to vote at the Meeting will be available
for inspection by any record shareholder at the Company's principal executive
offices in Riverton, Wyoming. The inspection period will begin no later than ten
days before the Meeting.
CRESTED CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, DECEMBER 16, 2002
The 2002 Annual Report to Shareholders, including audited financial
statements for the fiscal year ended May 31, 2002, is mailed to shareholders
together with these proxy materials on or before November 11, 2002. The proxy
materials consist of this proxy statement and notice of annual meeting, the
Annual Report, the Audit Committee Certification and the Audit Committee
Charter.
This proxy statement is provided in connection with a solicitation of
proxies by the board of directors of U.S. Energy Corp. for use at the annual
meeting of shareholders (the "meeting") to be held on Monday, December 16, 2002
and at any adjournments of the meeting.
WHO CAN VOTE
If you held any shares of common stock on the record date (October 18,
2002), then you will be entitled to vote at the meeting. If you held stock in
your own name, you may vote directly. If you owned stock beneficially but in the
record name (street name) of an institution, you may instruct the record holder
how to vote when the record holder contacts you about voting and gives you the
proxy materials.
COMMON STOCK OUTSTANDING ON THE RECORD DATE: 17,114,276 SHARES
QUORUM AND VOTING RIGHTS
A quorum for the meeting will exist if a majority of the voting power of
the shareholders is present at the meeting, in person or represented by properly
executed proxy delivered to us prior to the meeting. Shares of common stock
present at the meeting that abstain from voting, or that are the subject of
broker non- votes, will be counted as present for determining a quorum. A broker
non-vote occurs when a nominee holding stock in street name or otherwise for a
beneficial owner does not vote on a particular matter because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
You are entitled to one vote for each share of Crested Corp. common stock
you hold. That number of candidates equaling the number of directors to be
elected, having the highest number of votes cast in favor of their election are
elected. If you abstain from voting, your shares will not be counted for or
against any director.
Ratification of the appointment of independent auditors will be approved if
the number of votes cast in favor exceed the number of votes opposed, in
accordance with Colorado law.
Any other matter which properly comes before the meeting would be approved
if the number of votes cast in favor exceed the number of votes opposed, unless
Wyoming law requires a different approval ratio.
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Abstentions and broker non-votes will have no effect on the election of
directors. Abstentions as to all other matters which properly may come before
the meeting will be counted as votes against those matters. Broker non-votes as
to all other matters will not be counted as votes for or against, and will not
be included in calculating the number of votes necessary for approval of these
matters.
HOW YOUR PROXY WILL BE VOTED; RECOMMENDATION OF THE BOARD
The board of directors is soliciting a proxy in the enclosed form to
provide you with the opportunity to vote on all matters scheduled to come before
the meeting, whether or not you attend in person.
The board of directors recommends you vote in favor of the nominees for
director, and in favor of ratifying management's re-appointment of the audit
firm.
GRANTING YOUR PROXY
If you sign properly and return the enclosed form of proxy, your shares
will be voted as you specify. If you make no specifications, your proxy will be
voted in favor of both proposals.
We expect no matters to be presented for action at the meeting other than
the items described in this proxy statement. However, the enclosed proxy will
confer discretionary authority with respect to any other matter that may
properly come before the meeting, including any matter of which we did not have
notice at least 45 days before the date of mailing proxy materials for last
year's meeting, in accordance with SEC rule 14a-4(c). The persons named as
proxies intend to vote in accordance with their judgment on any matters that may
properly come before the meeting.
REVOKING YOUR PROXY
If you submit a proxy, you may revoke it later or submit a revised proxy at
any time before it is voted. You also may attend the meeting in person and vote
by ballot, which would cancel any proxy you previously submitted.
PROXY SOLICITATION
We will pay all expenses of soliciting proxies for the meeting. In addition
to solicitations by mail, arrangements have been made for brokers and nominees
to send proxy materials to their principals, and we will reimburse them for
their reasonable expenses. We have not hired a solicitation firm for the
meeting. Our employees and directors will solicit proxies by telephone or other
means, if necessary; these people will not be paid for these services.
REQUIREMENT AND DEADLINES FOR SHAREHOLDERS TO SUBMIT PROXY PROPOSALS
Generally, we will hold the annual meeting on the second Friday of each
December (December 13 in 2003). Under the rules of the SEC, if a shareholder
wants us to include a proposal in our proxy statement and form of proxy for
presentation at our 2003 Annual Meeting of Shareholders, the proposal must be
received by us in writing at least 150 calendar days in advance of the meeting
date (which would be 120 days in advance of the mailing date), at Crested Corp.,
877 North 8th West, Riverton, Wyoming 82501; Attention: Daniel P. Svilar,
Secretary.
For a special meeting, the proposal must be received a reasonable time
before the Company begins to print and mail its proxy materials.
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If we do not receive notice by the appropriate time, or if we meet other
requirements of the SEC rules, which allow the Company to exclude the proposal,
a vote on the proposal will not be included in the Company's proxy statement,
and will not be considered for a vote at that meeting.
A notice of a proposed item of business must include:
o a brief description of the substance of the proposal, and the reasons
for conducting, such business at the annual meeting;
o the shareholder's name and address;
o the number of shares of common stock held by the shareholder (with
supporting documentation where appropriate); and
o any material interest of the shareholder in such business.
CORPORATE GOVERNANCE, AUDIT COMMITTEE REPORT AND COMPENSATION COMMITTEE
MEETINGS OF THE BOARD. The board of directors, which held three formal
meetings during fiscal 2002, has primary responsibility for directing management
of the business. The board currently consists of four members. A fifth member,
Max T. Evans passed away in February 2002. The board conferred informally on
several other occasions during the fiscal year. From time to time the directors
also approve various matters by consent minutes without conducting formal
meetings.
AUDIT COMMITTEE. To provide effective direction and review of fiscal
matters, the board has established an audit committee. Its members are John L.
Larsen, Michael D. Zwickl and Kathleen R. Martin; Mr. Zwickl and Mrs. Martin are
independent directors under criteria established by the National Association of
Securities Dealers, Inc. The audit committee has the responsibility of reviewing
our financial statements, exercising general oversight of the integrity and
reliability of our accounting and financial reporting practices, and monitoring
the effectiveness of our internal control systems. The audit committee also
recommends selection of an auditing firm and exercises general oversight of the
activities of our independent auditors, principal financial and accounting
officers and employees and related matters.
The audit committee has reviewed our financial statements for fiscal 2002
and discussed them with management. The committee also discussed with the
independent audit firm the various matters required to be so discussed in SAS 63
(Codification of Statements on Auditing Standards, AU 380). The committee
received the written disclosure and the letter from the independent audit firm
as required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committee),
and the committee discussed with the audit firm their independence. Based on the
foregoing, the audit committee recommended to the board of directors that the
audited financial statements be included in our Annual Report on Form 10-K which
was filed with the Securities and Exchange Commission on September 13, 2002.
EXECUTIVE COMMITTEE. The executive committee members are John L. Larsen and
Daniel P. Svilar. This committee helps implement the board of directors' overall
directives as necessary. This committee usually does not conduct formal meetings
(none in fiscal 2002).
MANAGEMENT COST APPORTIONMENT COMMITTEE, established by USE and Crested in
1982, reviews the apportionment of costs between USE and Crested. John L. Larsen
and Robert Scott Lorimer are members of this committee.
The Board did not appoint nominating or compensation committees during
fiscal year ended May 31, 2002.
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PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY
The following is a list of all record holders who, as of the record date,
beneficially owned more than 5% of the outstanding shares of common stock, and
the outstanding common stock beneficially held by each director and nominee, and
by all officers and directors as a group, as reported in filings with the SEC,
or as otherwise known to us. Except as otherwise noted, each holder exercises
the sole voting and dispositive powers over the shares listed opposite the
holder's name, excluding the shares subject to forfeiture. Dispositive powers
over the forfeitable shares held by an employee("Forfeitable Shares") are shared
by the Company's board of directors. It should be noted that voting and
dispositive powers over certain shares are shared by one or more of the listed
holders. Such securities are reported opposite each holder having a shared
interest therein.
Amount and Nature of Beneficial Ownership
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Voting Rights Dispositive Rights
Name and address --------------------------- ---------------------------- Total Percent
of beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
- ------------------- ---- ------ ---- ------ -------------------- -----------
U.S. Energy Corp.(2) 12,030,848 -0- 12,030,848 -0- 12,030,848 70.2%
877 North 8th West
Riverton, WY 82501
John L. Larsen*(3) -0- 12,184,733 -0- 12,199,733 12,199,733 71.3%
201 Hill Street
Riverton, WY 82501
Harold F. Herron(4) 6,932 12,084,733 6,932 12,084,733 12,091,665 70.7%
3425 Riverside Road
Riverton, WY 82501
Keith G. Larsen(5) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
4045 Valley Green Circle
Riverton, WY 82501
Don C. Anderson(5) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
P. O. Box 1556
Mesquite, NV 89024
Nick Bebout(5) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
P. O. Box 112
Riverton, WY 82501
H. Russell Fraser(5) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
W Diamond X Ranch
3453 Southfork Road
Cody, WY 82414
Daniel P. Svilar*(6) 191,850 -0- 191,850 15,000 206,850 1.2%
580 S. Indiana Street
Hudson, WY 82515
Michael D. Zwickl*(7) 123,418 -0- 124,418 15,000 138,418 *
123 S. Durbin Street
Casper, WY 82601
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Amount and Nature of Beneficial Ownership
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Voting Rights Dispositive Rights
Name and address --------------------------- ---------------------------- Total Percent
of beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
- ------------------- ---- ------ ---- ------ -------------------- -----------
Kathleen R. Martin*(8) 121,308 -0- 121,308 15,000 136,308 *
309 N. Broadway
Riverton, WY 82501
Robert Scott Lorimer**(9) -0- -0- -0- -0- 15,000 *
11 Kor ell Court
Riverton, WY 82501
All officers and
directors as a group
(five persons)(10) 436,576 12,184,733 436,576 12,199,733 12,636,309 73.8%
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* Director
** Officer
(1) Percent of class is computed by dividing the number of shares
beneficially owned plus any options held by the reporting person, by the number
of shares outstanding plus the shares underlying options held by that person.
(2) Consists of 12,020,848 shares directly held by USE over which sole
voting and dispositive powers are exercised.
(3) Consists of 12,020,848 Crested shares held by USE, 100,000 shares held
by Sutter Gold Mining Company ("SGMC"), 60,000 shares held by Plateau Resources
Limited ("Plateau") and 3,885 shares held by Northwest Gold, Inc. ("NWG"), with
respect to which shared voting and dispositive powers are exercised as a
director with the other directors of those companies and 15,000 shares held by
an employee which are subject to forfeiture, over which Mr. Larsen exercises
shared dispositive powers with the remaining Crested directors.
(4) Consists of 6,932 directly held shares over which Mr. Herron exercises
sole voting and dispositive powers; and 12,020,848 shares held by USE, 60,000
shares held by Plateau, and 3,885 shares held by NWG, with respect to which
shared voting and dispositive powers are exercised as a USE, Plateau, and NWG
director with the other directors of those companies.
(5) Consists of 12,020,848 Crested shares held by USE over which the holder
shares voting and dispositive powers with the other directors of USE.
(6) Consists of 191,850 directly held shares, over which Mr. Svilar
exercises sole voting and dispositive powers, and 15,000 shares held by an
employee which are subject to forfeiture, over which Mr. Svilar exercises shared
dispositive powers with the remaining Crested directors.
(7) Consists of 123,418 directly held shares over which Mr. Zwickl
exercises sole voting and dispositive powers, and 15,000 shares held by an
employee which are subject to forfeiture, over which Mr. Zwickl exercises shared
dispositive power with the remaining directors of Crested.
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(8) Consists of 121,308 directly held shares over which Mrs. Martin
exercises sole voting and dispositive powers and 15,000 shares held by an
employee which are subject to forfeiture, over which Mrs. Martin exercises
shared dispositive power with the remaining directors of Crested.
(9) Consists of 15,000 shares subject to forfeiture. Crested directors
exercise shared voting and dispositive powers over such shares.
(10) The group exercises sole voting rights over 436,576 directly held
shares, and 15,000 shares held by an employee which are subject to forfeiture.
Shared voting rights are exercised over 12,035,848 shares held by USE, 100,000
shares held by SGMC, 60,000 shares held by Plateau, 3,885 shares held by NWG,
and 15,000 shares held by an officer which are subject to forfeiture. Sole
dispositive rights are exercised over the 436,576 directly held shares. The
group exercises shared dispositive rights over 12,020,848 shares held by USE,
100,000 shares held by SGMC, 60,000 shares held by Plateau, 3,885 shares held by
NWG, and 15,000 shares held by an officer which are subject to forfeiture.
PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY'S PARENT
U.S. ENERGY CORP.
The following is a list of all record holders of U.S. Energy Corp. who, as
of the record date, beneficially owned more than 5% of the outstanding shares of
common stock, and the outstanding common stock beneficially held by each
director and nominee, and by all officers and directors as a group, as reported
in filings with the SEC, or as otherwise known to us. Except as otherwise noted,
each holder exercises the sole voting and dispositive powers over the shares
listed opposite the holder's name, excluding the shares subject to forfeiture
and those held in ESOP accounts established for the employee's benefit.
Dispositive powers over the forfeitable shares held by employees who are not
officers and a non-employee director ("Forfeitable Shares") are shared by the
USE board of directors. Voting and dispositive powers over forfeitable shares
held by USE's five executive officers and a former officer (now deceased)
("Officers' Forfeitable Shares") are shared by the USE non-employee directors
(Messrs. Anderson, Bebout and Fraser). The ESOP Trustees (John L. Larsen and
Harold F. Herron) exercise voting powers over non-allocated ESOP shares and
dispositive powers over all ESOP shares. It should be noted that voting and
dispositive powers over certain shares are shared by one or more of the listed
holders. Such securities are reported opposite each holder having a shared
interest therein.
Amount and Nature of Beneficial Ownership
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Voting Rights Dispositive Rights
Name and address ---------------------- ------------------------ Total Percent
of beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
- ------------------- ---- ------ ---- ------ -------------------- -----------
John L. Larsen*(2) 893,624 1,012,657 893,624 1,393,161 2,416,211 19.2%
201 Hill Street
Riverton, WY 82501
Keith G. Larsen(3) 633,128 1,500 601,674 45,180 687,128 5.4%
4045 Valley Green Circle
Riverton, WY 82501
Harold F. Herron(4) 454,622 285,843 430,386 663,452 1,167,746 9.4%
3425 Riverside Road
Riverton, WY 82501
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Amount and Nature of Beneficial Ownership
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Voting Rights Dispositive Rights
Name and address ---------------------- ------------------------ Total Percent
of beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
- ------------------- ---- ------ ---- ------ -------------------- -----------
Daniel P. Svilar*(5) 491,934 517,359 491,934 517,359 1,110,143 8.9%
580 S. Indiana Street
Hudson, WY 82515
R. Scott Lorimer**(6) 458,362 -0- 418,356 -0- 525,595 4.2%
11 Korrel Court
Riverton, WY 82501
Michael D. Zwickl*(7) 62,069 512,359 62,069 512,359 574,428 4.8%
123 S. Durbin Street
Casper, WY 82601
Kathleen R. Martin*(8) 5,000 512,579 5,000 512,579 517,579 4.3%
309 N. Broadway
Riverton, WY 82501
All officers and
directors as a group
(five persons)(9) 1,910,989 1,017,877 1,879,983 1,398,381 3,566,873 26.7%
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* Director
** Officer
(1) Percent of class is computed by dividing the number of shares
beneficially owned plus any options held by the reporting person, by the number
of shares outstanding plus the shares underlying options held by that person.
(2) Mr. John L. Larsen exercises sole voting powers over 243,163 directly
owned shares, 106,000 shares held in joint tenancy with his wife, 500 shares
held in a street name account for his benefit, 50,061 shares held in an
Individual Retirement Account ("IRA") established for his benefit, and 493,900
shares underlying options. The directly owned shares include 27,500 shares
gifted to his wife, that have remained in Mr. Larsen's name. He exercises shared
voting rights over 42,350 shares held directly by his wife, 155,811 shares held
by the ESOP, which have not been allocated to accounts established for specific
beneficiaries, and shares held by corporations of which Mr. Larsen is a director
consisting of 512,359 shares held by Crested Corp. ("Crested"), 125,556 shares
held by Plateau Resources Limited ("Plateau"), 175,000 shares held by Sutter
Gold Mining Company ("SGMC"), and 1,581 shares held by Northwest Gold, Inc.
("NWG"). Mr. Larsen shares the voting rights over such shares with the other
directors of those corporations. Mr. Larsen shares voting powers over the
unallocated ESOP shares in his capacity as an ESOP Trustee with the other ESOP
Trustees. Shares over which sole dispositive rights are exercised consist of
243,163 directly owned shares, 106,000 joint tenancy shares, 500 shares held in
street name, 50,061 shares held in his IRA, and the 493,900 shares underlying
options. Shared dispositive powers are exercised over 42,350 shares directly
held by wife, 492,635 shares held by the ESOP, 43,680 Forfeitable Shares,
512,359 shares held by Crested, 125,556 shares held by Plateau, 175,000 shares
held by SGMC and 1,581 shares held by NWG. The shares listed under "Total
Beneficial Ownership" also include 129,426 Officers' Forfeitable Shares.
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(3) Mr. Keith Larsen exercises sole voting rights over 1,774 directly held
shares, 6,000 shares as custodian over shares held for his minor children under
the Wyoming Uniform Transfers to Minors Act (the "Custodial shares"), 31,454
shares held in an ESOP account established for his benefit, 593,900 shares
underlying options. He exercises shared voting rights over 1,500 shares held
directly by his minor children. Mr. Keith Larsen exercises sole dispositive
rights over 1,774 directly held shares, 6,000 Custodial shares, and 593,900
shares underlying options. He exercises shared dispositive rights over 1,500
shares held directly by his minor children and 43,680 Forfeitable Shares. The
shares listed under "Total Beneficial Ownership" also include 8,820 Officers'
Forfeitable Shares.
(4) Mr. Herron exercises sole voting powers over 38,486 directly owned
shares, 11,000 shares held in an IRA established for his benefit, 12,000
Custodial Shares, 368,900 shares underlying options, and 24,236 shares held in
the ESOP account established for his benefit. Shared voting powers are exercised
over 2,895 shares held directly by his wife, 155,811 which have not been
allocated to accounts established for specific beneficiaries, 125,556 shares
held by Plateau, 1,581 shares held by NWG. Sole dispositive powers are exercised
over 38,486 directly held shares, 11,000 shares held in his IRA, 12,000
Custodial Shares and 368,900 shares underlying options. Mr. Herron exercises
shared dispositive rights over 2,895 wife's shares, 492,635 shares held by the
ESOP, 125,556 shares held by Plateau, 1,581 shares held by NWG, and 43,680
Forfeitable Shares. Mr. Herron exercises shared dispositive and voting powers
over the shares held by Plateau and NWG as a director of those companies with
the other directors of those companies and over the ESOP shares in his capacity
as an ESOP Trustee with the other ESOP Trustees. The shares listed under "Total
Beneficial Ownership" also include 71,013 Officers' Forfeitable Shares.
(5) Mr. Svilar exercises sole voting powers over 50,121 directly owned
shares, 8,375 shares held in joint tenancy with his wife, 37,908 shares held in
an IRA established for his benefit, 630 shares held in a street name account
established for his benefit, 1,000 Custodial Shares, and 393,900 shares
underlying options. He exercises shared voting over 512,359 shares held by
Crested and 5,000 shares held by a private corporation of which he is a director
and officer. He exercises sole dispositive power over 50,121 directly held
shares, 8,375 joint tenancy shares, 37,908 IRA shares, 630 street name shares,
1,000 Custodial Shares, and 393,900 shares underlying his options. Mr. Svilar
exercises shared dispositive rights over 512,359 shares held by Crested and
5,000 shares held by a private corporation of which he is a director. The shares
listed under "Total Beneficial Ownership" also include 100,850 Officers'
Forfeitable Shares.
(6) Mr. Lorimer exercises sole voting rights over 24,456 directly held
shares, 40,006 shares held in the ESOP account established for his benefit, and
393,900 shares underlying options. He exercises sole dispositive rights over
24,456 directly held shares, and ;393,900 shares underlying options. The shares
listed under "Total Beneficial Ownership" also include 67,233 Officers'
Forfeitable Shares.
(7) Mr. Zwickl exercises sole voting and dispositive powers over 3,444
shares held in an IRA established for his benefit, 53,625 shares held by two
limited partnerships, of which he is the sole officer and director of the
corporate general partner, and 5,000 shares underlying options. As a director of
Crested, Mr. Zwickl exercises shared voting and dispositive powers over 512,359
shares held by Crested with the other Crested directors.
(8) Mrs. Martin exercises sole voting and dispositive powers over 5,000
shares underlying options. Shared voting and dispositive powers are exercised
over 220 shares held directly by Mrs. Martin's husband, and 512,359 shares held
by Crested with the other Crested directors.
(9) The group exercises sole voting rights over 317,740 directly held
shares, 114,375 shares held in joint tenancy, 91,413 shares held in IRAs, 1,130
shares held in street name, 1,000 Custodial Shares, 40,006 ESOP shares, and
1,291,700 shares underlying options. Shared voting rights are exercised over
42,570 shares held directly by spouses, 155,811 shares held in the ESOP which
are not allocated to plan participants,
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512,359 shares held by Crested, 125,556 shares held by Plateau, 175,000 shares
held by SGMC, 1,581 shares held by NWG, and 5,000 shares held by private
corporations. The sole dispositive shares consist of 317,740 directly held
shares, 114,375 shares held in joint tenancy, 91,413 shares held in IRAs, 1,130
shares held in street name, 1,000 Custodial Shares, and 1,291,700 shares
underlying options. The group exercises shared dispositive rights over 42,570
shares held directly by spouses, 492,635 shares held in the ESOP, 512,359 shares
held by Crested, 125,556 shares held by Plateau, 175,000 shares held by SGMC,
1,581 shares held by NWG, 5,000 shares held by private corporations, and 43,680
Forfeitable Shares. The shares listed under "Total Beneficial Ownership" also
include 297,509 Officers' Forfeitable Shares.
Each director of the Company beneficially holds 5,000,000 shares of Four
Nines Gold, Inc. ("FNG") stock held by the Company, and 5,000,000 shares held by
USECC Joint Venture ("USECC") over which they exercise shared voting and
dispositive powers as Company directors. Those shares represent 2% of the
outstanding shares of FNG. John L. Larsen beneficially holds 272,500,000 shares
of the common stock of FNG, representing 54.4% of its outstanding shares. Mr.
Larsen's FNG shares include 7,500,000 directly- owned shares, 255,000,000 shares
held by USE, 5,000,000 shares held by the Company and the 5,000,000 shares held
by USECC, over which he shares voting and dispositive powers with the remaining
directors of USE and the Company, respectively. Daniel P. Svilar beneficially
owns 14,000,000 shares of the common stock of FNG, representing 2.8% of that
class. Mr. Svilar's FNG holdings include 4,000,000 shares held directly in joint
tenancy with other family members, the 5,000,000 shares held by the Company and
the 5,000,000 shares held by USECC. Harold F. Herron holds 265,000,000 shares of
the common stock of FNG, representing 52.9%, respectively, of those classes. Mr.
Herron's FNG shares include 5,000,000 directly- owned shares, the shares held by
USE and USECC. Mr. Evans' wife holds 3,000,000 shares of the common stock of
FNG, providing him with beneficial ownership of 13,000,000 shares of FNG's
common stock, or 2.6% of the shares of that class. He exercises shared voting
and dispositive rights over the FNG shares held by the Company and USECC, in his
capacity as director of the Company. None of the other directors or officers of
the Company beneficially hold any other shares of stock of FNG. All executive
officers and directors of the Company as a group (six persons) beneficially hold
284,500,000 shares of the stock of FNG, representing 56.8% of the outstanding
shares of that company.
ELECTION OF DIRECTORS
Directors are currently elected for terms expiring at the next annual
meeting of the shareholders and until their successors are elected and
qualified. In the event the number of directors is increased to six or more, the
Company's Articles of Incorporation provide that the directors are then to be
divided into three groups or classes, and elected to staggered terms of three
years expiring at the third succeeding annual meeting. The directors nominated
for re-election at the 2002 Annual Meeting are as follows:
Other positions Director
Name Age with the Company since
- ---- --- ---------------- ---------
John L. Larsen 70 Chairman of the Board, 1974
CEO, Vice President
(a)(b)(c)
Daniel P. Svilar 73 Secretary(a) 1980
Michael D. Zwickl 55 Assistant Secretary (b) 1984
It is recommended that the shareholders vote for the re-election of the
directors.
9
(a) Member of the executive committee.
(b) Member of the audit committee.
(c) Trustee of the USE Employee Stock Ownership Plan (the "ESOP").
Executive officers of the Company are elected by the Board at annual
directors' meetings, which follow each Annual Shareholders' Meeting, to serve
until the officer's successor has been duly elected and qualified, or until
death, resignation or removal by the Board.
BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OF DIRECTORS AND NOMINEES.
JOHN L. LARSEN has been principally employed as an officer and director of
the Company and U.S. Energy Corp. ("USE") for more than the past five years. He
is also a director of USE's affiliate Northwest Gold, Inc. (NWG"). USE and NWG
have registered equity securities under the Securities Exchange Act of 1934 (the
"Exchange Act"). Mr. Larsen is Chief Executive Officer and Chairman of the board
of directors of Plateau Resources, Limited and of Sutter Gold Mining Company, a
director of Yellow Stone Fuels Corp., and Chairman of the Board of Rocky
Mountain Gas, Inc.
DANIEL P. SVILAR has been General Counsel for Crested and USE for more than
the past five years. He also has served as Secretary and a director of Crested,
Assistant Secretary of USE. He was appointed Secretary of USE on March 23, 2002.
He is also an officer of Plateau and SGMC. His positions of General Counsel to,
and as officers of the companies, are at the will of each board of directors.
There are no understandings between Mr. Svilar and any other person pursuant to
which he was named as officer or General Counsel. He has no family relationships
with any of the other executive officers or directors of USE or Crested, except
his nephew Nick Bebout is a USE director. During the past five years, Mr. Svilar
has not been involved in any Reg. S-K Item 401(d) proceeding.
MICHAEL D. ZWICKL has been engaged in the private practice of law at
Casper, Wyoming for more than the past five years. Mr. Zwickl received a
B.S.M.E. degree from the University of Wyoming in 1969. He received a J.D.
degree from the University of Wyoming in 1975 and was admitted to the practice
of law in Wyoming during that year. Mr. Zwickl is director and president of
NUPEC Resources, Inc. which has registered equity securities under the Exchange
Act.
FILING OF REPORTS UNDER SECTION 16(A)
The Company has conducted a review of Forms 3, 4 and 5 (as amended) and
certain written representations of persons filing reports with the SEC under
Section 16(a) of the Exchange Act. Based solely upon a review of those reports
and written representations, the Company believes no director, executive
officer, beneficial owner of more than ten percent of the Common Stock or other
person who was otherwise subject to Section 16, failed to file such reports on a
timely basis for the year ended May 31, 2001.
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided pursuant to Item 401 of Reg. S-K,
regarding the only executive officer of the Company who is not also a director.
ROBERT SCOTT LORIMER, age 51, has been Controller and Chief Accounting
Officer for both USE and Crested for more than the past five years. Mr. Lorimer
also has been Chief Financial Officer for both these companies since May 25,
1991, their Treasurer since December 14, 1990, and Vice President Finance since
April 1998. He serves at the will of each board of directors. There are no
understandings between Mr. Lorimer and any other person, pursuant to which he
was named as an officer, and he has no family relationship
10
with any of the other executive officers or directors of USE or Crested. During
the past five years, he has not been involved in any Reg. S-K Item 401(f) listed
proceeding.
EXECUTIVE COMPENSATION
Under a Management Agreement dated August 1, 1981, USE and Crested share
certain general and administrative expenses, including compensation of the
officers and directors of the companies (but excluding directors' fees) which
have been paid through the USECC Joint Venture ("USECC"). Substantially all the
work efforts of the officers of USE and Crested are devoted to the business of
both companies.
All USECC personnel are USE employees, in order to utilize USE's ESOP as an
employee benefit mechanism. The Company charges USECC for the direct and
indirect costs of its employees for time spent on USECC matters, and USECC
charges one-half of that amount to each of Crested and USE.
The following table sets forth the compensation paid to the USE Chief
Executive Officer, and those of the four most highly compensated USE executive
officers, and Peter G. Schoonmaker, president of RMG, who were paid more than
$100,000 cash in any of the three fiscal years ended May 31, 2002. The table
includes compensation paid such persons by Crested for 2000, 2001 and 2002 for
such persons' services to such subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($)(1) ($) SARs(#) ($) ($)(2)
- --------------------------------------------------------------------------------------------------------------------------------
John L. Larsen 2002 $ 152,000 $18,000(3) $ -0- $ 78,000(4) 100,000(5) $ -0- $ 17,000
CEO and 2001 153,000 4,300(7) -0- 107,000(4) 184,400(6) -0- 15,700
Chairman 2000 156,000 3,500(7) 22,600 60,000(4) -0- -0- 15,200
Keith G. Larsen 2002 $ 152,300 $17,700(3) $ -0- $ -0- 100,000(5) $ -0- $ 17,000
President 2001 153,900 3,600(7) -0- -0- 309,400(6) -0- 15,700
and COO 2000 95,300 2,500(7) 11,700 -0- -0- -0- 10,900
Daniel P. Svilar 2002 $ 149,400 $17,400(3) $ -0- $ 58,500(4) 100,000(5) $ -0- $ 16,700
General Counsel 2001 140,400 4,000(7) -0- 80,250(4) 121,900(6) -0- 14,400
and Secretary 2000 147,600 3,300(3) 7,800 45,000(4) -0- -0- 13,000
Harold F. Herron 2002 $ 99,500 $53,600(8) $ -0- $39,000 (4) 100,000(5) $ -0- $ 15,300
Sr. Vice President 2001 96,400 40,760(8) -0- 53,500(4) 96,900(6) -0- 13,700
2000 106,900 21,500(7) 3,600 30,000(4) -0- -0- 13,200
R. Scott Lorimer 2002 $ 141,000 $17,000(3) $ -0- $39,000 (4) 100,000(5) $ -0- $ 15,800
Treasurer 2001 136,900 3,900(7) -0- 53,500 (4) 121,900(6) -0- 14,100
and CFO 2000 141,700 3,200(7) 10,100 30,000 (4) -0- -0- 15,300
Peter G. Schoonmaker 2002 $ 96,000 $ 46,300(9) $ -0- -0- 100,000(5) $ -0- $ 14,200
President of RMG 2001 95,100 19,200(9) -0- -0- 71,900(6) -0- 11,400
2000 90,700 2,500(7) -0- -0- -0- -0- 9,300
- ----------
11
(1) Dollar value of vehicles provided to employees. No vehicles were
provided after 2000.
(2) Dollar values for ESOP contributions.
(3) Consists of a $10,000 bonus granted to officers and employees after the
conclusion of a coalbed methane gas transaction, and a Christmas bonus granted
to employees. The Christmas bonus amounts granted for John L. Larsen, Keith G.
Larsen, Daniel P. Svilar, Harold F. Herron, R. Scott Lorimer and Pete
Schoonmaker during 2002 were $8,000, $7,700, $7,400, $6,700, $7,000 and $6,300,
respectively
(4) Consists of shares issued under the USE 1996 stock award program
multiplied by $3.00, $5.35 and $3.90 (the closing bid price on the issue dates
for fiscal 2000, 2001 and 2002, respectively). These shares are subject to
forfeiture on termination of employment, except for retirement, death or
disability. If USE were to pay a stock dividend, dividends would be paid on
these shares. The following table lists the number of shares issued to each
executive each year.
Number of Shares
------------------------------------
Name 2000 2001 2002
---- ---- ---- ----
John L. Larsen 20,000 20,000 20,000
Keith G. Larsen -0- -0- -0-
Daniel P. Svilar 15,000 15,000 15,000
Harold F. Herron 10,000 10,000 10,000
R. Scott Lorimer 10,000 10,000 10,000
Peter G. Schoonmaker -0- -0- -0-
(5) Stock options granted pursuant to USE's 2001 Incentive Stock Option
Plan. See details of the options under "Grants to Executive Officers in 2002
(Qualified and Nonqualified)" below.
(6) Stock options granted pursuant to the USE 1998 Incentive Stock Option
Plan. See details of the options under "Grants to Executive Officers in 2001
(Qualified and Nonqualified)" below.
(7) Consists of a Christmas bonus paid in fiscal 2001 and 2000,
respectively.
(8) During the years ended May 31, 2000, 2001 and 2002 Mr. Herron was
instrumental in growing The Brunton Company to the level that it could be sold
to a third party. For his efforts USE granted Mr. Herron a bonus which is paid
out over several years, ending in August 2004. The amount of the bonus paid was
$36,900, $36,900 and $183,00 for fiscal 2002, 2001 and 2000, respectively. The
total bonus paid also includes a Christmas bonus of $6,700, $3,900 and $2,900
for fiscal 2002, 2001 and 2000, respectively, and a $10,000 bonus paid in 2002
to officers and employees after the conclusion of a coalbed methane gas
transaction.
(9) Mr. Schoonmaker has successfully completed significant equity financing
for Rocky Mountain Gas. In recognition of Mr. Schoonmaker's accomplishments, USE
has granted Mr. Schoonmaker a bonus which will be paid out over several years,
ending in November 2003. The compensation that Mr. Schoonmaker received under
this bonus plan was $30,000,$16,500 and $-0- during 2002, 2001 and 2000,
respectively. The total bonus paid also includes a Christmas bonus of $6,300,
$2,600 and $2,500 in fiscal 2002, 2001 and 2000, respectively, and a $10,000
bonus paid in 2002 to officers and employees after the conclusion of a coalbed
methane gas transaction.
12
EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
USE has adopted a plan to pay the estates of Messrs. J. Larsen and Svilar
amounts equivalent to the salaries they are receiving at the time of their
death, for a period of one year after death, and reduced amounts for up to five
years thereafter. The amounts to be paid in such subsequent years have not yet
been established, but would be established by the boards of directors of USE and
Crested.
Mr. Svilar has an employment agreement with USE and Crested, which provides
for an annual salary in excess of $100,000, with the condition that Mr. Svilar
pay an unspecified amount of expenses incurred by him on behalf of the Company,
USE and its affiliates. In the event Mr. Svilar's employment is involuntarily
terminated, he is to receive an amount equal to the salary he was being paid at
termination, for a year. If he should voluntarily terminate his employment, USE
and Crested will pay him that salary for nine months thereafter. The foregoing
is in addition to Mr. Svilar's Executive Severance and Non-Compete Agreement
with USE (see below).
In fiscal 1992, USE signed Executive Severance and Non-Compete Agreements
with Messrs. John L. Larsen, Evans, Svilar and Lorimer, providing for payment to
such person upon termination of his employment with USE, occurring within three
years after a change in control of USE, of an amount equal to (i) severance pay
in an amount equal to three times the average annual compensation over the prior
five taxable years ending before change in control, (ii) legal fees and expenses
incurred by such persons as a result of termination, and (iii) the difference
between market value of securities issuable on exercise of vested options to
purchase securities in USE, and the options' exercise price. These Agreements
also provide that for the three years following termination, the terminated
individual will not compete with USE in most of the western United States in
regards to exploration and development activities for uranium, molybdenum,
silver or gold. For such non-compete covenant, such persons will be paid monthly
over a three year period an agreed amount for the value of such covenants. These
Agreements are intended to benefit USE's shareholders, by enabling such persons
to negotiate with a hostile takeover offeror and assist the board of directors
concerning the fairness of a takeover, without the distraction of possible
tenure insecurity following a change in control. As of this proxy statement, USE
is unaware of any proposed hostile takeover.
USE and Crested provide all of their employees with certain forms of
insurance coverage, including life and health insurance with exception of
Messrs. John L. Larsen and Daniel P. Svilar. The Company and USE reimburse
Messrs. John L. Larsen and Svilar for their Medicare supplement premiums. The
health insurance plan does not discriminate in favor of executive employees;
life insurance of $50,000 is provided to each member of upper management (which
includes all persons in the compensation table), $25,000 of such coverage is
provided to middle-management employees, and $15,000 of such coverage is
provided to other employees.
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP"). USE has adopted an ESOP to
encourage ownership of the common stock by employees, and to provide a source of
retirement income to them. The ESOP is a combination stock bonus plan and money
purchase pension plan. It is expected that the ESOP will continue to invest
primarily in the common stock. Messrs. J. Larsen and Herron are the trustees of
the ESOP.
Contributions to the stock bonus plan portion of the ESOP are discretionary
and are limited to a maximum of 15% of the covered employees' compensation for
each year ended May 31. Contributions to the money purchase portion of the ESOP
are mandatory (fixed at ten percent of the compensation of covered employees for
each year), are not dependent upon profits or the presence of accumulated
earnings, and may be made in cash or shares of company's common stock.
13
USE made a contribution of 70,075 shares to the ESOP for fiscal 2002, all
of which were contributed under the money purchase pension plan. At the time the
shares were contributed, the market price was $3.38 per share, for a total
contribution with a market value of $236,900 (which has been funded by USE). The
Company and USE each are responsible for one-half of that amount. 28,408 of the
shares were allocated to the ESOP accounts of the USE executive officers and the
president of Rocky Mountain Gas, Inc.. Additionally, 16,033 shares were
allocated to the ESOP accounts of these same individuals from ESOP shares
forfeited by terminated employees who were not fully vested.
Employee interests in the ESOP are earned pursuant to a seven year vesting
schedule; after three years of service, the employee is vested to 20% of the
ESOP account, and thereafter at 20% per year. Any portion which is not vested is
forfeited upon termination of employment, other than by retirement, disability,
or death.
The maximum loan outstanding during fiscal 2002 under a loan arrangement
between USE and the ESOP was $927,013 at May 31, 2002 for loans made in fiscal
1992 and 1991. Interest owed by the ESOP was not booked by USE. The Company pays
one-half of the amounts contributed to the ESOP by USE. Because the loans are
expected to be repaid by contributions to the ESOP, Crested may be considered to
indirectly owe one-half of the loan amounts to USE. The loan was reduced by the
contribution of 10,089 shares by the ESOP to the ESOP in 1996. There was no
similar reduction, however, for fiscal 1997, 1998, 1999, 2000, 2001 or 2002.
1998 INCENTIVE STOCK OPTION PLAN. USE's 1998 Incentive Stock Option Plan
("1998 ISOP") reserved an aggregate of 2,750,000 shares of common stock for
issuance upon exercise of options granted thereunder. Awards under the plan were
made by a committee of three or more persons selected by the Board (presently
Messrs. Herron, Bebout and Fraser) and ratified by the board of directors.
Options expire no later than ten years from the date of grant, and upon
termination of employment for cause. Subject to the ten year maximum period,
upon termination, unless terminated for cause, options are exercisable for three
months or in the case of retirement, disability or death, for one year.
2001 INCENTIVE STOCK OPTION PLAN ("2001 ISOP"). The USE 2001 ISOP was
approved at the USE 2001 Annual Meeting of Shareholders, and provides for the
issuance of options to purchase up to 3.0 million shares of common stock; the
options are intended to qualify under section 422 of the Internal Revenue Code.
Options are issued at exercise prices equal to (or for holders of 10% of more of
the outstanding stock at the time, 110% of) market price on grant dates, and
would vest (become exercisable) at various times as determined by the executive
committee and approved by the board of directors. All options are exercisable
for cash, or through other means as determined by the executive committee and
approved by the board of directors, in accordance with similar plans of public
companies. However, "cashless exercise" will not be permitted (cashless exercise
is a technique in some plans where the holder receives shares equal to the
"equity" in the option, being market value less exercise price, and forfeits the
balance of the option).
A total of 1,030,000 options were issued under the 2001 ISOP in fiscal
2002.
For information about options, please see the USE consolidated Financial
Statements for fiscal year ended May 31, 2002. In fiscal 2002, options on
1,030,000 shares were granted, and previously granted options on 253,337 shares
were exercised in fiscal 2002. Subsequent to May 31, 2002, options on 973,000
shares were granted.
14
OPTION GRANTS TO EXECUTIVE OFFICERS OF USE IN 2002 (QUALIFIED AND NONQUALIFIED)
PERCENT
NUMBER OF OF ALL OPTIONS
SHARES UNDER- GRANTED TO
LYING OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED IN 2002 PRICE DATE PRES. VALUE(1)
John L. Larsen 100,000 9.7% $3.90 12/06/11 $299,000
Keith G. Larsen 100,000 9.7% $3.90 12/06/11 $299,000
Harold F. Herron 100,000 9.7% $3.90 12/06/11 $299,000
Daniel P. Svilar 100,000 9.7% $3.90 12/06/11 $299,000
R. Scott Lorimer 100,000 9.7% $3.90 12/06/11 $299,000
Peter G. Schoonmaker* 100,000 9.7% $3.90 12/06/11 $299,000
* President of Rocky Mountain Gas, Inc.
(1) The Black-Scholes option-pricing model was used to determine the grant date
present value of the stock options that were granted to the named officer. The
following facts and assumptions were used in making this calculation: An
exercise price of $3.90, which was equal to the market value of the stock on the
grant date; a zero dividend yield; expected volatility of 62.65%; risk-free
interest rate of 5.6%, and an expected life of 10 years.
15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table shows options exercisable, and the dollar values for
in-the-money options, at May 31, 2002 (closing market price on that date was
$3.29).
(a) (b) (c) (d) (e)
Value of
Number of In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value FY-End FY-End
Name on Exercise (#) Realized($) Exercisable Exercisable
- ---- --------------- ----------- ----------- -----------
John L. Larsen, -0- -0- 77,718 $ 100,256 (1)
CEO -0- -0- 34,782 $ 14,435 (2)
-0- -0- 184,400 $ 164,116 (3)
-0- -0- 100,000 $ (61,000)(4)
Keith G. Larsen -0- -0- 52,718 $ 68,006 (1)
President -0- -0- 34,782 $ 14,435 (s)
-0- -0- 309,400 $ 275,366 (3)
-0- -0- 100,000 $ (61,000)(4)
Harold F. Herron, -0- -0- 40,218 $ 51,881 (1)
Sr. Vice President -0- -0- 34,782 $ 14,435 (2)
-0- -0- 96,900 $ 86,241 (3)
-0- -0- 100,000 $ (61,000)(4)
Daniel P. Svilar -0- -0- 40,218 $ 51,881 (1)
Secretary -0- -0- 34,782 $ 14,435 (2)
-0- -0- 121,900 $ 108,491 (3)
-0- -0- 100,000 $ (61,000)(4)
R. Scott Lorimer 24,456 13,206 (5) -0- -0-
Treasurer -0- -0- 40,218 $ 51,881 (1)
-0- -0- 34,782 $ 14,435 (2)
-0- -0- 121,900 $ 108,491 (3)
-0- -0- 100,000 $ (61,000)(4)
Peter G. Schoonmaker -0- -0- 25,000 $ 32,250 (2)
President of RMG -0- -0- 71,900 $ 63,991 (3)
-0- -0- 100,00 $ (61,000)(4)
- ----------
(1) Equal to $3.29, the closing market price on last trading day in FY
2002, less $2.00 per share option exercise price, multiplied by all shares
exercisable.
(2) Equal to $3.29, the closing market price on last trading day in FY
2002, less $2.875 per share option exercise price, multiplied by all shares
exercisable.
(3) Equal to $3.29, the closing market price on last trading day in FY
2002, less $2.40 per share option exercise price, multiplied by all shares
exercisable.
(4) Equal to $3.29, the closing market price on last trading day in FY
2002, less $3.90 per share option exercise price, multiplied by all shares
exercisable.
16
(5) Equal to $3.29, the closing market price on the date of exercise, less
$2.75 per share option exercise price, multiplied by the number of options
exercised.
1996 STOCK AWARD PROGRAM. Since 1996 USE has had an annual incentive
compensation arrangement for the issuance of up to 67,000 shares of common stock
each year (from 1997 through 2002) to USE executive officers, in amounts
determined each year based on earnings of USE for the prior fiscal.
Shares are issued annually, but each officer to whom shares are to be
issued must be employed by USE or its subsidiary as of the issue date of the
grant year. The officers receive up to an aggregate total of 67,000 shares per
year for the years 1997 through 2002, although if in prior years, starting in
1997, fewer than 67,000 shares are awarded in any year, the unissued balance of
the 67,000 share maximum would be available for issue in subsequent years
(through 2007). One-half of the compensation expense under the Program is the
responsibility of Crested. The board of directors determines the date each year
when shares are to be issued.
Each allocation of shares is issued in the name of the officer, and earns
out (vests) over 5 years, at the rate of 20% as of May 31 of each year following
the date of issue. However, none of the vested shares become available to or
come under the control of the officer until termination of employment by
retirement, death or disability. Upon termination, the share certificates will
be released to the officer; until termination, the certificates are held by the
Treasurer of USE. Voting rights are exercised over the shares by the non-
employee directors of USE; dividends or other distributions with respect to the
shares will be held by the Treasurer for the benefit of the officers.
The number of shares to be awarded each year out of such 67,000 shares
aggregate limit is determined by the compensation committee. The total shares
issued are divided among the officers based on the following percentages: John
L. Larsen 29.85%, Daniel P. Svilar 22.39%, Max T. Evans 17.91%, Harold F. Herron
14.93% and R. Scott Lorimer 14.93%. For fiscal 2002, the compensation committee
awarded 67,000 shares to the officers, based on the revenues of USE for that
year.
2001 STOCK COMPENSATION PLAN. The USE shareholders approved the USE 2001
Stock Compensation Plan (the "plan"), at the USE 2001 Annual Shareholders
Meeting.
The plan has an initial term of seven years, with up to 10,000 shares of
common stock to be issued in January of each year (starting 2002) to six
individuals (five officers: John L. Larsen, Keith G. Larsen, Robert Scott
Lorimer, Harold F. Herron, Daniel P. Svilar; and Peter Schoonmaker (president
and a director of Rocky Mountain Gas, Inc.). The number of shares to be issued
in any year will be determined by the executive committee and approved by the
board of directors, taking into account our public stock prices at date of grant
and over the prior calendar year, USE's financial condition and business
prospects, and other factors deemed appropriate. USE will pay the income taxes
owed by recipients as a result of receipt of the stock. One-half of the
compensation expense under the Program is the responsibility of Crested.
The stock recipients will agree not to sell or transfer such shares during
their employment with USE..
The USE 2001 Stock Compensation Plan is now the sole mechanism for
compensating management with stock, however options may be granted to management
and others under the 2001 ISOP. This plan is designed to reward executives with
equity, and encourage them to increase their ownership of USE and not sell their
shares in the market.
17
DIRECTORS' FEES AND OTHER COMPENSATION
The Company pays non-employee directors a fee of $150 per meeting attended.
All directors are reimbursed for expenses incurred with attending meetings.
Non-employee directors are compensated for services with $400 per month,
payable each year by the issue of shares of Crested Common Stock based on the
closing stock market price as of January 15. In 2002, 25,946 shares were issued
to non-employee directors for service in calendar 2001.
A Management Cost Apportionment Committee was established by USE and the
Company in 1982, for the purpose of reviewing the apportionment of costs between
USE and the Company. John L Larsen and Scott Lorimer are members of this
Committee. The Committee had no meetings during fiscal 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FAMILY EMPLOYMENT. Three of John L. Larsen's sons, three sons-in-law and
one grandson are employed by USE or its subsidiaries. Collectively, Mr. Larsen
and these family members received $1,030,700 in total gross cash compensation
for services in fiscal 2002.
TRANSACTIONS INVOLVING USECC AND CRESTED. USE and Crested conduct most
activities through their equally-owned joint venture USECC. From time to time
USE and Crested advance funds to or make payments on behalf of USECC, which
create intercompany debt. The party extending funds is subsequently reimbursed
by the other venturer. USE had a note receivable of $7,560,700 from Crested at
May 31, 2002. During fiscal 2001, the debt was reduced by $3,000,000, by Crested
issuing another 6,666,666 shares of its common stock to USE, which increased
USE's ownership of Crested to 70.5%.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors seeks shareholder ratification of the board's
appointment of Grant Thornton LLP, certified public accountants, to act as the
auditors of our financial statements for the fiscal year ending May 31, 2003.
The audit committee has recommended that the board retain this auditing firm for
year 2003. Grant Thornton audited our financial statements for fiscal 2002 and
2001. The board has not determined what action, if any, would be taken should
the appointment of Grant Thornton not be ratified at the meeting.
ACCOUNTANT'S FEES. Grant Thornton billed the Company and USE the following
fees in fiscal 2002:
Audit Fees: $93,300
Financial Information Systems Design and Implementation Fees: $ -0-
All Other Fees: $ -0-
The audit committee of the board of directors considers the provision
of services described above to be compatible with Grant Thornton's independence.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Grant Thornton LLP has audited the Company's financial statements for the
fiscal year ended May 31, 2002. A representative of Grant Thornton LLP will be
present at the meeting in person or by telephone to respond to appropriate
questions, and will be provided the opportunity to make a statement at the
meeting.
18
There have been no disagreements between the Company and Grant Thornton LLP, or
Arthur Andersen LLP, concerning any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
were not resolved to the satisfaction of those firms. For information on the
change of audit firms, see the Annual Report on Form 10-K filed with the
Securities and Exchange Commission in August 2001.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the 2002 Annual Report to Shareholders, including financial
statements, has been forwarded to all record shareholders entitled to vote at
the Meeting. If any recipient of this Proxy Statement has not received a copy of
that Annual Report, please notify Daniel P. Svilar, 877 North 8th West,
Riverton, WY 82501, telephone (307) 856-9271, and the Company will send a copy.
OTHER MATTERS
The Board does not know of any other matters which may properly come before
the Meeting. However, if any other matters properly come before the Meeting, it
is the intention of the appointees named in the enclosed form of Proxy to vote
said Proxy in accordance with their best judgment on such matters.
Your cooperation in giving these matters your immediate attention, and in
returning your Proxy promptly, will be appreciated.
By Order of the
Board of Directors
CRESTED CORP.
DANIEL P. SVILAR, Secretary
Dated: October 18, 2002
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PROXY CRESTED CORP. PROXY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of Crested
Corp. (the "Company") in the amount noted below, hereby constitutes and appoints
Messrs. John L. Larsen and Daniel P. Svilar, or either of them with full power
of substitution, as attorneys and proxies, to appear, attend and vote all of the
shares of stock standing in the name of the undersigned at the Annual Meeting of
the Company's shareholders to be held at the Company's offices on Monday,
December 16, 2002 at 11:00 a.m., local time, or at any adjournments thereof upon
the following:
(INSTRUCTION: Mark only one box as to each item.)
1. Election of Directors:
|_| FOR the nominees listed below |_| ABSTAIN
John L. Larsen Daniel P. Svilar Michael D. Zwickl
(TO ABSTAIN FROM VOTING FOR ANY NOMINEE, DRAW A LINE THROUGH THE NAME OF
THAT NOMINEE.)
2. Ratification of appointment of Grant Thornton LLP as independent auditors
for the current fiscal year.
o FOR the appointment o AGAINST the appointment o ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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PROXY CRESTED CORP. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH RESPECT TO THE ABOVE PROPOSALS.
WHERE NO VOTE IS SPECIFIED, THE PROXYHOLDER WILL CAST VOTES FOR THE ELECTION OF
MANAGEMENT'S NOMINEES AND, IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY
COME BEFORE THE MEETING.
Sign your name exactly as it appears on the mailing label below. It is
important to return this Proxy properly signed in order to exercise your right
to vote, if you do not attend in person. When signing as an attorney, executor,
administrator, trustee, guardian, corporate officer, etc., indicate full title
as such.
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(Sign on this line - joint holders may
sign appropriately)
--------------- --------------------------
(Date) (Number of Shares)
PLEASE NOTE: Please sign, date and place this
Proxy in the enclosed self-addressed, postage
prepaid envelope and deposit it in the mail as
soon as possible.
Please check if you are planning to attend the
meeting __
If the address on the mailing label is not
correct, please provide the correct address in
the following space.
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