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
----- -----
Check the appropriate box:
Preliminary Proxy Statement
- -----
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
- ----- RULE 14A-6(E)(2)
X Definitive Proxy Statement
- -----
Definitive Additional Materials
- -----
Soliciting Material Pursuant to ss.240.14a-12
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CRESTED CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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:
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:
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 FRIDAY, JUNE 6, 2003
We are pleased to give you notice of our Annual Meeting of Shareholders:
Date: Friday, June 6, 2003
Time: 11:00 AM MST
Place: 877 North 8th West, Riverton, Wyoming 82501
Purpose: - Elect three directors to serve until the next 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: May 2, 2003. 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: May 2, 2003 Daniel P. Svilar, Secretary
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Only shareholders of record on May 2, 2003 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 FRIDAY, JUNE 6, 2003
The Annual Report to Shareholders, including audited financial statements
for the new fiscal year ended December 31, 2002, is mailed to shareholders
together with these proxy materials on or about May 9, 2003. 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 Crested Corp. for use at the annual meeting
of shareholders (the "meeting") to be held on Friday, June 6, 2003 and at any
adjournments of the meeting.
WHO CAN VOTE
If you held any shares of common stock on the record date (May 2, 2003),
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
Colorado law requires a different approval ratio.
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, inaccordance with SEC rule
14a-4(c); (1) 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, or (2) within a reasonable
period of time before the mailing for the current meeting, as we have change our
meeting date from December to June. 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 first Friday of each June
(June 4 in 2004). 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 Annual Meeting of Shareholders to be held in June of 2004, 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.
2
CORPORATE GOVERNANCE, AUDIT COMMITTEE REPORT AND COMPENSATION COMMITTEE
MEETINGS OF THE BOARD. The board of directors, which held five formal
meetings during the seven months ended December 31, 2002, has primary
responsibility for directing management of the business. The board currently
consists of three members. 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 current members are
John L. Larsen and Michael D. Zwickl. Mr. Zwickl is an independent director
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 the seven
months ended December 31, 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/A which was filed with the Securities and Exchange
Commission on April 3, 2003.
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 during the seven months ended December 31, 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 the
seven months ended December 31, 2002.
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. Voting and
dispositive powers over the forfeitable shares held by an officer ("Forfeitable
Shares") are exercised by the Company's non-employee director. 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.
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Amount and Nature of Beneficial Ownership
---------------------------------------------------------------------------------
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) 12,020,848 -0- 12,020,848 -0- 12,020,848 70.2%
877 North 8th West
Riverton, WY 82501
John L. Larsen*(3) -0- 12,184,733 -0- 12,184,733 12,184,733 71.2%
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%
Double Diamond X Ranch
3453 Southfork Road
Cody, WY 82414
Daniel P. Svilar*(6) 191,850 -0- 191,850 -0- 191,850 1.1%
580 S. Indiana Street
Hudson, WY 82515
Michael D. Zwickl*(7) 138,418 -0- 138,418 -0- 138,418 ***
123 S. Durbin Street
Casper, WY 82601
Robert Scott Lorimer**(8) -0- -0- -0- -0- 15,000 ***
11 Kor ell Court
Riverton, WY 82501
All officers and
directors as a group
(five persons)(9) 330,268 12,184,733 330,268 12,184,733 12,515,001 73.1%
- --------
* Director
** Officer
*** Less than one percent
4
(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.
(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.
(7) Consists of 123,418 directly held shares and 15,000 shares held by an
officer which are subject to forfeiture, over which Mr. Zwickl exercises sole
voting and dispositive powers. Mr. Zwickl exercises sole voting and dispositive
powers over the shares subject to forfeiture as the only non-employee director
of Crested.
(8) Consists of 15,000 shares subject to forfeiture. Crested's non-employee
director exercises sole voting and dispositive powers over such shares.
(9) The group exercises sole voting and dispositive rights over 330,268
directly held shares and 15,000 shares which are subject to forfeiture. Shared
voting and dispositive rights are exercised over the 12,020,848 shares held by
USE, 100,000 shares held by SGMC, 60,000 shares held by Plateau and 3,885 shares
held by NWG.
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 ("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.
5
Amount and Nature of Beneficial Ownership
--------------------------------------------------------------------------
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) 895,746 1,012,657 895,746 1,412,396 2,437,568 19.2%
201 Hill Street
Riverton, WY 82501
Keith G. Larsen(3) 637,112 1,500 601,674 45,180 691,112 5.4%
4045 Valley Green Circle
Riverton, WY 82501
Harold F. Herron(4) 433,841 285,843 405,986 685,582 1,162,581 9.3%
3425 Riverside Road
Riverton, WY 82501
Daniel P. Svilar*(5) 488,749 517,359 488,749 517,359 1,106,958 8.8%
580 S. Indiana Street
Hudson, WY 82515
R. Scott Lorimer**(6) 437,615 -0- 393,906 -0- 504,848 4.0%
11 Korrel Court
Riverton, WY 82501
Michael D. Zwickl*(7) 62,069 512,359 62,069 512,359 574,428 4.7%
123 S. Durbin Street
Casper, WY 82601
All officers and
directors as a group
(four persons)(9) 1,884,179 1,017,657 1,841,100 1,417,396 3,555,375 26.4%
- ----------
* 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, 52,183 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, 52,183 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,
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511,870 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.
(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"), 35,438
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 47,986 directly owned
shares, 11,000 shares held in an IRA established for his benefit, 7,600
Custodial Shares, 339,400 shares underlying options, and 27,855 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 47,986 directly held shares, 11,000 shares held in his IRA, 7,600 Custodial
Shares and 339,400 shares underlying options. Mr. Herron exercises shared
dispositive rights over 2,895 wife's shares, 511,870 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, 34,723 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, 34,823 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 41,673 directly held
shares, 43,709 shares held in the ESOP account established for his benefit, and
352,233 shares underlying options. He exercises sole dispositive rights over
41,673 directly held shares, and 352,233 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) The group exercises sole voting rights over 334,957 directly held
shares, 114,375 shares held in joint tenancy, 90,350 shares held in IRAs, 1,130
shares held in street name, 1,000 Custodial Shares, 43,709 ESOP shares, and
1,245,033 shares underlying options. Shared voting rights are exercised over
42,350 shares
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held directly by spouses, 155,811 shares held in the ESOP which are not
allocated to plan participants, 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 334,957 directly held shares, 114,375 shares held in joint tenancy, 90,350
shares held in IRAs, 1,130 shares held in street name, 1,000 Custodial Shares,
and 1,245,033 shares underlying options. The group exercises shared dispositive
rights over 42,350 shares held directly by spouses, 511,879 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. 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. Mr. John L. Larsen holds 7,024,219 shares of NWG consisting of the
6,982,219 held by USE, 1,000 directly held shares, 1,000 shares held directly by
his wife and 40,000 shares which are subject to forfeiture, representing 89.9%
of the outstanding common stock of NWG. Harold F. Herron beneficially holds
7,027,704 shares of NWG consisting of the 6,982,219 shares held by USE, 5,575
shares held directly and 40,000 shares subject to forfeiture, representing 90%
of the outstanding stock of NWG. Messrs. Keith G. Larsen, Svilar and Lorimer
each hold 40,000 shares of NWG, which are subject to forfeiture.
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 Annual Meeting are as follows:
Other positions Director
Name Age with the Company since
- ---- --- ---------------- ---------
John L. Larsen 71 Chairman of the Board, 1974
CEO, Vice President
(a)(b)(c)
Daniel P. Svilar 74 Secretary(a) 1980
Michael D. Zwickl 55 Assistant Secretary (b) 1984
8
It is recommended that the shareholders vote for the re-election of the
directors.
(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,
and 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 the 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 related to transactions occurring during the seven months ended
December 31, 2002.
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 52, has been 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.
9
He serves at the will of the 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 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 two fiscal years ended May 31, 2002, and more than
$50,000 for the seven months ended December 31, 2002. The table includes
compensation paid such persons by Crested for the seven months ended December
31, 2002, and the two fiscal years ended May 31, 2001 and 2000 for such persons'
services to such subsidiaries. to such subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)(1)
- --------------------------------------------------------------------------------------------------------------------------------
John L. Larsen 2002* $ 109,500 $ 7,500(2) $ -0- $ -0- 97,000(3) $ -0- $ 11,700
CEO and 2002 152,000 18,000(4) -0- 78,000(5) 100,000(3) -0- 17,000
Chairman 2001 153,000 4,300(7) -0- 107,000(5) 184,400(6) -0- 15,700
Keith G. Larsen 2002* $ 90,000 $ 7,200(2) $ -0- $ -0- 97,000(3) $ $ 9,700
President 2002 152,300 17,700(4) -0- -0- 100,000(3) -0- 17,000
and COO 2001 153,900 3,600(7) -0- -0- 309,400(6) -0- 15,700
Daniel P. Svilar 2002* $ 86,200 $ 6,900(2) $ -0- $ -0- 97,000(3) $ -0- $ 9,300
General Counsel 2002 149,400 17,400(4) -0- 58,500(5) 100,000(3) -0- 16,700
and Secretary 2001 140,400 4,000(7) -0- 80,250(5) 121,900(6) -0- 14,400
Harold F. Herron 2002* $ 60,500 $ 27,800(8) $ -0- $ -0- 97,000(3) $ -0- $ 8,800
Sr. Vice President 2002 99,500 53,600(8) -0- 39,000(5) 100,000(3) -0- 15,300
2001 96,400 40,760(8) -0- 53,500(5) 96,900(6) -0- 13,700
R. Scott Lorimer 2002* $ 83,500 $ 6,800(2) $ -0- $ -0- 97,000(3) $ -0- $ 9,000
Treasurer 2002 141,000 17,000(4) -0- 39,000(5) 100,000(3) -0- 15,800
and CFO 2001 136,900 3,900(7) -0- 53,500(5) 121,900(6) -0- 14,100
Peter G. Schoonmaker 2002* $ 55,400 $ 23,100(9) $ -0- $ -0- 97,000(3) $ -0- $ 7,800
President of RMG 2002 96,000 46,300(9) -0- -0- 100,000(3) -0- 14,200
2001 95,100 19,200(9) -0- -0- 71,900(6) -0- 11,400
- ----------
10
* For seven months June 1, 2002 to December 31, 2002
(1) Dollar values for ESOP contributions.
(2) Consists of Christmas bonus amounts granted to employees during the
seven month period ended December 31, 2002.
(3) Stock options granted pursuant to the Company's 2001 Incentive Stock
Option Plan. See details of the options under "Grants to Executive Officers in
2002 (Qualified and Nonqualified)" below.
(4) Consists of $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 the former fiscal year ended May 31, 2002 were $8,000,
$7,700, $7,400, $6,700, $7,000 and $6,300, respectively.
(5) Consists of shares issued under the 1996 stock award program multiplied
by$5.35 and $3.90 (the closing market price on the issue dates for former fiscal
years 2001 and 2002 respectively). These shares are subject to forfeiture on
termination of employment, except for retirement, death or disability. If the
Company 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 2001 2002
---- ---- ----
John L. Larsen 20,000 20,000
Keith G. Larsen -0- -0-
Daniel P. Svilar 15,000 15,000
Harold F. Herron 10,000 10,000
R. Scott Lorimer 10,000 10,000
Peter G. Schoonmaker -0- -0-
(6) Stock options granted pursuant to the Company's 1998 Incentive Stock
Option Plan. See details of the options.
(7) Consists of a Christmas bonus paid in fiscal 2001.
(8) Mr. Herron was instrumental in growing The Brunton Company to the level
that it could be sold to a third party. For his efforts the Company granted Mr.
Herron a bonus which is paid out over several years, ending in August 2004. The
amount of the bonus paid was $21,200, $36,900 and $36,900 for seven months ended
December 31, 2002, and the fiscal years ended May 31, 2002 and 2001,
respectively. The total bonus paid also includes a Christmas bonus of $6,600,
for the seven months ended December 31, 2002, and $6,700 and $3,900 for fiscal
years ended May 31, 2002 and 2001, 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 completed equity financing for Rocky Mountain Gas. In
recognition of Mr. Schoonmaker's accomplishments, the Company 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 $17,300 during the seven months ended December 31, 2002, and $30,000
and $16,500 during the fiscal years ended May 31, 2002 and 2001, respectively.
The total bonus paid also includes a Christmas bonus
11
of $5,800 for the seven months ended December 31, 2002, and $6,300 and $2,600 in
the fiscal years ended May 31, 2002 and 2001, respectively, and a $10,000 bonus
paid in 2002 to officers and employees after the conclusion of a coalbed methane
gas transaction.
EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
USE has adopted a plan to pay the dependants 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, 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 $200,000 is provided to each member of upper management (which
includes all persons in the compensation table), $100,000 of such coverage is
provided to middle-management employees, and $90,000 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 accounting year. Contributions to the money purchase pension portion of the
ESOP are mandatory (fixed at ten percent of the compensation of
12
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.
USE made a contribution of 43,867 shares to the ESOP for the seven months
ended December 31, 2002, all of which were contributed under the money purchase
pension plan. At the time the shares were contributed, the market price was
$3.08 per share, for a total contribution with a market value of $135,100 (which
has been funded by USE). The Company and USE each are responsible for one-half
of that amount. 18,315 of the shares were allocated to the ESOP accounts of the
USE executive officers and the president of Rocky Mountain Gas, Inc.
Additionally, 4,806 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 the seven months ended December 31,
2002 under a loan arrangement between USE and the ESOP was $927,013 at December
31, 2002. 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.
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.
For information about options, please see the USE consolidated Financial
Statements for the seven months ended December 31, 2002. During the seven months
ended December 31, 2002, options on 973,000 shares were granted, and previously
granted options on 71,167 shares were exercised during the seven months ended
December 31, 2002.
In the prior fiscal year ended May 31, 2002, options on 1,030,000 shares
were granted, and previously granted options on 253,337 shares were exercised as
of May 31, 2002.
13
OPTION GRANTS TO USE EXECUTIVE OFFICERS IN THE SEVEN MONTHS ENDED
DECEMBER 31, 2002 (NONQUALIFIED)
The issuance of these options was previously disclosed in the Proxy Statement
for the December 2002 Annual Shareholders' Meeting.
PERCENT
NUMBER OF OF ALL OPTIONS
SHARES UNDER- GRANTED TO
LYING OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED IN 2002 PRICE DATE (1) PRES. VALUE (2)
John L. Larsen 97,000 10.0% $2.25 12/07/11 $299,000
Keith G. Larsen 97,000 10.0% $2.25 12/07/11 $299,000
Harold F. Herron 97,000 10.0% $2.25 12/07/11 $299,000
Daniel P. Svilar 97,000 10.0% $2.25 12/07/11 $299,000
R. Scott Lorimer 97,000 10.0% $2.25 12/07/11 $299,000
Peter G. Schoonmaker* 97,000 10.0% $2.25 12/07/11 $299,000
* President of Rocky Mountain Gas, Inc.
(1) These options were granted on August 8, 2002.
(2) 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 $2.25 which was equal to the market value of the stock on the
grant date (August 8, 2002); a zero dividend yield; expected volatility of
62.65%, risk-free interest rate of 5.6%, and an expected life of 10 years.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
SEVEN MONTHS ENDED 12/31/02 AND OPTION/SAR VALUES AT 12/31/02
The following table shows options exercised during the seven month period
ended December 31, 2002, options exercisable at May 31, 2002, and options
exercisable and the dollar values for in-the-money options, at December 31, 2002
(closing market price on that date was $3.08).
(a) (b) (c) (d) (e) (f)
In Seven Months Ended 12/31/02 Value of
------------------------------ Number of Number of In-the-Money
Shares Options/SARS Options/SARs Options/SARs
Acquired Value at 5/31/02 at 12/31/02 at 12/31/02
Name on Exercise (#) Realized($) Exercisable Exercisable Exercisable
- ---- --------------- ----------- ----------- ----------- -----------
John L. Larsen, -0- -0- 77,718 77,718 $ 83,935 (1)
CEO -0- -0- 34,782 34,782 $ 7,130 (2)
-0- -0- 184,400 184,400 $125,392 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
Keith G. Larsen -0- -0- 52,718 52,718 $ 56,935 (1)
President -0- -0- 34,782 34,782 $ 7,130 (s)
-0- -0- 309,400 309,400 $210,392 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
14
(a) (b) (c) (d) (e) (f)
In Seven Months Ended 12/31/02 Value of
------------------------------ Number of Number of In-the-Money
Shares Options/SARS Options/SARs Options/SARs
Acquired Value at 5/31/02 at 12/31/02 at 12/31/02
Name on Exercise (#) Realized($) Exercisable Exercisable Exercisable
- ---- --------------- ----------- ----------- ----------- -----------
Harold F. Herron, -0- -0- 40,218 40,218 $ 43,435 (1)
Sr. Vice President -0- -0- 34,782 34,782 $ 7,130 (2)
29,500 $33,661(6) 96,900 67,400 $ 45,832 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
Daniel P. Svilar -0- -0- 40,218 40,218 $ 43,435 (1)
Secretary -0- -0- 34,782 34,782 $ 7,130 (2)
-0- -0- 121,900 121,900 $ 82,892 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
R. Scott Lorimer -0- -0- 40,218 40,218 $ 43,435 (1)
Treasurer -0- -0- 34,782 34,782 $ 7,130 (2)
41,667 $70,417(7) 121,900 80,233 $ 54,558 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
- ---------
(1) Equal to $3.08, the closing market price on December 31, 2002, less
$2.00 per share option exercise price, multiplied by all shares exercisable.
(2) Equal to $3.08, the closing market price on December 31, 2002, less
$2.875 per share option exercise price, multiplied by all shares exercisable.
(3) Equal to $3.08, the closing market price on December 31, 2002, less
$2.40 per share option exercise price, multiplied by all shares exercisable.
(4) Equal to $3.08, the closing market price on December 31, 2002, less
$3.90 per share option exercise price, multiplied by all shares exercisable.
(5) Equal to $3.08, the closing market price on December 31, 2002, less
$2.25 per share option exercise price, multiplied by all shares exercisable.
(6) Equal to $3.539, the closing market price on the date of exercise, less
$2.40 per share option exercise price, multiplied by the number of options
exercised. No shares acquired on exercise of these options have been sold.
(7) Equal to $4.09, the closing market price on the date of exercise, less
$2.40 per share option exercise price, multiplied by the number of options
exercised. No shares acquired on exercise of these options have been sold.
1996 STOCK AWARD PROGRAM. The Company 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 executive officers of the Company, in amounts
determined each year based on earnings of the Company for the prior fiscal. A
total of 349,158 shares were issued under this plan. The compensation committee
did not award any shares under this plan during the seven months ended December
31, 2002.
15
One-half of the compensation expense under the Program was the
responsibility of Crested.
Each allocation of shares was issued in the name of the officer, and is
earned out (vested) 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 the Company. Voting rights are exercised over the shares by the
non-employee directors of the Company; 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 awarded each year out of such 67,000 shares aggregate
limit was determined by the compensation committee. The total shares issued were
divided among the officers based on the following percentages: John L. Larsen
29.85%, Daniel P. Svilar 22.39%, Max T. Evans 17.91% (now deceased), Harold F.
Herron 14.93% and R. Scott Lorimer 14.93%.
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 the date of
grant and during 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. As of December 31, 2002, no shares had been granted
under the Plan.
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.
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.
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.
16
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 subsidiaries. Collectively, Mr. Larsen and
these family members received $665,300 in total compensation for services during
the seven months ended December 31, 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. Crested owed USE $8,553,900 at December 31, 2002.
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 December 31,
2003. The audit committee has recommended that the board retain this auditing
firm for year 2003. Grant Thornton audited our financial statements for the
fiscal years ended May 31, 2002 and 2001, and the seven month period ended
December 31, 2002. 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 the seven month period ended December 31, 2002.
Audit Fees: $87,500
Financial Information Systems Design and Implementation Fees: $ -0-
All Other Fees: $12,823
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
seven months ended December 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. There have been no disagreements between the Company and Grant
Thornton 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 that firm.
17
COPIES OF OUR FORM 10-K
Promptly upon receiving a request from any shareholder, without charge, we
will send to the requester a copy of our Annual Report on Form 10-K/A for the
seven months ended December 31, 2002, with exhibits, as filed with the
Securities and Exchange Commission. Please address your request to Daniel P.
Svilar, Secretary, at Crested Corp., 877 North 8th West, Riverton, WY 82501,
telephone (307) 856-9271. You also may call or fax him at T 307.856.9271, F
307.857.3050.
EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
99.1 Audit Committee Charter
99.2 Certification by Audit Committee
18
PROXY CRESTED CORP. PROXY
KNOW ALL PERSONS: 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 FRIDAY, JUNE
6, 2003 AT 11:00 A.M., local time, or at any adjournments thereof upon the
following:
THE PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THIS CARD; (2) AS THE BOARD OF
DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER LISTED ON
THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE DIRECTOR NOMINEES,
AND IN FAVOR OF RATIFYING THE SELECTION OF INDEPENDENT AUDITORS.
(INSTRUCTION: Mark only one box as to each item.)
1. Election of Directors:
|_| FOR the nominees |_| ABSTAIN
John L. Larsen Daniel P. Svilar Michael D. Zwickl
TO VOTE FOR SOME NOMINEE(S), BUT ABSTAIN FROM VOTING FOR OTHER NOMINEE(S),
(1) CHECK THE FOR BOX FOR THE NOMINEE YOU WANT TO VOTE FOR, AND (2) DRAW A
LINE THROUGH THE NAME OF THE NOMINEE(S) YOU WANT TO ABSTAIN FROM. TO
ABSTAIN FROM VOTING FOR ALL NOMINEES, CHECK ONLY THE ABSTAIN BOX AND DO
NOT DRAW A LINE THROUGH ANY NAME.
2. Ratification of appointment of Grant Thornton LLP as independent auditors for
the current fiscal year.
|_| FOR the appointment |_| AGAINST the appointment |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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)
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(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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