COLUMBUS ENERGY CORP.
(A Colorado Corporation)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 20, 1997
You are invited to attend or be represented by proxy at the Annual Meeting
of Shareholders of Columbus Energy Corp., a Colorado corporation, to be held in
the Norwest Bank Building Forum Room, Main Floor, 1740 Broadway, Denver,
Colorado, at 9:30 a.m. MDT on May 8, 1997, for the following purposes:
1. To elect three Class II members of the Board of Directors for the
ensuing year as listed in the proxy statement.
2. To transact such other business as may properly be brought before the
meeting.
The transfer books of the Company will not be closed, but only shareholders
of record at the close of business on March 10, 1997 will be entitled to receive
notice of, and vote at, the meeting or at any postponement or adjournment
thereof.
A copy of the annual report of the Company for the fiscal year ended
November 30, 1996 accompanies this Notice of Annual Meeting of Shareholders.
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY SO THAT YOUR VOTE CAN BE RECORDED WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. POSTAGE IS PROVIDED IF MAILED WITHIN THE UNITED STATES.
You may revoke your proxy by following the procedures set forth in the
accompanying proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
H. C. Gutjahr
Secretary
<PAGE>
COLUMBUS ENERGY CORP.
1660 Lincoln Street
Denver, Colorado 80264
ANNUAL MEETING MAY 8, 1997
PROXY STATEMENT
March 20, 1997
SOLICITATION OF PROXY
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board of Directors" or the
"Board") of Columbus Energy Corp. ("Columbus" or the "Company") for use at the
annual meeting of shareholders of Columbus to be held May 8, 1997. The notice of
the meeting and form of proxy are enclosed with this proxy statement.
PROXY
Each properly executed proxy will be voted, and where a choice has been
specified by the shareholders on the proxy, it will be voted in accordance with
the specifications made. If no choice is specified it will be voted FOR the
nominee directors. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and to vote in person. Any shareholder
giving a proxy has the right to revoke it at any time before it is voted by
notice to the Secretary of the Company prior to or at the time of the meeting,
by executing a new proxy bearing a later date, or by voting in person at the
meeting.
VOTING MATTERS
The only voting class of security of the Company is its common stock, par
value $.20 per share, each share of which entitles its holder to one vote. As of
March 10, 1997, there were outstanding and entitled to vote 3,165,690 shares of
common stock. Only shareholders of record at the close of business on March 10,
1997 are entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
The presence, in person or by proxy, of holders of one-third of the
outstanding common stock of the Company will constitute a quorum for the
transaction of business at the annual meeting, but, if a quorum is not present,
the meeting may be adjourned from time to time until a quorum is obtained. Both
abstentions and broker non-votes are treated as present for purposes of
determining a quorum at the annual meeting. The affirmative vote of a majority
of the shares present in person or by proxy and entitled to vote is necessary
for election of directors. With regard to the election of directors, votes may
be cast in favor of or withheld from each nominee; votes that are withheld will
be excluded entirely from the vote and will have no effect. Brokers that do not
receive instructions are entitled to vote on the election of directors. Under
applicable Colorado law, a broker non-vote will have no effect on the outcome of
the election of directors as such votes will not be counted as votes cast.
This proxy statement and the accompanying notice of annual meeting and form
of proxy are first being sent to shareholders on or about March 20, 1997.
THE COMPANY WITHOUT CHARGE WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996, TO EACH RECORD OR BENEFICIAL
OWNER OF ITS COMMON STOCK ON THE RECORD DATE. SUCH REQUESTS SHOULD BE DIRECTED
TO: COLUMBUS ENERGY CORP., 1660 LINCOLN STREET, SUITE 2400, DENVER, COLORADO
80264, ATTENTION: H. C. GUTJAHR, SECRETARY.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning persons known by the
Company to be beneficial owners of more than five percent of the Company's
voting securities as of February 28, 1997. All information is taken from or
based on filings made by such beneficial owners with the Securities and Exchange
Commission ("SEC") or information provided by such owners to the Company. Except
as indicated in the footnotes, each person identified in the table holds sole
voting and investment power with respect to the shares shown opposite such
person's name.
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
-------- ------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Harry A. Trueblood, Jr. 827,493 (1) 25.8
par value 1660 Lincoln St., Suite 2400
$.20 per share Denver, CO 80264
Carl Seaman 332,024 (2) 10.4
63 Hunting Ridge Road
Greenwich, CT 06831
Fidelity Low-Priced Stock Fund, 277,526 (3) 8.7
c/o Fidelity Management
& Research Company
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP 305,740 9.6
Wellington Trust Co. N.A.
75 State Street
Boston, MA 02109
<FN>
(1) Includes 25,000 shares underlying non-statutory stock options that Mr.
Trueblood has the right to acquire within 60 days of the record date; and
16,940 shares which are owned by Lucile B. Trueblood, Mr. Trueblood's wife,
which she holds as her separate property and as to which Mr. Trueblood
disclaims any beneficial ownership.
(2) Includes 121,000 shares owned by Carl and Associates, a general partnership
in which Mr. Seaman owns an 80% partnership interest and as to which Mr.
Seaman shares voting and investment power, and 4,471 shares which are owned
by Linda Seaman, Mr. Seaman's wife, which she holds as her separate
property and as to which Mr. Seaman disclaims any beneficial ownership.
(3) Fidelity Low-Priced Stock Fund (the "Fund") is reported to be an investment
company whose investment adviser is Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. FMR Corp. is
controlled by Edward C. Johnson, 3d. Edward C. Johnson, 3d., Fidelity, and
FMR Corp. have sole power to dispose of the shares owned by the Fund.
</FN>
</TABLE>
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The table below provides information as to each class of Columbus' equity
securities beneficially owned as of February 28, 1997 by (i) each director, (ii)
each "named executive officer" listed in the table under the heading "Executive
Compensation", and (iii) all directors and executive officers as a group. All
information is taken from or based on filings made by such persons with the SEC
or provided by such persons to the Company. Except as indicated in the
footnotes, each person identified in the table holds sole voting and investment
power with respect to the shares shown opposite such person's name.
<TABLE>
<CAPTION>
Title Amount and Nature Percent
of Class Name of Beneficial Ownership of Class
-------- ---- ----------------------- --------
<S> <C> <C> <C>
Common stock Harry A. Trueblood, Jr. 827,493 (1) 25.8
par value J. Samuel Butler 16,266 (2) *
$.20 per share William H. Blount, Jr. 12,803 (2) *
Donald W. Ringsby 45,494 (2)(3) 1.4
Jerol M. Sonosky 17,161 (2) *
Clarence H. Brown 50,576 (4) 1.6
Ronald H. Beck 32,667 (5) 1.0
Michael M. Logan 32,792 (5) 1.0
All directors and 1,087,742 (6) 32.2
executive officers as a
group (10 persons)
<FN>
* Less than 1%
(1) See footnote (1) under "Security Ownership of Certain Beneficial Owners."
(2) Includes 8,000 shares underlying stock options that Messrs. Butler, Blount,
Ringsby and Sonosky have the right to acquire within 60 days of the record
date.
(3) Includes 16,940 shares which are owned by Karen R. Ringsby, Mr. Ringsby's
wife, which she holds as her separate property and to which Mr. Ringsby
disclaims any beneficial ownership.
(4) Includes 47,760 shares underlying stock options that Mr. Brown has the
right to acquire within 60 days of the record date.
(5) Includes 29,024 shares underlying stock options that Mr. Beck and Mr. Logan
can acquire within 60 days of the record date.
(6) Includes an aggregate of 194,536 shares of common stock underlying stock
options that such persons have the right to acquire within 60 days of the
record date.
</FN>
</TABLE>
PROPOSAL NO. 1
NOMINEES FOR ELECTION OF DIRECTORS
The Board of Directors consists of six members, divided into two classes
(Class I and Class II) having staggered terms of two years each. The Class I
directors are Harry A. Trueblood, Jr., William H. Blount, Jr. and Donald W.
Ringsby. The Class II directors are J. Samuel Butler, Jerol M. Sonosky and
Clarence H. Brown. Three Class II directors are to be elected at this meeting.
The persons authorized by the enclosed form of proxy intend to vote each proxy
received by them for the election of the three Class II nominees named below
unless different instructions are given. The term of office of all Class II
nominees, if elected, will commence on their election and will continue until
the annual meeting in 1999 or until their successors are duly elected and
qualified.
Each Class II nominee has consented to be named in this proxy statement and
to serve if elected.
If any nominee becomes unable to serve as a director before the annual
meeting, the persons authorized by the proxy will vote in their discretion for
the election of another person for such office. The Board of Directors has no
reason to believe that any Class II nominee will decline or become unable to
serve before the annual meeting.
The Board of Directors unanimously recommends a vote FOR the Class II
nominees named below. Proxies solicited by the Board of Directors will be voted
FOR those nominees unless instructions to the contrary are given.
3
<PAGE>
Certain information as to each nominee for election as a Class II director
is set forth in the table below and in the paragraphs below. The information
appearing in the table below has been furnished to the Company by the nominees.
<TABLE>
<CAPTION>
Name of Nominees for Director, First Became
Principal Occupation and Biographical Information (1) Age Director in
----------------------------------------------------- --- -----------
<S> <C> <C>
J. Samuel Butler 51 1984
Director. Mr. Butler was President and Chief Operating Officer of Columbus
from 1985 until July 31, 1989 after which he became a founding principal of
the investment banking firm of Petrie Parkman & Co. until December 1994.
Also during that time he served as Chief Executive Officer and President of
privately-held Sterling Energy Corp. and Sheffield Exploration Company, a
publicly-held independent company. He currently serves as Chairman of the
Board, Chief Executive Officer and President of ST Oil Company, a
privately-held independent oil and gas company.
Jerol M. Sonosky 71 1985
Director. Mr. Sonosky served in various capacities with the First
Interstate Bank of California, Los Angeles, California, from 1959 to 1983,
retiring in 1983 as Executive Vice President and Manager of the
International Division. Currently he is an energy and financial consultant.
Clarence H. Brown 62 1989
Director. Mr. Brown was elected Executive Vice President of Columbus in
September 1988 and was later named Chief Operating Officer in August 1989.
From 1984 until September 1988, he was Chief Executive Officer and Chairman
of the Board of Kimbark Oil & Gas Company.
</TABLE>
Information Concerning Continuing Directors
Certain information as to each director who will continue in office is set
forth in the table below. The information appearing in the table below has been
furnished to the Company by the directors.
<TABLE>
<CAPTION>
Name of Continuing Directors, First Became
Principal Occupation and Biographical Information (1) Age Director in
----------------------------------------------------- --- -----------
<S> <C> <C>
Harry A. Trueblood, Jr. 71 1982
Chairman of the Board, President, Chief Executive Officer and Director. In
addition, he was a founder and former President and/or Chairman of the
Board and Chief Executive Officer of Consolidated Oil & Gas, Inc., the
former parent of Columbus, from 1958 until October 1988. He also currently
holds those same offices in CEC Resources Ltd., a former wholly-owned
Canadian subsidiary, which was divested by a rights offering to Columbus'
shareholders in February 1995. He is a former Director of the Chief
Executives Organization and several public companies, some of which were
affiliates of Consolidated and Columbus.
William H. Blount, Jr. 50 1988
Director. Mr. Blount has been Chairman and President of Power Motive
Corporation, Denver, Colorado, a distributor of heavy construction
equipment, since 1980. He has been with that firm since 1972 and was Vice
President from 1974 to 1980. He is a member of the Chief Executives
Organization and a Director of Colorado Uplift.
Donald W. Ringsby 57 1988
Director. Mr. Ringsby is President and Chairman of the Board of Ringsby
Terminals, Inc., an industrial real estate investment company. He is a
member of the Chief Executives Organization, a Director of Colorado Uplift,
and a past Director of the University of Colorado Foundation.
<FN>
(1) As to the extent of participation of executive officers and directors in
oil and gas exploration and other matters, see "Transactions with
Management."
</FN>
</TABLE>
4
<PAGE>
Compensation of Directors
At each annual organizational meeting, the Board of Directors adopts a new
compensation policy for its directors for the next year. Following the 1996
annual meeting, the Board determined the following policy to be effective until
May 31, 1997: The directors of Columbus who are not otherwise employed as
officers are currently paid an annual director's fee of 1,500 shares of
restricted common stock issued from treasury, which for tax purposes is valued
at 75% of the closing price of the common stock on the date of that directors'
meeting, plus $1,300 per meeting for attendance at all regular and special
meetings of the Board of Directors, and $650 for attendance at meetings of the
Audit, Compensation and Executive Committees if held at a time other than at the
time that a regular or special meeting of the Board is held.
Committees and Meetings
The Board of Directors held four meetings during fiscal 1996. Each director
attended at least 75% of the aggregate of the meetings of the Board of Directors
and the meetings of the committees described below on which such director
served.
The Company has a standing Executive Committee comprised of Messrs.
Trueblood and Sonosky. The function of the Executive Committee is to act on
matters in the absence of the Board of Directors, which actions are later
ratified by the Board of Directors. The Executive Committee met one time during
fiscal 1996.
The Company has a standing Audit Committee comprised of Messrs. Ringsby
(Chairman of the Committee), Butler and Blount. The principal duties of the
Audit Committee are to recommend to the Board of Directors the engagement and
discharge of the independent auditors; review with management and the
independent auditors the type of services to be performed by the independent
auditors, their performance and their fees; review the scope of the audit;
consider comments by the auditors regarding internal controls and accounting
procedures, as well as management's response to those comments; and review the
adequacy of the Company's system of internal accounting controls. The Audit
Committee met three times during fiscal 1996.
The Company has a standing Compensation Committee comprised of Messrs.
Sonosky (Chairman of the Committee), Ringsby and Trueblood. The function of the
Compensation Committee is to review and determine the compensation to be awarded
to all executive officers (other than the Chief Executive Officer) and the
general level of various plan contributions, and annual wage increases to
non-officer employees. Messrs. Sonosky and Ringsby form the Compensation
Committee with respect to the compensation of Mr. Trueblood. In that role they
recommend the compensation for Mr. Trueblood to the Board of Directors, which
makes a final determination (without Mr. Trueblood's participation). The
Compensation Committee held two meetings in fiscal 1996.
The Company has a standing Incentive Stock Option Plan Administrative
Committee comprised of Messrs. Blount, Butler and Sonosky. This Committee
administers the Columbus Energy Corp. 1995 Stock Option Plan. The Incentive
Stock Option Plan Administrative Committee met two times during fiscal 1996.
The Company does not have a standing Nominating Committee.
5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information concerning the executive officers of
the Company, each of whom serves at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name and Age Position with Columbus and Biographical Information
------------ ---------------------------------------------------
<S> <C>
Harry A. Trueblood, Jr. (71) See "Information Concerning Continuing Directors"
Clarence H. Brown (62) See "Nominees for Election of Directors"
Ronald H. Beck (52) Vice President. Mr. Beck was elected Vice President of
Columbus in August 1985 and served as Treasurer from August
1985 to May 1993. He also serves as Chief Financial Officer.
Michael M. Logan (47) Vice President. Mr. Logan joined Columbus in August 1985 and
was elected Vice President of Corporate Development and
Marketing in November 1985.
Harold C. Gutjahr (67) Secretary. Mr. Gutjahr was elected Senior Vice President and
Secretary of Columbus in 1982. He has been a part time
employee since August 1, 1989, serving as Secretary.
James P. Garrett (50) Treasurer. Mr. Garrett joined Columbus in August 1992 as
Controller and was elected Treasurer in May 1993. He served
Gold King Consolidated, Inc., a publicly-held oil and gas
and mining company, as Controller from 1982 to 1988 and was
the Vice President-Finance from 1988 to October 1991.
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the last three years to the Company's Chief Executive
Officer and the other executive officers who earned over $100,000 in salary and
bonus in fiscal 1996 (referred to subsequently as the "named executive
officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Name and Principal Fiscal Long Term Compensation Awards All Other
Position Year Salary($) Bonus($) Securities Underlying Options(#) Compensation($)
-------- ---- --------- -------- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
H.A. Trueblood, Jr. 1996 $108,000 $11,766 120,400(3) $15,179(1)
Chief Executive 1995 109,546 50,000 -0- 2,987(1)
Officer 1994 110,333 -0- 88,000 12,886(1)
Clarence H. Brown 1996 110,400 13,873 12,000 4,320(2)
Chief Operating 1995 110,987 20,688 12,000 4,000(2)
Officer 1994 110,333 17,444 11,000 3,105(2)
Ronald H. Beck 1996 93,917 11,787 8,000 6,816(2)
Vice President 1995 94,300 11,719 21,024 6,624(2)
Finance 1994 93,750 11,135 6,600 5,213(2)
Michael M. Logan 1996 93,917 11,787 8,000 5,220(2)
Vice President 1995 94,300 11,719 21,024 5,637(2)
Corp. Development 1994 93,750 11,135 6,600 5,208(2)
<FN>
(1) Amounts represent matching contributions by the Company under the 401(k)
Plan of $4,320, $4,000 and $2,886 in fiscal 1996, 1995, and 1994 and the
balance represents amounts accrued under the Company's separation pay
policy of $10,859 in fiscal 1996, $10,000 in fiscal 1994, and a $1,013
reduction in 1995 because of a 15% salary reduction as of September 1,
1995.
(2) Amounts represent matching contributions by the Company under the 401(k)
Plan and Company contributions under the Employee Stock Purchase Plan.
(3) Includes a delayed grant of 70,400 options in exchange for the surrender of
88,000 outstanding options pursuant to an offer made by the Company in
fiscal 1995 to all option holders whose salary had been reduced by the
Board of Directors on August 1, 1995 to receive a number of options at the
closing price on date of grant equal to 80% of the number of options held.
Also includes a 25,000-share stock option approved by the Board of
Directors in May 1995 but granted effective February 5, 1996, which was the
earliest date that Mr. Trueblood was not subject to liability under Section
16 of the Securities Act of 1934.
</FN>
</TABLE>
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during fiscal 1996 to the Company's named executive officers.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------- Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Price Appreciation
Options Granted to Exercise For Option Term (3)
Granted Employees in Price Expiration ------------------
Name (#)(1)(2) Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- --------- ----------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
H. A. Trueblood, Jr. 95,400(4) 48.2 5.25 2/4/99 78,946 165,781
25,000 12.6 7.50 5/7/99 29,555 62,063
Clarence H. Brown 12,000 6.1 7.50 5/7/99 14,186 29,790
Michael M. Logan 8,000 4.0 7.50 5/7/99 9,458 19,860
Ronald H. Beck 8,000 4.0 7.50 5/7/99 9,458 19,860
<FN>
(1) Because of the prior service provision in the Company's Employee Stock
Option Plan, all options are exercisable upon grant.
(2) Options granted at the closing price of the Company's common stock on that
date.
(3) These columns present hypothetical future realizable values of the options,
obtainable upon exercise of the options net of the option's exercise price,
assuming that the market price of the Company's common stock appreciates at
a 5% and 10% compound annual rate over the term of the options. The 5% and
10% rates of market price appreciation are presented as examples pursuant
to rules of the Securities and Exchange Commission and do not reflect
management's prediction of the future market price of the Company's common
stock. No gain to the optionees is possible without an increase in the
market price of the common stock above the option price. There can be no
assurance that the potential realizable values shown in this table will be
achieved. The potential realizable values presented are NOT intended to
indicate the value of the options.
(4) Represents a delayed grant of 70,400 options in exchange for the surrender
of 88,000 outstanding options pursuant to an offer made by the Company in
fiscal 1995 to all option holders whose salary had been reduced by the
Board of Directors on August 1, 1995 to receive a number of options at the
closing price on date of grant equal to 80% of the number of options held.
Also includes a 25,000-share stock option approved by the Board of
Directors in May 1995 but granted effective February 5, 1996, which was the
earliest date that Mr. Trueblood was not subject to liability under Section
16 of the Securities Act of 1934.
</FN>
</TABLE>
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR END OPTION VALUES
The table below summarizes for each of the named executive officers the
number of stock options exercised during fiscal 1996, the total number of
unexercised options held at November 30, 1996, and the aggregate dollar value of
in-the-money, unexercised options held at November 30, 1996. Value realized upon
exercise is the difference between the market price of the underlying common
stock on the exercise date and the exercise price of the option. Value of
unexercised in-the-money options at fiscal year end is based on the difference
between the aggregate exercise price of the common stock and the market price of
the stock on November 30, 1996 which was $10.50 per share. As of that date, the
underlying options had not been, and may never be, exercised. The actual gain
realized, if any, will be when exercised and will depend on the value of the
Company's common stock on that date. There is no assurance that any of the
theoretical values shown below will ever be realized or will not be surpassed.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options at
on Exercise Value Fiscal Year End(#) Fiscal Year End($)
Name (#)(1) Realized ($) Exercisable Exercisable
---- ------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
H.A. Trueblood, Jr. 70,400 $224,400 50,000 $206,250
Clarence H. Brown 5,500 14,254 48,860 115,309
Ronald H. Beck -0- -0- 29,024 94,968
Michael M. Logan -0- -0- 29,024 94,968
<FN>
(1) All options are vested and exercisable.
</FN>
</TABLE>
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The members of the Company's Compensation Committee during fiscal 1996 were
Harry A. Trueblood, Jr., Jerol M. Sonosky and Donald W. Ringsby, each of whom
are directors of the Company. Mr. Trueblood is the Chief Executive Officer of
the Company. Mr. Trueblood's compensation is determined by the full Board of
Directors without his participation.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The Company has prepared, in accordance with rules of the Securities and
Exchange Commission, a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Company's common stock with the
cumulative total return of the American Stock Exchange Market Value Index and
the American Stock Exchange Natural Resources Group for a period of five fiscal
years commencing December 1, 1991, and ending November 30, 1996, as set forth
below. The graph assumes the value of the investment in Columbus' common stock
and each index as $100 on November 30, 1991, and that all cash dividends (of
which there were none) were reinvested.
The Stock Price Performance Graph below shall not be deemed incorporated by
reference into any filing by the Company under the Securities Exchange Act of
1934 or the Securities Act of 1933, except to the extent that the Company
specifically incorporates this information by reference and shall not otherwise
be deemed filed under such acts.
<TABLE>
<CAPTION>
COLUMBUS ENERGY CORP.
STOCK PRICE PERFORMANCE GRAPH
AMEX AMEX
Columbus Market Natural
Fiscal Year Covered Energy Value(1) Resources(1)
--------------------- -------- -------- ------------
<S> <C> <C> <C> <C>
1991 100 100 100
1992 120.8 106.6 82.5
1993 158.3 124.1 97.4
1994 160.4 117.0 100.3
1995 118.5 145.0 118.3
1996 211.7 159.6 151.3
<FN>
(1) Source: American Stock Exchange
</FN>
</TABLE>
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of Officers and Employees Generally
The Board of Directors has delegated to the Compensation Committee (the
"Committee") the responsibility of developing compensation programs to attract,
motivate, and retain competent executives and other Company personnel. The
Committee as a part of its normal practice obtains the recommendations from
Company's management about individual performance. The Committee attempts to be
informed about the compensation programs of other oil and gas companies,
particularly those which are similarly situated who normally would provide the
greatest source of competition for hiring Columbus' personnel.
The Committee primarily institutes changes or sets the level of
compensation based on consideration of recent and long-term contributions of
individual employees; the business circumstances of the Company at the time
compensation levels are set; and a review of competitor's compensation programs.
It is believed that the Company's past policies have proved successful in
retaining employees by providing meaningful incentives. A measure of this
success is the significant growth in the Company's operating assets and
improvements in financial performance during its relatively short history. The
Committee is confident that one of the best ways to maximize shareholder value
is to challenge employees to perform through incentive awards that in some
manner involve shares or share prices.
The basic elements of Columbus' executive compensation program continues to
be a comparatively modest base salary augmented by grants of new stock options
annually and more recently by issuance of stock in lieu of cash under the
Incentive Compensation Plan. It also includes usual types of employee benefit
plans offered by other companies (i.e., a 401(k) Plan and Employee Stock
Purchase Plan). The Company grants increases (and on occasion has instituted
reductions) in the base salaries of its officers based on performance and only
after a year-by-year analysis of (a) an increase in the market price of the
Company's common stock, (b) an increase in the Company's total revenues, net
income, cash flow, total assets, and stockholders' equity, and/or (c)
anticipated future market performance of the common stock based upon an expected
future cash flow increase from oil and gas activity not yet reflected in the
Company's operating results. The Committee believes that the base salaries of
its officers (as well as the level of increases in base salaries) have been at
or below a median level for the fiscal years from 1988 through 1996. The
Committee proposes to continue its policy of maintaining base salaries around
the median for similarly situated companies which will preserve cash for
operations and debt reduction. Compensation should be increased to levels equal
to or above that of other companies through use of special awards, bonuses, or
Incentive Compensation Plan grants which are common stock oriented.
The Committee annually reviews the operating results and compensation
reported by five or more selected peer companies within the same industry niche
before determining special awards or wage increases. It firmly believes that the
Company's executives should be able, with a fair degree of certainty, to rely
upon the fact that with good results they will be rewarded in line with the
Company's competitors. Recently, because of the Incentive Compensation Plan, the
Committee has been able to reduce somewhat the previous total reliance by the
Company's officers upon the exercise and sale of their stock option shares to
generate extra cash in order that their eventual compensation would at least be
competitive with that of peer companies. The extent to which any individual
officer especially contributes to the Company's success in a given year will
also be taken into consideration when setting that officer's salary or when
granting an Incentive Compensation Plan award. Therefore, the percentage
increase in the salary of one officer will not necessarily be the same as that
of any other officer in a given year.
The Committee believes that the Incentive Compensation Plan, adopted in
1994, has provided an excellent vehicle with which to supplement the base
salaries of the executive officers. Through its optimum use, the Company hopes
to avoid committing itself to a spiral of ever and ever increasing cash salaries
which become very difficult to reduce without destroying morale or losing key
executives in the process.
Notwithstanding the foregoing philosophy, during August 1995, the Board of
Directors did in fact determine to reduce cash salaries of all officers by 10%
to be effective as of September 1, 1995, primarily as a result of a significant
reduction in crude oil and natural gas prices which plagued the industry
throughout most of the preceding 12-month period. However, in connection with
such salary reduction, the Company offered each holder of 1985 Plan options the
opportunity to exchange these outstanding options for a number of options equal
to 80% of the number surrendered for exchange at an exercise price of $6.625 per
share equal to the closing price on date of grant.
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Compensation of the Chief Executive Officer
The Committee separately evaluates the annual salary and other remuneration
of Harry A. Trueblood, Jr., the Company's Chairman, President, and Chief
Executive Officer, without Mr. Trueblood's participation. The Committee assesses
Mr. Trueblood's past performance and future contributions expected from him and,
based upon that assessment, makes its recommendations to the full Board of
Directors which ultimately makes the final determination of Mr. Trueblood's
compensation. At no point during this process does he participate in any
findings, deliberations or decisions made by those directors.
The Board of Directors has in the past utilized similar performance
parameters for Mr. Trueblood as have been used for all other executive officers
but with special emphasis placed on the Company's performance based on industry
comparisons in light of the Company's own circumstances. The Committee expects
to continue such a policy with respect to Mr. Trueblood's compensation in 1997
and in future. Based on those guidelines, at its annual review in May 1996, the
Committee proposed to restore his salary to the pre-August 1995 level of a
$115,200 base salary plus an annual bonus of $11,766 and a grant of a
non-qualified stock option to purchase 25,000 shares of the Company's common
stock. The new options were granted on May 8, 1996 based on the closing price
that day and are exercisable for a term of three years. The Board accepted the
other recommendations of the Committee while duly noting that when it had
reduced salaries of all officers by 10% because of significantly lower crude oil
and natural gas prices prevailing in the industry for an extended period, Mr.
Trueblood had voluntarily agreed to decrease his annual salary rate by 15%, or
$17,280.
Mr. Trueblood's annual compensation package has usually consisted of a
modest base salary supplemented by an annual bonus in most years, and annual
grants of non-qualified stock options. The latter do not possess the same tax
advantages as do incentive stock options granted to other officers of the
Company and, by virtue of his percentage stock ownership, Mr. Trueblood is not
permitted to participate in either the Incentive Compensation Plan or the
Employee Stock Purchase Plan. He is allowed to receive the same percentage of
annual Company matching contributions to his 401(k) Plan as received by officers
and key employees.
The Committee is a standing Committee. Its current composition with respect
to a review of all officers other than Mr. Trueblood consists of Jerol M.
Sonosky, Chairman of the Committee, Donald W. Ringsby, and Harry A. Trueblood,
Jr., all of whom are directors of the Company, but consists only of Messrs.
Sonosky and Ringsby with respect to Mr. Trueblood. The Board of Directors in May
1996 elected each of these persons as Committee members to serve for the balance
of fiscal 1996 and until the annual organizational meeting following the Annual
Meeting of Shareholders in May 1997.
For the Compensation Committee
Donald W. Ringsby Harry A. Trueblood, Jr. Jerol M. Sonosky
The above report of the Compensation Committee will not be deemed to be
incorporated by reference into any filing by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates this information by reference and shall
not otherwise be deemed filed under such Acts.
Separation Pay Policy
Since December 1, 1990, the Company has had a separation pay policy which
covers all regular terminations and, in addition, certain "special" terminations
of officers (including the named executive officers) in the case of certain
contractions and restructures of the Company, and in the event of a change of
control of the Company. All officers and employees with at least one year of
service are covered by this policy.
In the event of a contraction, restructure, a "special" termination or a
"friendly" change of control (i.e. having received affirmative vote of the
Board), an officer (i) with less than 24 months of service will receive six
weeks' severance pay; (ii) with more than 24 months but less than 36 months of
service will receive nine weeks' severance pay; and (iii) with more than 36
months of service will receive three month's salary plus an additional three
weeks of pay for each full year of service; provided that all officers with 36
months or more of service will receive not less than six months of severance
pay. The severance pay rate will be calculated on the basis of the average
weekly salary received during the 52 weeks immediately preceding such
termination. If there is a "hostile" change of control (i.e. not approved by the
Board), the amounts will be increased by one and one-half times.
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At the discretion of the Board of Directors, officers and non-officer
employees may receive upon their retirement the same benefits they would have
received upon a friendly change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Historically, Columbus has sought the participation of other persons in its
oil and gas exploration and other business activities. Participation in such
ventures have been sold for the purpose of permitting Columbus to minimize its
cost basis in the transactions, to realize profit from the ventures, and to
reduce the risk to Columbus in any single business transaction. During fiscal
1996, no directors, officers or holders of more than 5% of the Company's voting
securities or such person's immediate family ("insiders") acquired participation
in Columbus' oil and gas ventures or other business activities in an amount of
$60,000 or more. In the past, certain of the Company's directors and officers
have participated in the Company's business activities as individual investors
with varying levels of investment from year to year which sometimes has exceeded
that threshold amount.
Any participation by such insiders has always been (and will continue to
be) on the same terms and conditions as the participation of other persons who
are not directors or officers of Columbus, and no director or officer will
derive any special benefits by virtue of their relationship as
directors/officers of Columbus. In the course of the exploration, development
and operations which are conducted on the oil and gas leases in which Columbus
is the operator, officers and directors of Columbus from time to time are
indebted to the Company for the period beginning when they receive their monthly
invoices until they pay the amounts they owe on such invoices.
Mr. Trueblood is an executive officer and director and more than 10%
shareholder of CEC Resources Ltd. ("Resources"). For the fiscal year ended
November 30, 1996, the Company received $296,000 from Resources for providing
certain management services for that former wholly-owned Canadian subsidiary,
which included a charge for his prorated time devoted to serving as Resources'
Chief Executive Officer. Other named executive officers' prorated time spent on
Resources' matters were also included in that charge.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who beneficially own
more than 10% of the outstanding shares of the Company's common stock, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of the Company's common stock and other equity
securities. Such persons are required to furnish the Company with copies of all
Section 16(a) reports they file.
Based on its review of the copies of such reports received by it, the
Company believes that all such reports were timely filed in fiscal 1996.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. began serving the Company as of its incorporation
in 1982 and was the Company's independent auditor for the year ended November
30, 1996. Coopers & Lybrand L.L.P. has informed the Company that it has no
direct financial interest or any material indirect financial interest in the
Company. Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the annual meeting and will be provided the opportunity to make a statement
if they so desire. Such representatives are expected to be available to respond
to appropriate questions. The Board of Directors has selected Coopers & Lybrand
L.L.P. as the independent accountants for fiscal 1997.
FUTURE SHAREHOLDER PROPOSALS
If any shareholder intends to present a proposal for action at the annual
meeting of shareholders to be held in 1998, such proposal must be received by
the Company at its principal executive offices not later than the close of
business on November 20, 1997, in order to be included in the Company's proxy
material for that meeting.
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OTHER BUSINESS
The Company does not know of any business to be presented for consideration
at the annual meeting other than the election of directors. If other business is
properly presented, it is the intention of each person named in the proxy to
vote such proxy in accordance with his judgment on such matters, although all
proxies will be voted as directed.
The cost of preparing and mailing the enclosed material will be borne by
Columbus. In addition to the solicitation of proxies by mail, it is expected
that some of the officers, directors and regular employees of the Company, who
will receive no compensation therefor in addition to the regular compensation,
will solicit proxies on behalf of the Company by telephone, facsimile and
personal interview, with the cost of any such solicitation to be borne by the
Company.
BY ORDER OF THE BOARD OF DIRECTORS
H. C. Gutjahr
Secretary
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COLUMBUS ENERGY CORP. Common Stock Proxy
(a Colorado corporation)
THIS PROXY IS SOLICITED BY ITS BOARD OF DIRECTORS
The undersigned hereby appoints Harry A. Trueblood, Jr., William H. Blount,
Jr. and Donald W. Ringsby, or any one or more of them, with full power of
substitution, as attorneys-in-fact of the undersigned to vote the shares of
stock held of record on March 10, 1997, which the undersigned would be entitled
to vote if personally present, at the annual meeting of shareholders of Columbus
Energy Corp. to be held in the Norwest Bank Building Forum Room, Main Floor,
1740 Broadway, Denver, Colorado on Thursday, May 8, 1997 at 9:30 a.m. MDT and at
any adjournment thereof.
Management proposals:
(1) Election of Class II Directors for the nominees listed below
(except as marked to the contrary below) [ ]
Withhold authority to vote for all nominees listed below [ ]
J. Samuel Butler, Jerol M. Sonosky and Clarence H. Brown
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.
If authority is not withheld, it shall be deemed granted.)
(2) In their discretion for such other matters as may properly come before the
meeting.
NOTE: THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
ABOVE. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND, IN THE PROXY HOLDER'S DISCRETION, ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING, UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IMMEDIATELY.
Date signed: ____________________________
Signature:
X_____________________________________
X_____________________________________
Please sign exactly as your name appears on this proxy.
