COLUMBUS ENERGY CORP.
(A Colorado Corporation)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 18, 1999
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 6, 1999, 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 12, 1999 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, 1998 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 6, 1999
PROXY STATEMENT
March 18, 1999
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 6, 1999. 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 12, 1999, there were outstanding and entitled to vote 3,920,332 shares of
common stock. Only shareholders of record at the close of business on March 12,
1999 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 18, 1999.
-------------------------
THE COMPANY WITHOUT CHARGE WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998, 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.
1
<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, 1999. 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>
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. 991,582(1) 24.7
par value 1660 Lincoln St., Suite 2400
$.20 per share Denver, CO 80264
Carl Seaman 456,527(2) 11.6
63 Hunting Ridge Road
Greenwich, CT 06831
Fidelity Low-Priced Stock 312,500(3) 7.9
Fund, c/o Fidelity Management
& Research Company
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP 419,925 10.7
Wellington Trust Co. N.A.
75 State Street
Boston, MA 02109
</TABLE>
(1) Includes 66,375 shares underlying non-statutory stock options that are
exercisable within 60 days of February 28, 1999; and 23,292 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. Mr. Trueblood is the sole trustee of the Harry A.
Trueblood, Jr. Charitable Remainder Unitrust dated 6/1/98 and as such holds
sole voting rights to 239,653 shares but disclaims any beneficiary
ownership thereto.
(2) Includes 166,375 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 6,146 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 a mutual fund 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.
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, 1999 by (i) each
director, (ii) each "named executive officer" listed in the summary compensation
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>
Title Amount and Nature Percent
of Class Name of Beneficial Ownership of Class
-------------- ----------------------------------- -------------------- --------
<S> <C> <C> <C>
Common stock Harry A. Trueblood, Jr. 991,582 (1) 24.7
par value J. Samuel Butler 27,908 (2) *
$.20 per share William H. Blount, Jr. 21,331 (2) *
Jerol M. Sonosky 30,366 (2) *
Clarence H. Brown 78,254 (3) 2.0
Ronald H. Beck 50,311 (4) 1.3
Michael M. Logan 54,533 (5) 1.4
James P. Garrett 61,333 (6) 1.5
All directors and 1,340,023 (7) 31.4
executive officers as a
group (9 persons)
</TABLE>
* Less than 1%
(1) See footnote (1) under "Security Ownership of Certain Beneficial Owners."
(2) Includes 11,000 shares of common stock underlying stock options that are
exercisable within 60 days of February 28, 1999.
(3) Includes 67,245 shares of common stock underlying stock options that are
exercisable within 60 days of February 28, 1999.
(4) Includes 44,643 shares of common stock underlying stock options that are
exercisable within 60 days of February 28, 1999.
(5) Includes 48,750 shares of common stock underlying stock options that are
exercisable within 60 days of February 28, 1999.
(6) Includes 49,890 shares of common stock underlying stock options that are
exercisable within 60 days of February 28, 1999.
(7) Includes an aggregate of 326,153 shares of common stock underlying stock
options that are exercisable within 60 days of February 28, 1999.
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 II directors are J. Samuel Butler, Jerol M. Sonosky and Clarence H. Brown.
The Class I directors are Harry A. Trueblood, Jr. and William H. Blount, Jr.
Donald W. Ringsby, a Class I director submitted his resignation on March 5,
1999. His replacement will be elected at the next meeting of the Board of
Directors which will be before the annual meeting. 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 2001 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.
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>
Name of Nominees for Director, First Became
Principal Occupation and Biographical Information (1) Age Director in
----------------------------------------------------- --- ------------
<S> <C> <C>
J. Samuel Butler 53 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 oil and exploration 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 and Director of Colorado Wyoming Reserve Company.
Jerol M. Sonosky 73 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 64 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.
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.
Name of Continuing Directors, First Became
Principal Occupation and Biographical Information (1) Age Director in
----------------------------------------------------- --- ------------
<S> <C> <C>
Harry A. Trueblood, Jr. 73 1982
Chairman of the Board, President, Chief Executive Officer and Director. Mr. Trueblood 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 is a
Director of CEC Resources Ltd., a former wholly-owned subsidiary of the Company. 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. 52 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.
</TABLE>
(1) As to the extent of participation of executive officers and directors in oil
and gas exploration and other matters, see "Transactions with Management."
4
<PAGE>
Compensation of Directors
At each annual organization meeting, the Board of Directors adopts a new
compensation policy for its directors for the next year. Following the 1998
annual meeting, the Board determined the following policy to be effective until
May 31, 1999: The directors of Columbus who are not otherwise employed as
officers are currently paid an annual director's fee of 3,750 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 $1,500 per meeting for attendance at all regular and special
meetings of the Board of Directors, and $750 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 1998. 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 two times during
fiscal 1998.
The Company has a standing Audit Committee comprised of Messrs. Butler and
Blount. Before his resignation, Mr. Ringsby served as chairman of the committee.
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 two times during fiscal 1998.
The Company has a standing Compensation Committee comprised of Messrs.
Sonosky (Chairman of the Committee), and Trueblood. Prior to his resignation,
Mr. Ringsby was also a member of the Compensation Committee. 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. Prior to Mr. Ringsby's resignation, Messrs. Sonosky and
Ringsby formed the Compensation Committee with respect to the compensation of
Mr. Trueblood. In that role they recommended 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 1998.
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 1998.
The Company does not have a standing Nominating Committee.
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>
Name and Age Position with Columbus and Biographical Information
- - ---------------------------- ------------------------------------------------------------------------------------------------
<S> <C>
Harry A. Trueblood, Jr. (73) See "Information Concerning Continuing Directors"
Clarence H. Brown (64) See "Nominees for Election of Directors"
Ronald H. Beck (54) 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 (49) 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 (69) 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 (52) Treasurer. Mr. Garrett joined Columbus in August 1992 as Controller and was elected Treasurer in
May 1993.
</TABLE>
5
<PAGE>
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 $100,000 in
salary and bonus in fiscal 1998 (referred to as the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation
Name and Principal Fiscal ----------------------- Long Term Compensation Awards All Other
Position Year Salary($) Bonus($) Securities Underlying Options(#) Compensation($)
- - ------------------ ----- -------- -------- ---------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
H.A. Trueblood, Jr. 1998 $127,917 $100,000 32,000 $17,877 (1)
Chief Executive 1997 120,916 100,000 34,375 (7) 22,057
Officer 1996 108,000 11,766 165,550 (5)(7) 15,179
Clarence H. Brown 1998 122,917 91,500 20,000 4,800 (2)
Chief Operating 1997 118,000 68,400 20,625 (7) 4,480
Officer 1996 110,400 13,873 16,500 (7) 4,320
Ronald H. Beck 1998 104,333 25,083 13,000 7,250 (3)
Vice President 1997 100,333 15,653 13,750 (7) 6,928
Finance 1996 93,917 11,787 11,000 (7) 6,816
Michael M. Logan 1998 104,333 25,083 13,000 5,700 (4)
Vice President 1997 100,333 15,653 13,750 (7) 5,380
Corp. Development 1996 93,917 11,787 11,000 (7) 5,220
James P. Garrett 1998 84,333 20,028 10,400 6,849 (6)
Treasurer 1997 80,083 12,331 11,000 (7) 6,415
1996 74,175 9,308 9,625 (7) 6,093
</TABLE>
(1) Represents matching contributions by the Company under the 401(k) Plan of
amounts accrued under the Company's separation pay policy of $4,800 and
$13,077, respectively.
(2) Represent matching contributions by the Company under the 401(k) Plan.
(3) Represents matching contributions by the Company under the 401(k) Plan and
Company contributions under the Employee Stock Purchase Plan of $4,800 and
$2,450, respectively.
(4) Represents matching contributions by the Company under the 401(k) Plan and
Company contributions under the Employee Stock Purchase Plan of $4,800 and
$900, respectively.
(5) Includes a delayed grant of 96,800 options in exchange for the surrender of
121,000 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 34,375-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.
(6) Represents matching contributions by the Company under the 401(k) Plan and
Company contributions under the Employee Stock Purchase Plan of $4,800 and
$2,049, respectively.
(7) All option amounts have been adjusted for the Company's five-for-four stock
split in May 1997 and 10% stock dividend paid the shareholders of record on
February 23, 1998.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during fiscal 1998 to the Company's named executive
officers.
<TABLE>
Individual Grants
----------------------------- Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Price Appreciation
Options Granted to Exercise For Option Term (3)
Granted Employees in Price Expiration --------------------
Name (#)(1) Fiscal Year ($/Share)(2) Date 5% ($) 10% ($)
- - -------------------- ------ ----------- ------------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
H. A. Trueblood, Jr. 32,000 17.6 $7.00 5/6/01 $35,308 $74,144
Clarence H. Brown 20,000 11.0 7.00 5/6/01 22,068 46,340
Michael M. Logan 13,000 7.1 7.00 5/6/01 14,344 30,121
Ronald H. Beck 13,000 7.1 7.00 5/6/01 14,344 30,121
James P. Garrett 10,400 5.7 7.00 5/6/01 11,475 24,097
</TABLE>
(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 SEC 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.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998
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 1998, the total number of
unexercised options held at November 30, 1998, and the aggregate dollar value of
in-the-money, unexercised options held at November 30, 1998. 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, 1998 which was $6.50 per share. As of that date, the
underlying options had not been, and may never be, exercised. The actual gain
realized, if any, will be when exercised and will depend on the value of the
Company's common stock on that date. There is no assurance that any of the
theoretical values shown below will ever be realized or will not be surpassed.
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options Options
on Exercise Value at Fiscal at Fiscal
Name (#)(1)(2) Realized ($) Year End(#)(1) Year End(#)(1)
- - ------------------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
H.A. Trueblood, Jr. 34,375 $82,031 66,375 $ -0-
Clarence H. Brown 26,475 44,344 67,245 10,028
Ronald H. Beck 12,308 33,323 48,750 19,500
Michael M. Logan 17,908 45,980 48,750 19,500
James P. Garrett -0- -0- 49,890 14,745
</TABLE>
(1) All options are vested and exercisable.
(2) Option amounts have been adjusted for Company's five-for-four stock split
in May 1997 and 10% stock dividend paid the shareholders of record on
February 23, 1998.
8
<PAGE>
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 Dow Jones Secondary Oil Index for a period of five fiscal years commencing
December 1, 1993, and ending November 30, 1998, as set forth below. Prior to
1997, the Company had selected the American Stock Exchange (the "Amex") Natural
Resources Group Index as the published industry index in the stock performance
graph, however, the Amex discontinued this index on December 29, 1996.
Accordingly, the Company selected the Dow Jones Secondary Oil Index for its
published industry index. The graph assumes the value of the investment in
Columbus' common stock and each index as $100 on December 1, 1993, 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.
COLUMBUS ENERGY CORP.
STOCK PRICE PERFORMANCE GRAPH
AMEX Dow
Columbus Market Jones
Fiscal Year Covered Energy Value(1) Secondary Oil(2)
------------------- -------- -------- ----------------
1993 100 100 100
1994 101.4 94.0 97.6
1995 74.8 116.7 105.8
1996 133.8 128.4 138.9
1997 137.3 148.3 143.1
1998 113.8 150.4 110.8
(1) Source: American Stock Exchange
(2) Source: Dow Jones Index
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of Officers and Employees in General
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 related to individual performance in addition to reviewing
compensation programs of other oil and gas companies with emphasis on those
companies that would normally provide the greatest source of competition for
Columbus' personnel.
The Committee institutes changes in, 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 such
compensation levels are set; and comparison of competitor's compensation
programs to those of the Company. In the opinion of the Committee, this policy
has proved successful in retaining employees and contributed to the Company's
operating asset growth since it became a public company in 1988. The Committee
is convinced that one of the best ways to maximize shareholder value is to
closely align the interests of employees and shareholders by promoting the
acquisition of an equity interest in the Company whenever possible. Accordingly,
it has made liberal use of stock options in its recommended compensation package
of all employees.
Columbus' executive compensation policy for many years has been to
maintain a comparatively modest base salary augmented by grants of new stock
options annually and, since 1994, through issuance of stock in lieu of cash
under the Incentive Compensation Plan. The Company has granted increases (and on
one occasion instituted reductions) in the base salaries of its officers based
on performance using a comparative year-to-year review of (a) the market price
of the Company's common stock, (b) the Company's total revenues, net income,
discretionary cash flow, total assets, and stockholders' equity, and/or (c)
expected future market performance of the common stock based upon anticipated
improvement in its cash flow from previous activity not yet reflected in the
Company's operating results. The Committee also believes the cash salaries paid
to management and the annual level of increases have been at or below the median
level for similarly situated companies for the fiscal years from 1988 through
1998. It proposes to continue this policy in order to preserve cash for
operations and debt reduction.
The Committee also annually reviews the operating results and compensation
reported by four or more selected peer companies similarly situated within
Columbus' industry niche before determining special award bonuses, Incentive
Compensation Plan grants, or wage increases for the executives. Accordingly,
with a fair degree of certainty, they may rely upon the fact that with good
comparative results, they will be rewarded in line with the Company's
competitors. Creation of the Incentive Compensation Plan in 1994 has somewhat
reduced the previous total reliance upon the exercise and sale by officers of
their stock option shares to generate extra cash necessary for an officer's
total compensation in any given year to be at least comparable to that of peer
companies. Occasionally an individual officer makes an unusually important
contribution to the Company's success in a particular year which is taken into
consideration when setting such officer's salary or when granting an Incentive
Compensation Plan award. The Incentive Compensation Plan has provided an
excellent vehicle with which to supplement the base salaries of the executive
officers. By its optimum use, the Company limits an upward spiral of cash demand
which then becomes difficult to reduce salaries without destroying morale or
losing key executives. There was one across-the-board reduction in management's
salaries over the past ten years in August 1995 due to low commodity prices and
may be utilized again if the present price environment persists in 1999.
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
annually assesses Mr. Trueblood's performance and expected future contributions
and, based upon such an assessment, then makes its recommendations to the full
Board of Directors who make a final determination of Mr. Trueblood's
compensation. At no point during this process does Mr. Trueblood participate in
any findings, deliberations or decisions made by those directors.
The Board of Directors normally utilizes similar performance parameters
for Mr. Trueblood as is used for the other executive officers. However, special
emphasis is placed on the Company's performance versus peer group companies and
with results of the energy industry in general and will continue such a policy
to determine Mr. Trueblood's compensation in 1999. Using similar guidelines
during its annual review during May 1998, the Committee recommended an increase
of $5,000 in Mr. Trueblood's base salary and an award of a 32,000-share
non-qualified stock option. Thereafter, the full Board of Directors also granted
a cash bonus of $100,000 in recognition of the outstanding improvement in
operating results which Columbus achieved during fiscal 1997. See "Executive
Compensation - Summary Compensation Table - Option Grants in Last Fiscal Year".
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Mr. Trueblood's compensation package over the past several years has
consisted of a modest base salary supplemented by an annual bonus plus annual
grants of non-qualified stock options. The latter do not possess the same tax
advantages as do incentive stock options normally granted to other officers but
because 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 matching
percentage contribution from the Company to his 401(k) Plan as that received by
other officers and all employees.
The Committee is a standing Committee and its current composition during
the review of all officers other than Mr. Trueblood consisted of Jerol M.
Sonosky, Chairman of the Committee, Harry A. Trueblood, Jr. and Donald W.
Ringsby (who was a member until his resignation on March 5, 1999), all of whom
are or were directors of the Company, but consisted only of Messrs. Sonosky and
Ringsby with respect to Mr. Trueblood. The Board of Directors in May 1998
elected each of these persons as Committee members to serve for the balance of
fiscal 1998 and until the Board's annual organizational meeting following the
Annual Meeting of Shareholders in May 1999.
For the Compensation Committee
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 restructurings 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 termination as a result of a contraction, restructuring,
or 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.
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.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Historically, Columbus, in the ordinary course of business, 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, or realize a
profit from the ventures, and to reduce the risk to Columbus in any single
business transaction. During fiscal 1998, no directors, officers or holders of
more than 5% of the Company's voting securities or such person's immediate
family ("insiders") acquired from Columbus participation in its oil and gas
ventures 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 $60,000.
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 was the former Chief Executive Officer and currently is a
director and more than 5% shareholder of CEC Resources Ltd. ("Resources"), a
former wholly-owned Canadian subsidiary. For the fiscal year ended November 30,
1998, the Company received $221,000 from Resources for providing certain
management services for Resources which included a charge by Columbus 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 1998.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP began serving the Company as of its
incorporation in 1982 and was the Company's independent auditor for the year
ended November 30, 1998. PricewaterhouseCoopers LLP has informed the Company
that it has no direct financial interest or any material indirect financial
interest in the Company. Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP as the independent accountants
for fiscal 1999.
FUTURE SHAREHOLDER PROPOSALS
If any shareholder intends to present a proposal for action at the annual
meeting of shareholders to be held in 2000, such proposal must be received by
the Company at its principal executive offices not later than the close of
business on November 19, 1999, in order to be included in the Company's proxy
material for that meeting. Such proposals may be included in next year's Proxy
Statement if they comply with certain rules and regulations of the SEC.
Shareholders who intend to present a proposal to be considered at the
Annual Meeting of Shareholders to be held in 2000 must provide notice of such
proposal to the Company not later than February 2, 2000. Otherwise, the proxies
will have discretionary authority to vote on the matter.
All notices should be sent to the Secretary at the address on the cover of
this Proxy Statement.
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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
<PAGE>
[PROXY CARD]
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. and J. Samuel
Butler 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 12, 1999, 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 6, 1999 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.
