<PAGE>
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 (Amendment No. )
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 (S) 240.14a-11(c) or (S) 240.14a-12
CEC RESOURCES LTD.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CEC RESOURCES LTD.
(A Calgary, Alberta, Canada Corporation)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
April 20, 1999
You are cordially invited to attend or be represented by proxy at the Annual
Meeting of Shareholders of CEC Resources Ltd., a Calgary, Alberta, Canada
corporation. The meeting will be held in the Company's offices, located at 700
6th Avenue, S.W., Suite 1605, Calgary, Alberta, on May 18, 1999 at 1:30 pm local
time, for the following purposes:
1. To elect six members of the Board of Directors.
2. To appoint auditors of the Corporation for the upcoming year and authorize
the directors to fix their remuneration.
3. To transact any other business as may properly be brought before the
meeting.
Shareholders of record at the close of business on March 30, 1999 will be
entitled to attend and receive notice of, and vote at, the meeting or at any
postponement or adjournment thereof.
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
Kevin D. Struzeski
Secretary
<PAGE>
CEC RESOURCES LTD.
700 6th Avenue, S.W., Suite 1605
Calgary, Alberta, Canada T2P 0T8
ANNUAL MEETING MAY 18, 1999
PROXY STATEMENT
April 20, 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 CEC Resources Ltd. ("Resources" or the "Company") for use at the
annual meeting of shareholders of Resources to be held May 18, 1999 and at any
adjournment of the meeting. The notice of the meeting and form of proxy are
enclosed with this proxy statement. The mailing address of the principal
executive offices of the Company is 700 6th Avenue, S.W., Suite 1605, Calgary,
Alberta, Canada T2P 0T8.
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 on the proxy. If no choice is specified it will be
voted FOR the nominee directors, and FOR the appointment of auditors for the
Corporation for the upcoming year and authorization of the directors to fix
their remuneration. 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 written 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, no par
value, each share of which entitles its holder to one vote. As of March 30,
1999 there were outstanding and entitled to vote 1,532,400 shares of common
stock. Only shareholders of record at the close of business on March 30, 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 25% 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 casting votes for purposes of determining a
quorum at the annual meeting. The affirmative vote of a majority of the shares
casting votes in person or by proxy is necessary for election of directors and
the appointment of auditors. In regards to Proposal 1, votes may be cast in
favor of or withheld from each nominee; votes that are withheld will not be
considered as "votes cast" and will be excluded entirely from the vote and will
have no effect. With respect to Proposal No. 2, shares as to which the "ABSTAIN"
box has been selected on the proxy card will be counted as votes cast and will
have the effect of a vote against the matter for which the "ABSTAIN" box has
been selected. Under the rules of the American Stock Exchange, brokers who hold
shares in street name have the authority to vote on certain items when they have
not received instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors and on the
appointment of auditors. Under applicable Alberta law, a broker non-vote will
have no effect on the outcome of the election of directors or the approval of
Proposal No. 2 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 April 20, 1999.
THE COMPANY WITHOUT CHARGE WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM
10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION 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: CEC RESOURCES
LTD., 1700 BROADWAY, SUITE 1150, DENVER, COLORADO 80290, ATTENTION: KEVIN D.
STRUZESKI, PHONE (303) 860-1575, FAX (303) 860-9128.
2
<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 March 30, 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>
<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 Patrick R. McDonald and 393,800(1) 22.1
no par value McDonald Energy, LLC
1700 Broadway, Suite 1150
Denver, CO 80290
Harry A. Trueblood, Jr. 329,696(2) 21.5
1660 Lincoln Street, Suite 2400
Denver, CO 80264
Carl Seaman 217,209(3) 14.2
63 Hunting Ridge Road
Greenwich, CT 06831
Craig W. Sandahl 114,050(4) 7.3
13875 Virginia Foothills Drive
Reno, NV 89511
</TABLE>
- --------------------------------------------------------------------------------
(1) Patrick R. McDonald is the sole member of McDonald Energy, LLC. Includes
250,000 shares underlying a one year option which expires June 30, 1999.
Also includes 73,800 shares owned by CEC Resources Holdings, LLC of which
McDonald Energy, LLC has 58.3% interest.
(2) Does not include 28,911 shares which are owned by Lucile B. Trueblood, Mr.
Trueblood's wife, which she acquired as her separate property and as to
which Mr. Trueblood disclaims any beneficial ownership. Includes 207,000
shares owned by the Harry A. Trueblood Charitable Remainder Unitrust dated
June 1, 1998 to which shares Mr. Trueblood disclaims ownership; but as the
only trustee, does hold sole voting rights to such shares.
(3) Includes 79,957 shares owned by Carl and Associates, a partnership in which
Mr. Seaman owns an 80% partnership interest and as to which Mr. Seaman
shares voting and investment power. Does not include 2,032 shares which are
owned by Linda Seaman, Mr. Seaman's wife, which she acquired as her separate
property and as to which Mr. Seaman disclaims any beneficial ownership.
(4) Includes 20,000 shares underlying exercisable stock options.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The table below provides information as to each class of Resources' equity
securities beneficially owned as of March 30, 1999 by (i) each director, (ii)
the Company's President and Chief Executive Officer 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>
Name and Address Amount and Nature of Percent
Title of Class Of Beneficial Owner Beneficial Ownership of Class
- ------------------------------------- ----------------------------------- -------------------- -----------------
<S> <C> <C> <C>
Common Stock - no par value Patrick R. McDonald and 393,800(1) 22.1
McDonald Energy, LLC
Harry A. Trueblood, Jr. 329,696(2) 21.5
Craig W. Sandahl 114,050(3) 7.3
Peter N.T. Widdrington 21,000(3) 1.4
James C. Crawford 20,500(3) 1.3
Loyola G. Keough - -
All directors and executive 879,046 47.7
officers as a group
(9 persons including the above)
</TABLE>
- -------------------------------------------------------------------------------
(1) See Footnote 1 under "Security Ownership of Certain Beneficial Owners".
(2) See Footnote 2 under "Security Ownership of Certain Beneficial Owners".
(3) Includes 20,000 shares underlying exercisable stock options.
PROPOSAL NO. 1
NOMINEES FOR ELECTION OF DIRECTORS
The Board of Directors currently consists of six members: James C. Crawford,
Q.C., Loyola G. Keough, Patrick R. McDonald, Craig W. Sandahl, Harry A.
Trueblood, Jr., and Peter N.T. Widdrington. The persons authorized by the
enclosed form of proxy intend to vote each proxy received by them for the
election of the six nominees named below unless different instructions are
given. The term of office of all nominees, if elected, will commence on their
election and will continue until the annual meeting in 2000 or until their
successors are duly elected and qualified.
Each 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 nominee will decline or become unable to serve before
the annual meeting.
The Board of Directors unanimously recommends a vote FOR the nominees named
below. Proxies solicited by the Board of Directors will be voted FOR those
nominees unless instructions to the contrary are given.
4
<PAGE>
Certain information as to each director/nominee for election as a 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, Principal Occupation and Five Year First Became
Biographical Information Age Director in
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
James C. Crawford, Q.C. 64 1995
Director. Mr. Crawford has been a partner in the law firm McDonald
Crawford, Calgary, Alberta, and is Chairman of the Board of Directors
of Belfast Petroleum Inc.
Loyola G. Keough 42 1998
Director. Mr. Keough has been a partner in the law firm Bennett
Jones, Calgary, Alberta. He is a Director of WBI Canadian Pipeline
Ltd. and Interenergy Sheffield Processing Company (Canada) Ltd.
Patrick R. McDonald 42 1998
Director. Mr. McDonald has been President and Chief Executive Officer
of Resources since July 1998. From 1987 until 1997 Mr. McDonald was
Chairman and President of Interenergy Corporation, Denver, Colorado.
Since January 1998, he has been the sole member of McDonald Energy,
LLC. Mr. McDonald is a Petroleum Geologist.
Craig W. Sandahl 71 1995
Director. Mr. Sandahl is a private investor in the oil and gas and
banking industries. He is a member of the Board of Directors of the
Chief Executives Organization.
Harry A. Trueblood, Jr. 73 1972
Director. Mr. Trueblood was President and Chief Executive Officer of
Resources from 1972 until July 1998. Mr. Trueblood has served as
Chairman, President and CEO of Columbus Energy Corp., since 1982 and
was a founder and former President and/or Chairman and CEO of
Consolidated Oil and Gas, Inc., the former parent of both Columbus
Energy Corp. and Resources, from 1958 to 1988. He is a member and
former Director of the Chief Executives Organization.
Peter N.T. Widdrington 68 1995
Director. Mr. Widdrington is a Director of Canadian Imperial Bank of
Commerce, Laidlaw Inc., SNC-Lavalin Group Inc., Talisman Energy Inc.
and Radiology Corporation of America Inc. He is a member of the
Board of Directors and former President of the Chief Executives
Organization.
</TABLE>
5
<PAGE>
Directors Remuneration and Committee Assignments
At each annual organizational meeting, the Board of Directors elects officers
and approves the compensation and committee assignments for directors for the
ensuing year. During the August 5, 1998 meeting, the Board of Directors adopted
the following policy to be effective until amended:
Each director of Resources who is neither an officer nor an employee will be
paid an annual directors' fee of Cdn $400 per quarter plus Cdn $700 per meeting
for attendance at all regular and special meetings of the Board of Directors.
In 1998, each non-employee director was granted a 6,000 share, three-year
stock option except for Mr. Keough who was granted a 10,000 share, five-year
option. No options were granted in 1997. In 1996, each non-employee director
was granted a 10,000 share, three-year stock option. The exercise price for all
director stock options is the fair market value of the Company's Common Stock on
the date of the grant.
During fiscal 1998, Messrs. Crawford, Keough, Sandahl and Widdrington served
on the Audit 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 once during fiscal 1998
and again in March 1999.
The Company did not have a Compensation Committee or other Board committee
performing equivalent functions during fiscal 1998. For fiscal 1999, Messrs.
Crawford and Keough have been appointed to serve on a Special Committee, the
principal duties of which are to recommend to the Board of Directors, for their
approval, compensation of executive officers and recommend Director committee
assignments.
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
as well as the Audit Committee, if appropriate, during the last fiscal year
except that Mr. Keough (who was elected to the Board in August 1998) attended
one of the two Board meetings held while he was a director in fiscal 1998.
Additional Information
On June 30, 1998, Resources entered into a Stock Purchase Agreement (the
"Agreement") with McDonald Energy, L.L.C. ("McDonald"), a Colorado limited
liability company solely owned by Patrick R. McDonald, currently a director,
President and Chief Executive Officer of Resources, pursuant to which McDonald
acquired 70,000 shares of newly issued common stock of the Company representing
approximately 4.5% of the outstanding shares of common stock (after taking into
account the newly-issued shares) for U.S. $5.50 per share. In connection with
the Agreement, McDonald was granted a one-year option to purchase 250,000 shares
of common stock at U.S. $6.00 per share and the right to nominate a Canadian
resident as a director to stand for election at the August 5, 1998 Shareholders'
Meeting. Mr. Loyola Keough was that nominee and was elected as a director at
last year's annual meeting.
The Agreement further provided that McDonald and/or its designee was to use
its commercially reasonable efforts, subject to compliance with applicable
securities laws and acceptable market conditions, to acquire in open market
transactions up to 250,000 shares of the Company's common stock during the 60-
day period following June 30, 1998. If McDonald was unable to acquire that
number of shares during that period, it had the right, but not the obligation,
during the five-day period immediately thereafter to request the Company to sell
a number of newly-issued shares of common stock equal to the difference between
250,000 and the number of shares of common stock acquired by McDonald in market
transactions, for U.S. $5.75 per share. Through CEC Resources Holdings, LLC,
McDonald acquired 73,800 shares on the open market and did not request the
Company to sell additional shares.
6
<PAGE>
Pursuant to the Agreement, Mr. Trueblood resigned as President and Chief
Executive Officer as of July 1, 1998, and Mr. McDonald was elected to fill those
vacancies. Mr. Trueblood continued to serve as Chairman through the 1998 Annual
Meeting of Shareholders on August 5, 1998 at which time Mr. Trueblood stood for
reelection as a director but not as Chairman.
In addition, the Agreement provides for potential changes in the Board of
Directors. At such time as McDonald (i) has exercised the option to acquire
250,000 shares at U.S. $6.00, or (ii) if the Company acquires entities or assets
having a market value equal to or greater than Resources' value on June 30,
1998, McDonald may require that two of the current directors (other than the
directors nominated by McDonald) resign and then nominate two qualified persons
to fill those vacancies, unless one or both those vacancies have previously been
filled by representatives of the acquired companies, in which case such right to
nominate is reduced or terminated.
PROPOSAL NO. 2
APPOINTMENT OF AUDITORS
At the annual meeting, the shareholders will be asked to appoint auditors to
serve until the close of the next annual meeting of shareholders of the
Corporation and to authorize the directors to fix the auditors' remuneration.
The Board of Directors of the Company proposes that the independent auditors
for the fiscal year ended November 30, 1999 be Arthur Andersen LLP. Unless
otherwise specified, the persons named in the enclosed form of proxy will vote
for the appointment of Arthur Andersen LLP, independent accountants, as auditors
of the Company to hold office until the next annual meeting of shareholders or
until their successors are appointed and for authorization of the directors to
fix their remuneration. A representative of Arthur Andersen LLP is expected to
be present at the annual meeting of shareholders and to have the opportunity to
make a statement if the representative so desires. The representative of Arthur
Andersen LLP also is expected to be available to respond to appropriate
questions at that time.
PricewaterhouseCoopers LLP were engaged as the Company's independent auditors
for the 1998 fiscal year. On April 16, 1999, the Company, upon approval of its
Board of Directors, determined that the appointment of PricewaterhouseCoopers
LLP should not be renewed and that Arthur Andersen LLP should be proposed to the
Company's shareholders as the Company's independent auditors for the Company's
1999 fiscal year. The President and Chief Executive Officer of the Company, as
well as the Chief Financial Officer, both of whom joined the Company during the
last half of the fiscal 1998 year, have a previous relationship with Arthur
Andersen LLP as a result of work at another oil and gas company. In addition for
fiscal 1999, Arthur Andersen LLP has proposed a fee structure for the year end
audit, quarterly reviews and accounting consultation that is economically
beneficial to the Company.
During the Company's two most recent years and subsequent interim period
preceding this determination, there were no disagreements with the former
auditors on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. The auditors' report during
the Company's two most recent years preceding this determination did not contain
an adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information concerning the executive officers of
the Company, each of whom has served at the pleasure of the Board of Directors
since the last annual meeting. Biographical information concerning Mr. McDonald
is set forth under the heading "Proposal No. 1 -- Nominees for Election of
Directors".
<TABLE>
<CAPTION>
Name of Officer, Position with Resources and
Five Year Biographical Information Age
- --------------------------------------------------------------------------------------------
<S> <C>
Richard C. Frantz 43
Vice President-Business Development of Resources since November 1998.
Mr. Frantz was Vice President, KN Energy, from 1997 to 1998; Vice
President, Interenergy Corporation, from 1996 to 1997; Vice
President, Premier Enterprises, an energy company, from 1988 to 1996.
Patrick R. McDonald - President and Chief Executive Officer. 42
Robert R. Morrison 36
Vice President - Engineering and Operations of Resources since
December 1998. Prior to joining CEC, Mr. Morrison was employed as
Senior District Engineer for Tarragon Oil and Gas Limited from 1993
to 1998.
Kevin D. Struzeski 40
Chief Financial Officer, Treasurer and Secretary for Resources since
November 1998. Mr. Struzeski was employed as Accounting Manager,
MediaOne Group from 1997 to 1998 and prior to that he was employed as
Controller, Interenergy Corporation from 1995 to 1997 and Accounting
Manager, Snyder Oil from 1993 to 1995.
</TABLE>
8
<PAGE>
EXECUTIVE COMPENSATION
The Company entered into a written agreement in 1995 with Columbus Energy
Corp. ("Columbus") to provide management services until new management was
retained, either by merger, acquisition or direct employment. The Company paid
no direct cash compensation to the officers of Columbus for the period that they
served as officers of Resources. The Company was charged by Columbus on a
monthly basis for the specific time each Columbus officer or employee devoted to
the Company. See "Certain Relationships and Related Transactions". As a result
of Mr. McDonald's investment in the Company and the election of new executive
officers in fiscal 1998, the management agreement with Columbus was terminated
in March 1999.
The following table depicts information regarding the annual and long-term
compensation paid during each of the last three years to the Company's President
and Chief Executive Officer, who is the only executive officer to earn in excess
of U.S. $100,000 in salary and bonus in fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Number of Securities
Name and Fiscal Underlying
Principal Position Year Salary(U.S.$) Bonus(U.S.$) Options Granted
- --------------------------- ------ ------------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Patrick R. McDonald, 1998 $50,000(1) 0 78,000
President
</TABLE>
- ------------------------------------------------------------------------------
(1) Appointed July 1, 1998.
STOCK OPTION GRANTS AND EXERCISES
On October 27, 1994 the Company adopted an Employee Incentive Share Option
Plan (the "Plan"). The Plan is administered by the directors of the Corporation
or by a committee appointed by the Board of Directors of the Company. The Plan
authorizes the committee to grant options for up to 300,000 shares of the
Company's common stock. The shares are to be issued out of the Company's
authorized and unissued shares and will be issued as fully paid and non-
assessable. Also, the number of Resources shares so reserved for issuance or
subject to an option under the Plan to any one person may not exceed 5% of the
number of Resources shares which are outstanding at the time of the granting of
the option.
Options may be granted to officers, directors and regular full and part-time
employees of the Company and majority-owned subsidiaries. Options may be
exercised starting one year after grant. The option term cannot be less than one
year or more than five years from the date the option is granted. The option
price may not be less than 100% of the fair market value of the last trading
price on the date the option is granted.
9
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during fiscal 1998 to the Company's President and Chief
Executive Officer. The stock options were granted at the market price on the
date of grant.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Number of Rates of Stock Price
Securities % of Total Appreciation for
Underlying Options Granted Option Term(2)
Options to Employees in Exercise Price Expiration 5% 10%
Name Granted(1) Fiscal Year (U.S.$/Share) Date (U.S. $) (U.S. $)
- -------------- ---------- --------------- -------------- ---------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Patrick R.
McDonald 78,000 66.1 $5.50 7/1/03 $145,902 $331,000
</TABLE>
- -------------------------------------------------------------------------------
(1) Options granted at the closing price of the Company's common stock on the
date of the grant.
(2) 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.
No options were exercised by the Company's President and Chief Executive
Officer during fiscal 1998 . The following table summarizes information with
respect to the value of that officer's unexercised stock options at November 30,
1998:
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities In-the-Money
Underlying Unexercised Value of Unexercised
Options at Year End Options at Year End(2)
Nane Exercisable Unexerciseable Exercisable Unexerciseable
- ---- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Patrick R.
McDonald 0 78,000(1) 0 0
</TABLE>
- -------------------------------------------------------------------------------
(1) These options become exercisable on July 1, 1999.
(2) The in-the-money value of unexercised options is equal to the excess of the
per share market price of the Company's stock at November 30, 1998 over the
per share exercise price multiplied by the number of unexercised options.
However, the per share exercise price was higher than the market price of
the Company's stock at fiscal year end.
10
<PAGE>
INSIDER PARTICIPATION IN COMPENSATION MATTERS
During fiscal 1998, the Company had no compensation committee of its Board of
Directors. Decisions as to the compensation of Patrick R. McDonald who became
President, Chief Executive Officer and director on July 1, 1998, as well as two
executive officers hired during the fourth quarter of the 1998 fiscal year, were
determined by the Board of Directors.
Mr. McDonald participated as a director in determining the compensation of the
two executives during the 1998 fiscal fourth quarter. Harry A. Trueblood, Jr.
was President and Chief Executive Officer of the Company until July 1, 1998 and
a director throughout the 1998 fiscal year and also participated in the
determination of the executive compensation of each of the above-mentioned
executive officers. See also "Executive Compensation" and "Certain
Relationships and Related Transactions" regarding Mr. Trueblood and Columbus.
REPORT OF BOARD ON EXECUTIVE COMPENSATION
Prior to July 1, 1998, all management services were provided to the Company by
Columbus under a management agreement. On July 1, 1998, Patrick R. McDonald
became President and Chief Executive Officer of the Company. In November and
December, 1998, Mr. McDonald and the Board of Directors of the Company added
three other executive officers to the Company's management team. The management
agreement with Columbus was terminated in March, 1999.
The goal of the Board of Directors with respect to the compensation of
executive officers is to develop a program which attracts, retains and motivates
the executive officers. The Board also seeks to align the interests of the
executives with the success of the Company. In order to do so, the Board of
Directors believes that the Company should (1) pay competitive salaries, (2)
establish a performance bonus plan in order to provide short-term incentives
relating to the performance of the individual and the Company, and (3) provide
long-term incentives consisting of stock or stock options to tie the executive
officers to the long-term economic interests of the Company. The Board of
Directors intends to adopt a performance bonus plan for executive officers. The
Company has in place an Employee Incentive Share Option Plan.
Mr. McDonald's salary in fiscal 1998 and stock options for his services as
President and Chief Executive Officer were determined in accordance with an
employment agreement into which the Company and Mr. McDonald entered at the time
of Mr. McDonald's acquiring shares of the Company and becoming the President,
Chief Executive Officer and a director of the Company. The employment agreement
was the result of arm's length negotiations. It set forth the base annual
salary of Mr. McDonald and provided for the grant of an employee stock option
for 78,000 shares. The Board intended the base salary to be competitive and to
reflect the experience of Mr. McDonald, his responsibilities at the Company, and
the size and complexities of the Company's business. The stock options granted
to McDonald were part of the existing Employee Incentive Share Option plan
designed to attract and retain officers, directors and other key employees.
The Company believes that the limitation on the deductibility of compensation
for United States federal income tax purposes under Section 162(m) of the
Internal Revenue Code does not apply to the fiscal 1998 compensation of the
Company's executive officers. Any such limitation would be a factor in deciding
future compensation.
BOARD OF DIRECTORS
James C. Crawford
Loyola G. Keough
Patrick R. McDonald
Craig W. Sandahl
Harry A. Trueblood, Jr.
Peter N.T. Widdrington
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EMPLOYMENT AGREEMENT
On June 30, 1998, the Company also entered into a three-year employment
contract with Mr. McDonald, effective as of July 1, 1998, which provides for a
base salary of U.S. $120,000 per year along with other usual benefits such as
medical and dental coverage and industry-related dues and subscriptions. The
employment contract with Mr. McDonald provides for the ability of either the
Company or Mr. McDonald to terminate the contract if there is a change in
control of the Company. Change in control includes (1) the acquisition by a
party of 50% or more of the combined voting power of the Company's outstanding
shares within a 12-month period, or (2) the acquisition of the Company by
merger, sale or purchase of assets, liquidation or other means as a result of
which existing stockholders of the Company own less than 50.1% of the surviving
entity, or (3) there is a change in more than a majority of the Company's Board
of Directors as a result of a transaction or proxy contest with a third party
unaffiliated with Mr. McDonald and not endorsed by Mr. McDonald. In the event
of a change in control not supported by a majority of the Company's then
existing Board of Directors, Mr. McDonald is to be paid 400% of his
"Compensation" upon termination of the employment agreement. In the event of a
change in control supported by the then existing Board of the Company, Mr.
McDonald is to be paid 200% of his "Compensation" upon termination of the
employment agreement. For this purpose, the term "Compensation" means the
average of Mr. McDonald's annual base pay salary and bonuses for two years prior
to the termination date (or such lesser period of employment), prorated to be a
monthly amount, multiplied by the remaining months during the three-year term of
employment contract (or multiplied by 12 if the initial three year term has
expired). In addition, any incentive awards become 100% vested upon the
occurrence of a change in control. As part of the compensation stated in his
employment contract, Mr. McDonald was also granted options to acquire 78,000
shares of Resources' common stock. See "Stock Option Grants and Exercises".
Mr. McDonald may also present to the Board for approval in its discretion, a
proposed incentive compensation benefit plan for officers and key employees.
12
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SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The Company has prepared, in accordance with rules of the SEC, 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
from March 10, 1995, the first day of trading, to November 30, 1998, as set
forth below. The graph assumes the value of the investment in Resources' common
stock and each index as $100 on March 10, 1995, and that all dividends (of which
there were none by the company) 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
1933 or the Securities 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.
[STOCK PRICE PERFORMANCE GRAPH APPEARS HERE]
3/10/95 11/30/95 11/30/96 11/30/97 11/30/98
------- -------- -------- -------- --------
CEC Resources Ltd. 100 175.0 173.1 196.2 134.6
Amex Market Value (1) 100 118.7 130.6 150.8 153.0
Dow Jones - Secondary Oil (2) 100 103.3 135.6 139.7 108.4
(1) Source: American Stock Exchange
(2) Source: Dow Jones Index
13
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has never entered into any transactions with officers or directors
of the Company with respect to participation in its oil and gas ventures, and
the present management of the Company has no current intention of doing so in
the future. However, if any transaction with an officer or director of the
Company does occur, it is the Company's intention to cause any such transaction
to be on terms that are no less favorable to the Company than the terms that
could be obtained from an unrelated third party in an arm's length transaction.
Mr. Trueblood is a director, executive officer and more than 10% shareholder
of Columbus. During fiscal 1998, Columbus received U.S. $218,000 from the
Company for providing certain management services pursuant to the management
agreement described in "Executive Compensation".
During fiscal 1999, the Company has utilized for general corporate matters the
legal services of McDonald Crawford and Bennett Jones whose partners include Mr.
Crawford and Mr. Keough, respectively.
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 SEC 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 except
that Carl Seaman filed a late Form 4 in February 1999 regarding 10 purchases of
14,200 shares occurring from October 1997 through June 1998; these purchases
would have otherwise been set forth in six Form 4 reports.
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Company's proxy materials relating
to the next annual meeting of shareholders must be received by the Company on or
before December 1, 1999. Also, persons named in the proxy solicited by the
Board of Directors of the Company for its Year 2000 annual meeting of
shareholders may exercise discretionary authority on any proposal presented by a
shareholder of the Company at that meeting if the Company has not received
notice of the proposal by February 14, 2000.
All notices should be sent to the secretary at the address on the cover of
this Proxy Statement.
14
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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 and the appointment of
auditors for the Company for the upcoming year and authorization of the
directors to fix their remuneration. 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 judgement on such matters, although all proxies will be
voted as directed.
The cost of preparing and mailing the enclosed material will be borne by
Resources. 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 their regular compensation,
if any, will solicit proxies on behalf of the Company by telephone, facsimile,
electronic mail and personal interview, with the cost of any such solicitation
to be borne by the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Kevin D. Struzeski
Secretary
15
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CEC RESOURCES LTD. Common Stock Proxy
(an Alberta corporation)
THIS PROXY IS SOLICITED BY ITS BOARD OF DIRECTORS
The undersigned hereby appoints Patrick R. McDonald, James C. Crawford and
Loyola G. Keough, 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 30, 1999, which the undersigned would be entitled to vote if
personally present at the annual meeting of shareholders of CEC Resources Ltd.
to be held in the Company's office, 700 6th Avenue, S.W., Suite 1605, Calgary,
Alberta, on May 18, 1999, at 1:30 pm local time, and at any adjournment thereof.
Proposals:
(1) Election of Directors for the nominees listed below
(except as marked to the contrary below) [ ]
Withhold authority to vote for all nominees [ ]
listed below
James C. Crawford, Q.C., Loyola G. Keough, Patrick R. McDonald, Craig W.
Sandahl, Harry A. Trueblood, Jr. and Peter N.T. Widdrington
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name on the space below. If authority is not withheld, it
shall be deemed granted.)
(2) To appoint auditors of the Corporation for the upcoming year and authorize
the Directors to fix their remuneration.
[ ] For [ ] Against [ ] Abstain
(3) In their discretion for such other matters as may properly be brought 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, FOR APPROVAL OF PROPOSAL 2, AND IN THE PROXY HOLDER'S DISCRETION, ON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, UNLESS A CONTRARY
SPECIFICATION IS MADE. THE UNDERSIGNED HEREBY REVOKES ANY PROXIES GIVEN PRIOR
TO THE DATE REFLECTED BELOW.
PLEASE SIGN, DATE AND RETURN THIS
PROXY CARD IMMEDIATELY.
Date signed:________________________
Signature:
X___________________________________
X___________________________________
Please sign exactly as your name
appears on this proxy.
