<PAGE>
PRELIMINARY COPY
The Coastal Corporation The Energy People
March 26, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of The Coastal Corporation to be held on May 6, 1999, at the
Renaissance Houston Hotel, Greenway Plaza, Houston, Texas, at 10:00 a.m. Your
Board of Directors and executive officers look forward to personally greeting
those stockholders able to attend.
The matters to be acted on at the meeting are set forth in the
accompanying Notice of Annual Meeting and Proxy Statement.
It is important that your shares be represented at the meeting. Would
you please sign, date and mail the enclosed proxy in the envelope provided at
your earliest convenience.
DAVID A. ARLEDGE
--------------------------------
David A. Arledge
Chairman of the Board, President
and Chief Executive Officer
COASTAL TOWER
NINE GREENWAY PLAZA
HOUSTON, TEXAS 77046-0995
<PAGE>
PRELIMINARY COPY
THE COASTAL CORPORATION
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
NOTICE OF THE 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1999
To the Stockholders of The Coastal Corporation:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
The Coastal Corporation ("Coastal" or the "Company") will be held at 10:00 a.m.
on May 6, 1999, at the Renaissance Houston Hotel, Greenway Plaza, Houston,
Texas, for the following purposes:
(1) To elect three Class I directors to terms of office expiring
at the year 2002 Annual Meeting of Stockholders;
(2) To approve an increase in the authorized shares of Common
Stock from 250 million shares to 500 million shares; and
(3) To transact such other business as may properly come before
the meeting or any adjournments thereof.
The voting stock of the Company should be represented as fully as
possible at the Annual Meeting. Therefore, it will be appreciated if you would
sign, date and return the enclosed proxy at your earliest convenience. You may,
of course, change or withdraw your proxy at any time prior to the voting at the
meeting. However, signing and returning the proxy will assure your
representation at the Annual Meeting.
The Board of Directors has fixed the close of business on March 10,
1999 as the record date for the determination of holders of Common Stock, Class
A Common Stock, $1.19 Cumulative Convertible Preferred Stock, Series A, $1.83
Cumulative Convertible Preferred Stock, Series B, and $5.00 Cumulative
Convertible Preferred Stock, Series C, entitled to notice of, and to vote at,
the Annual Meeting.
By Order of the Board of Directors,
AUSTIN M. O'TOOLE
-----------------------------------
Austin M. O'Toole
Senior Vice President and Secretary
March 26, 1999
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE MEETING AND SAVE THE
EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE SIGN, DATE AND MAIL YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
<PAGE>
TABLE OF CONTENTS
Page
Stock Ownership......................................................... 2
Proposal 1 - Election of Directors...................................... 3
Information Regarding Directors......................................... 4
Committees and Meetings........................................... 5
Compensation of Directors......................................... 6
Stock Ownership Guideline for Directors........................... 7
Corporate Governance.................................................... 7
Executive Compensation.................................................. 8
Summary of Cash and Certain Other Compensation.................... 8
Stock Options..................................................... 9
Option/SAR Exercises and Holdings................................. 10
Compensation and Executive Development Committee Report on Executive
Compensation.......................................................... 10
Pension Plan Table...................................................... 13
Performance Graph - Shareholder Return on Common Stock.................. 14
Transactions with Officers and Directors................................ 14
Proposal 2 - Proposal to Increase the Authorized Shares of Common Stock. 15
Vote Required for Approval.............................................. 15
Compliance with Section 16(a) of the Exchange Act....................... 15
Independent Auditors.................................................... 15
Stockholder Proposals................................................... 16
Other Matters........................................................... 16
Availability of Form 10-K Annual Report ................................ 16
(i)
<PAGE>
PRELIMINARY COPY
THE COASTAL CORPORATION
PROXY STATEMENT
The enclosed proxy is being solicited by the Board of Directors of The
Coastal Corporation ("Coastal" or the "Company"), Coastal Tower, Nine Greenway
Plaza, Houston, Texas 77046-0995, telephone number (713) 877-1400, for use at
the 1999 Annual Meeting of Stockholders to be held at 10:00 a.m. on May 6, 1999,
at the Renaissance Houston Hotel, Greenway Plaza, Houston, Texas, or any
adjournments thereof. Certain directors, officers and employees of the Company
will solicit proxies by telephone, telegram, mail or personal contact at the
Company's expense. In addition, the Company has retained D. F. King & Co., Inc.
to assist in the solicitation of proxies and will pay such firm a fee of $6,000
plus reimbursement of expenses. Arrangements will be made with brokers, nominees
and fiduciaries to send proxies and proxy material at the Company's expense to
their principals. This proxy statement is being mailed on or about March 26,
1999 to stockholders of record on March 10, 1999.
The purpose of the Meeting is for the stockholders of the Company (1) to
elect three Class I directors to terms of office expiring at the year 2002
Annual Meeting of Stockholders; (2) to approve an increase in the authorized
shares of Common Stock from 250 million shares to 500 million shares; and (3) to
transact such other business as may properly come before the Meeting or any
adjournments thereof.
The total number of shares of stock of the Company outstanding and
entitled to vote at the Meeting is 212,957,243 consisting of: 55,809 shares of
$1.19 Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred
Stock"), 60,696 shares of $1.83 Cumulative Convertible Preferred Stock, Series B
(the "Series B Preferred Stock"), and 27,714 shares of $5.00 Cumulative
Convertible Preferred Stock, Series C (the "Series C Preferred Stock") (the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
are referred to herein collectively as the "Preferred Stock"), 212,461,400
shares of Common Stock, and 351,624 shares of Class A Common Stock. Each share
of Common Stock or Preferred Stock entitles the holder to one vote with respect
to all matters to come before the Meeting and all of such shares will vote
together as a single class. Except with respect to the election of one of the
three Class I directors, each share of Class A Common Stock entitles the holder
to 100 votes with respect to all matters to come before the Meeting, voting with
the Common Stock and the Preferred Stock. In the election of directors, the
Class A Common Stock will vote, together as a class with the Common Stock and
Preferred Stock, for the election of two of the three Class I directors standing
for election. The Common Stock and Preferred Stock will vote together as a class
for the election of one of the Class I directors standing for election and the
holders of shares of Class A Common Stock will have no vote in the election of
this director. Only holders of voting securities of record at the close of
business on March 10, 1999 are entitled to notice of, and to vote at, the
Meeting or any adjournments thereof. Management knows of no person that owns
beneficially more than five percent (5%) of the outstanding shares of any class
of voting securities of the Company, other than as set forth below under "Stock
Ownership." The aggregate of all shares entitled to vote at the meeting have
247,768,019 votes. A quorum consists of a majority of the votes entitled to be
cast, or 123,884,010 votes.
The Annual Report of the Company for the year ended December 31, 1998,
including financial statements, is being mailed on or about March 26, 1999,
together with this Proxy Statement to all stockholders of record as of March 10,
1999, except for accounts where the stockholder has filed a written request to
eliminate duplicate reports. Additional copies of the Annual Report are
available without charge, upon request. See "Availability of Form 10-K Annual
Report."
Each properly executed proxy received at or before the Meeting on May 6,
1999 will be voted at the Meeting as specified therein. If a stockholder does
not specify otherwise, the shares represented by his or her proxy will be voted
FOR the election of all the nominees as Class I directors and FOR the proposal
to increase the authorized shares of Common Stock. The shares held by each
stockholder who signs and returns the enclosed proxy will be counted for
purposes of determining the presence of a quorum at the Meeting unless such
proxy is timely revoked. If the enclosed form of proxy is executed and returned,
it may nevertheless be revoked at any time before it is voted by giving written
notice to the Secretary of the Company, or by a stockholder personally voting
his or her shares at the Meeting, or by giving a later dated proxy.
<PAGE>
STOCK OWNERSHIP
The following table sets forth information, as of March 10, 1999, with
respect to each person known or believed by the Company to be the beneficial
owner, who has or shares voting and/or investment power (other than as set forth
below), of more than five percent (5%) of any class of its voting securities.
<TABLE>
<CAPTION>
Name and Address Percent (%)
of Beneficial Owner Title of Class Number of Shares of Class <F1>
------------------- -------------------- ---------------- ------------
<S> <C> <C> <C>
O. S. Wyatt, Jr. Class A Common Stock 154,430 <F2> 43.6
Eight Greenway Plaza
Houston, Texas 77046-0995
Trustee/Custodian under the Common Stock 22,314,762 <F3> 10.4
Thrift Plan, ESOP and Class A Common Stock 56,147 <F3> 15.9
Pension Plan of Coastal
and its subsidiaries
Chase Bank of Texas, N.A.
600 Travis, 10th Floor
Houston, Texas 77002
FMR Corp. Common Stock 14,750,948 6.9
82 Devonshire Street
Boston, Massachusetts 02109
Mellon Bank Corporation Common Stock 11,837,286 5.5
Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Isabel H. Long Series A Preferred Stock 28,976 51.7
485 S. Parkview Ave.,
Columbus, Ohio 43209-1075
The DeZurik Family Series C Preferred Stock 27,714 <F4> 100.0
c/o David DeZurik
777 S. Federal Hwy.
Pompano Beach, Florida 33062
<FN>
- - ----------
<F1>
Class includes shares represented by presently exercisable stock options held by
directors and executive officers.
<F2>
Includes 7,207 shares of Class A Common Stock owned by the spouse of Mr. Wyatt,
as to which shares beneficial ownership is disclaimed.
<F3>
The Trustee/Custodian is the record owner of these shares; and also is the
record owner of 394 shares of the Series B Preferred Stock, each of which is
convertible into 7.325 shares of Common Stock and 0.1 share of Class A Common
Stock. Voting instructions are requested from each participant in the Thrift
Plan and ESOP and from the trustees under the Pension Trust. Absent timely
voting instructions, the Trustee is permitted to vote Thrift Plan and ESOP
shares on any matter, but has no authority to vote Pension Plan shares. Nor does
the Trustee/Custodian have any authority to dispose of shares except pursuant to
instructions of the administrator of the Thrift Plan and ESOP or pursuant to
instructions from the trustees under the Pension Trust.
<F4>
Members of the DeZurik family acquired the Series C Preferred Stock in
connection with a 1972 Agreement of Merger involving the acquisition of Colorado
Interstate Gas Company, a subsidiary of the Company.
</FN>
</TABLE>
2
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a Board
of Directors to serve in three classes having staggered terms of three years
each. At present, there are twelve directors: four directors whose terms of
office expire at the Annual Meeting; three directors whose terms of office
expire at the 2000 Annual Meeting; and five directors whose terms of office
expire at the 2001 Annual Meeting. Information regarding each of the incumbent
directors is set forth herein under the headings "Information Regarding
Directors," and "Executive Compensation." At the 1999 Annual Meeting, the
stockholders will be asked to elect three Class I directors.
The three nominees for Class I director, each of whom is presently serving
in that capacity, and whose new terms would expire at the year 2002 Annual
Meeting of Stockholders, are: John M. Bissell, Harold Burrow and Jerome S.
Katzin. Roy D. Chapin, Jr., a Class I director who has served since 1988, has
chosen not to stand for re-election.
The holders of Common Stock, voting as a class with the Preferred Stock,
are entitled to elect one of the Company's directors standing for election at
the Annual Meeting. Mr. Burrow has been nominated by the Nominating Committee of
the Board of Directors to stand for election by the holders of Common Stock and
Preferred Stock at the Annual Meeting. Each share of Common Stock and Preferred
Stock has one vote for the election of this director. All directors and
executive officers as a group own shares representing 2.7% of the votes entitled
to be cast for the election of Mr. Burrow.
The holders of Common Stock, Preferred Stock and Class A Common Stock,
voting together as a class, are entitled to elect the remaining directors
standing for election. Messrs. Bissell and Katzin have been nominated by the
Nominating Committee of the Board of Directors to stand for election by the
holders of Common Stock, Preferred Stock and Class A Common Stock at the Annual
Meeting. Each share of Common Stock or Preferred Stock has one vote for the
election of these two directors. Each share of Class A Common Stock has 100
votes for the election of these two directors. Holders of Class A Common Stock
entitled to vote at the Meeting have 35,162,400 votes of a total of 247,768,019
votes, or 14.2% of the votes entitled to be cast. All directors and executive
officers as a group own shares representing 9.7% of the votes entitled to be
cast for the election of Messrs. Bissell and Katzin.
If any nominee becomes unwilling or unable to serve, which is not
expected, the proxies will be voted for a substitute person, if any, designated
by the Nominating Committee of the Board of Directors.
The enclosed form of proxy provides a means for stockholders to vote for
the election of the Class I directors listed above, to withhold authority to
vote for one or more of such directors, or to withhold authority to vote for all
of such directors. Unless a stockholder who withholds authority votes for the
election of one or more other persons at the Meeting or votes by means of
another proxy, the withholding of authority will have no effect upon the
election of directors, assuming that a quorum (a majority of the votes entitled
to be cast), is present at the Meeting.
3
<PAGE>
INFORMATION REGARDING DIRECTORS
The following table sets forth information, as of March 10, 1999,
regarding each of the current directors, including Class I directors standing
for election, and all directors and executive officers as a group. Each director
has furnished the information with respect to age, principal occupation and
ownership of shares of stock of the Company. Messrs. Bissell, Burrow, Chapin and
Katzin are Class I directors whose terms expire in 1999 (as stated above, Mr.
Chapin has chosen not to stand for re-election); Messrs. Arledge, Brundrett and
Wyatt are Class II directors whose terms expire in 2000; and Messrs. Cordes,
Gates, Johnson, MacNeil and McDade are Class III directors whose terms expire in
2001.
<TABLE>
<CAPTION>
Number of Shares
Name, (Age), Year Offices with Coastal Beneficially Percent (%)
First Became Director and/or Principal Occupation Title of Class Owned<F1> of Class<F1>
- - ----------------------- ------------------------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C>
David A. Arledge Chairman of the Board, President Common Stock 611,993
(54), 1988 and Chief Executive Officer of Coastal Class A Common Stock 2,352
Harold Burrow Retired; Vice Chairman of the Board Common Stock 280,593 <F2>
(84), 1973 of Coastal Class A Common Stock 13,601 3.8
John M. Bissell Chairman of the Board Common Stock 11,593
(68), 1985 of Bissell Inc. Class A Common Stock -0-
George L. Brundrett, Jr. Attorney Common Stock 13,318
(77), 1973 Class A Common Stock 2,290
Roy D. Chapin, Jr. Former Chairman and Common Stock 7,840 <F2>
(83), 1988 Chief Executive Officer Class A Common Stock -0-
of American Motors Corporation
James F. Cordes Retired; former Executive Vice Common Stock 23,066
(58), 1985 President of Coastal Class A Common Stock -0-
Roy L. Gates Ranching and Investments Common Stock 12,423
(70), 1969 Class A Common Stock 2,736
Kenneth O. Johnson Senior Vice President of Coastal Common Stock 84,639
(78), 1988 Class A Common Stock 9,604 2.7
Jerome S. Katzin Retired Investment Banker Common Stock 84,976 <F2>
(80), 1983 Class A Common Stock -0-
J. Carleton MacNeil, Jr. Securities Brokerage and Investments Common Stock 3,116
(65), 1997 Class A Common Stock -0-
Thomas R. McDade Senior Partner, Law Firm of McDade, Common Stock 13,772 <F2>
(66), 1993 Fogler, Maines & Lohse L.L.P., Houston Class A Common Stock -0-
O. S. Wyatt, Jr. Retired; Chairman of the Executive Common Stock 4,852,384 <F2> 2.3
(74), 1955 Committee of Coastal Class A Common Stock 154,430 <F2> 43.6
All directors and executive officers as a group Common Stock 7,011,635 <F3> 3.3
(32 persons, including the above) Class A Common Stock 186,301 <F3> 52.6
(See footnotes on following page)
<FN>
* Less than one percent unless otherwise indicated. Class includes
outstanding shares and presently exercisable stock options held by
directors and executive officers. Excluding presently exercisable
stock options, directors and executive officers as a group would own
184,021 shares of Class A Common Stock, which would constitute 52.0%
of the shares of such class.
4
<PAGE>
<F1>
Except for the shares referred to in Notes 2 and 3 below, and the shares
represented by presently exercisable stock options, the holders are believed by
Coastal to have sole voting and investment power as to the shares indicated.
Amounts include shares in Coastal ESOP and Thrift Plan, and presently
exercisable stock options to purchase (i) shares of Common Stock held by Messrs.
Arledge 565,746, Burrow 1,338, Bissell 1,370, Brundrett 1,208, Chapin 1,340,
Cordes 1,338, Gates 1,338, Johnson 7,696, Katzin 1,370, MacNeil 1,116, McDade
1,272 and Wyatt 1,316, and (ii) shares of Class A Common Stock held by Mr.
Arledge 2,280.
<F2>
Includes shares owned by the spouse of Mr. Burrow (10,000 shares of Common
Stock), by the spouse of Mr. Chapin (2,000 shares of Common Stock), by the
spouse of Mr. Katzin (1,856 shares of Common Stock), by the spouse of Mr. McDade
(2,000 shares of Common Stock) and by the spouse and a son of Mr. Wyatt (539,491
shares of Common Stock and 7,207 shares of Class A Common Stock), as to which
shares beneficial ownership is disclaimed.
<F3>
Includes presently exercisable stock options to purchase 1,288,574 shares of
Common Stock and 2,280 shares of Class A Common Stock; also includes 569,825
shares of Common Stock and 7,207 shares of Class A Common Stock owned by spouses
and/or children, as to which shares beneficial ownership is disclaimed. In
addition, one executive officer owns 8 shares of Series B Preferred Stock, each
of which is convertible into 7.325 shares of Common Stock and 0.1 share of Class
A Common Stock.
</FN>
</TABLE>
No incumbent director is related by blood, marriage or adoption to another
director or to any executive officer of the Company or its subsidiaries or
affiliates.
Except as hereafter indicated, the above table includes the principal
occupation of each of the directors during the past five years. The listed
executive officers have held various executive positions with Coastal during the
five-year period.
Mr. Cordes is a member of the Board of Directors of Comerica Inc.
Mr. Katzin is a member of the Board of Directors of Qualcomm Incorporated.
Messrs. Arledge and Burrow are directors of Colorado Interstate Gas
Company and ANR Pipeline Company. Both of these subsidiaries of the Company are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Committees and Meetings
The Company's Board of Directors has an Executive Committee which consists
of Messrs. Wyatt (Chairman), Arledge, Burrow and Cordes which has general
authority to act in the management and business affairs of the Company when the
full Board of Directors is not in session, except for the review of capital
expenditures in excess of $15,000,000.
As permitted by the General Corporation Law of the State of Delaware and
the Company's By-Laws, the Board of Directors and the Executive Committee took
various corporate actions during 1998 by means of unanimous written consent.
These actions included approval or review of certain capital expenditures,
credit arrangements, corporate guarantees, elections of officers, establishment
of bank accounts and similar authorizations.
During 1998, the Board of Directors held 9 regular meetings and 3 special
meetings. The Executive Committee held 4 meetings and approved 95 matters by
unanimous consent action.
The Company also has an Audit Committee consisting of Messrs. Katzin
(Chairman), Bissell and Gates which meets periodically to review the results of
operations of the Company with members of the Company's staff who are
responsible for accounting matters and from time to time with the Company's
independent auditors, Deloitte & Touche LLP. During 1998, the Audit Committee
met 8 times.
In addition, the Company has a Compensation and Executive Development
Committee which consists of Messrs. Bissell (Chairman), Chapin and Katzin which
meets from time to time to review compensation, stock option
5
<PAGE>
awards and other matters concerning remuneration of employees of the Company.
During 1998, the Compensation and Executive Development Committee met 2 times
and also approved 27 matters by unanimous consent action.
The Company also has a Nominating Committee consisting entirely of
independent directors, namely John M. Bissell, Roy D. Chapin, Jr., J. Carlton
MacNeil, Jr. and Jerome S. Katzin. The Nominating Committee met 3 times and
approved one unanimous consent action in 1998. The Committee will consider
nominations recommended by stockholders upon submission in writing to the
Secretary of the Company the name of any nominee, together with the
qualifications for service as a director of the Company.
Each incumbent director attended a minimum of 75% of the aggregate of (i)
the 1998 meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board of Directors on which he served,
except Mr. Chapin who attended 71% of such meetings. Nine directors attended
100% of such meetings. Attendance of all directors at such meetings averaged
95%.
Compensation of Directors
There is a limitation of $60,000 per annum on cash fees paid by Coastal to
any non-management director. Messrs. Arledge and Johnson, as members of
management of the Company, receive no fees for services as directors. Each
remaining director received directors' fees at the annual rate of $24,000 for
services as a director; Messrs. Wyatt, Burrow and Cordes each received fees at
the annual rate of $24,000 for services as members of the Executive Committee;
Messrs. Bissell, Katzin and Gates each received fees of $24,000 for services as
members of the Audit Committee; Messrs. Bissell and Katzin each received fees of
$12,000 for services as members of the Compensation and Executive Development
Committee. Mr. Chapin received fees of $15,000 for services as a member of the
Compensation and Executive Development Committee. Messrs. Chapin and MacNeil
each received fees at the rate of $10,000 per annum for services as members of
the Nominating Committee.
Mr. Burrow retired effective December 31, 1995 and entered into consulting
agreements with Colorado Interstate Gas Company and ANR Pipeline Company
pursuant to which he received consulting fees in the aggregate of $60,000 in
1998. He also received aggregate fees of $48,000 as a director and member of the
Executive Committee of Coastal, fees of $18,000 as a director of Colorado
Interstate Gas Company, fees of $24,000 as a director of ANR Pipeline Company
and fees of $12,000 as a director of Coastal Oil & Gas Corporation. The Company
is providing Mr. Burrow with appropriate office space and administrative
support.
Upon his retirement as an officer and employee of the Company on July 15,
1997, Mr. Wyatt entered into a five-year renewable Agreement for Consulting
Services with the Company under which he agrees to devote 50% of his time on a
consultive basis to Company matters as requested by the chief executive officer
of the Company. The agreement provides for compensation of Mr. Wyatt at the rate
of $35,500 per month. The agreement also contains standard confidentiality and
non-competition provisions. During the period of the agreement, the Company is
providing Mr. Wyatt with appropriate office space, administrative support and
the use of Company aircraft on Company business.
Under the Company's Deferred Compensation Plan approved by the Board of
Directors, directors are permitted to defer receipt of their fees with the
amount of the deferred fees converted into phantom shares of Common Stock of the
Company based on the market price of such shares on the quarterly dates on which
fees are earned. On the date of termination as a director, the phantom shares
are converted into cash based on the then-market price of the shares and
distributed in accordance with the directors election. In addition, each
director who elects to defer receipt of his fees in this manner receives a stock
option to purchase an equivalent number of shares as the phantom shares. The
options vest over a three-year period and expire at the end of five years.
Messrs. Bissell, Burrow, Chapin, Cordes, Katzin, MacNeil, McDade and Wyatt have
elected to defer receipt of their directors' fees in accordance with the
provisions of the Plan.
On June 5, 1997, the Board of Directors adopted the "1997 Directors Stock
Plan" pursuant to which each director who is not an employee of the Company will
receive annually a stock option to purchase the number of whole shares of Common
Stock of the Company which have an equivalent value of $25,000 on the date of
grant. Options are granted at 100% of the fair market value of the Common Stock
on the date of grant, vest over a three-year period and expire at the earliest
of five years from the date of grant, three years after retirement, or one year
after death. In accordance with the Plan, Messrs. Bissell, Brundrett, Burrow,
Chapin, Cordes, Gates, Katzin, MacNeil, McDade and Wyatt each received options
on May 7, 1998 to purchase 2,508 shares, adjusted for the 2-for-1 stock split
distributed July 1, 1998.
6
<PAGE>
Mr. McDade's firm received fees in the amount of $338,840 for legal
services rendered to the Company in 1998; and is receiving a retainer of
$240,000 for legal services rendered and to be rendered in 1999.
Stock Ownership Guideline for Directors
The Board of Directors has adopted a stock ownership guideline for
directors. Under the guideline, each director is expected to own a minimum
number of shares of Common Stock of the Company within five years, based on the
number of shares of Common Stock having a market value of $100,000 or, if
greater, three times the annual cash compensation (including deferred
compensation) the director is receiving for serving as a director.
CORPORATE GOVERNANCE
The Board of Directors presently consists of twelve members, of whom ten
are outside directors, including several former officers and employees of the
Company. The Board also has one non-voting Director emeritus. Each of the
outside directors, in the opinion of the Board, is independent of management and
free of any relationship that would interfere with the exercise of independent
judgment and is eligible to serve as a member of the Board's committees.
The Board is committed to a policy of having a majority of its directors
as "independent directors." In fact, since 1988, no additional insider (i.e.,
officer or employee) has been elected to the Board of Directors.
Consistent with the personnel policy of the Company which requires equal
treatment regardless of race, color, religion, sex, age, national origin,
physical handicap or veteran status, the Board of Directors is also committed to
a strong and diverse Board membership. Acting through its Nominating Committee,
it is engaged in a careful process to identify individuals who can best
contribute to the Company's continued success and the best interest of its
stockholders. As part of that process, the Board and the Nominating Committee
will continue to take all reasonable steps to identify and consider for Board
membership all candidates, including women and minorities, who satisfy the needs
of the Company at the time of election.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth information for the fiscal years ended
December 31, 1998, 1997 and 1996 as to cash compensation paid by the Company and
its subsidiaries, as well as certain other compensation paid or accrued for
those years, to the Company's Chief Executive Officer ("CEO") and its four other
most highly compensated executive officers (the "Named Executive Officers").
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
--------------------------
Annual Compensation<F1> Awards Payouts
------------------------------------- ---------- -------
Securities All Other
Underlying LTIP Compen-
Name and Options/ Payouts sation
Principal Position Year Salary ($) Bonus ($)<F2> SARs (#)<F3> ($) $<F4>
- - --------------------- ---- ---------- ------------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
David A. Arledge, 1998 722,527 400,000 100,000 57,802
Chairman of the Board, 1997 722,527 400,000 100,000 57,802
President and CEO 1996 707,194 300,000 300,000 56,576
Coby C. Hesse, 1998 353,597 140,000 70,000 28,288
Executive V.P. - 1997 297,213 140,000 60,000 23,777
Administration 1996 254,973 120,000 30,000 20,349
James A. King, 1998 362,030 115,000 30,000 21,513
Executive V.P. - 1997 343,823 90,000 20,000 17,138
Refining 1996 343,823 80,000 20,000 13,572
Jeffrey A. Connelly 1998 314,884 120,000 50,000 25,191
Senior V.P. - Natural 1997 300,893 120,000 40,000 24,071
Gas 1996 288,014 100,000 20,000 23,041
Carl A. Corrallo 1998 309,901 100,000 50,000 24,792
Senior V.P. and 1997 297,635 100,000 40,000 23,811
General Counsel 1996 281,536 90,000 20,000 22,523
<FN>
- - ------------------------
<F1>
Does not include the value of perquisites and other personal benefits because
the aggregate amount of such compensation, if any, does not exceed the lesser of
$50,000 or 10 percent of annual salary and bonus for any named individual.
<F2>
Bonuses are based on the following factors: the individual's position; the
individual's responsibility; and the individual's ability to impact the
Company's financial success. See Committee Report on page 10.
<F3>
Adjusted for the 2-for-1 stock split distributed July 1, 1998. The options do
not carry any stock appreciation rights.
<F4>
All Other Compensation for 1998 consists of: (i) Company contributions to the
Coastal Thrift Plan (David A. Arledge $12,800; Coby C. Hesse $12,800; James A.
King $9,600; Jeffrey A. Connelly $12,800 and Carl A. Corrallo $12,800); (ii)
certain payments in lieu of Thrift Plan contributions (David A. Arledge $45,002;
Coby C. Hesse $15,488; James A. King $11,913; Jeffrey A. Connelly $12,391; and
Carl A. Corrallo $11,992); these latter payments are made to all employees of
the Company and its subsidiaries who participate in the Thrift Plan who must
discontinue their Thrift Plan participation due to federal statutory limits.
</FN>
</TABLE>
8
<PAGE>
Stock Options
The following table sets forth information with respect to stock options
granted on March 19, 1998 for the fiscal year ended December 31, 1998 to the
Named Executive Officers.
<TABLE>
Option/SAR Grants in Last Fiscal Year (1998)
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees in Price Expiration Present
Name Granted<F1><F2> Fiscal Year<F3> ($/Sh)<F1> Date Value ($)<F4>
- - ----------------------- -------------- --------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David A. Arledge 100,000 4.88 32.75 3/18/08 1,277,250
Coby C. Hesse 70,000 3.42 32.75 3/18/08 894,075
James A. King 30,000 1.47 32.75 3/18/08 383,175
Jeffrey A. Connelly 50,000 2.44 32.75 3/18/08 638,625
Carl A. Corrallo 50,000 2.44 32.75 3/18/08 638,625
<FN>
- - ---------------------
<F1>
Adjusted for the 2-for-1 stock split distributed July 1, 1998.
<F2>
Options expire ten years from the date of issuance and are granted at the fair
market value of the Common Stock of the Company on the date of grant. Options
vest cumulatively at a rate of 15% of the option shares on the first anniversary
date of the date of grant, 20% on each of the second, third and fourth
anniversary dates and 25% on the fifth anniversary date.
<F3>
The options do not carry any stock appreciation rights.
<F4>
Calculated at $12.7725 per share based on the Black-Scholes option pricing model
expressed as a ratio .39 x exercise price x number of shares. The actual value,
if any, an executive may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The estimated values under that model are
based on assumptions that include (i) a stock price volatility of .2241,
calculated using monthly stock prices for the three years prior to the grant
date, (ii) an interest rate of 5.57%, (iii) a dividend yield of 0.611% and (iv)
an expected option holding period of eight years. The Securities and Exchange
Commission ("S.E.C.") requires disclosure of the potential realizable value or
present value of each grant. The Company's use of the Black-Scholes model to
indicate the present value of each grant is not an endorsement of this
valuation.
</FN>
</TABLE>
9
<PAGE>
Option/SAR Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options and SARs held as of the fiscal year ("FY") ended
December 31, 1998.
<TABLE>
Aggregated Option/SAR Exercises In Last Fiscal Year
And FY-End Option/SAR Values (1998)
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)<F1>
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- - ------------------- --------------- ------------------ ------------------ ------------------------
<S> <C> <C> <C> <C>
David A. Arledge -0- -0- 451,746 / 499,000 8,804,969 / 6,758,795
Coby C. Hesse 12,000 498,540 85,000 / 167,000 1,687,570 / 1,617,730
James A. King -0- -0- 75,000 / 75,000 1,577,890 / 961,810
Jeffrey A. Connelly 21,000 371,700 59,400 / 113,600 1,177,270 / 1,057,080
Carl A. Corrallo 6,000 242,514 89,000 / 116,000 1,769,120 / 1,106,880
<FN>
- - ------------------
<F1>
$-based on the market price of $35.00 at December 31, 1998.
</FN>
</TABLE>
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The following report has been provided by The Coastal Corporation's
Compensation and Executive Development Committee (the "Committee") of the Board
of Directors in accordance with current S.E.C. proxy statement disclosure
requirements. The current members of the Committee include John M. Bissell
(Chairman), Roy D. Chapin, Jr., and Jerome S. Katzin.
This material states Coastal's current overall compensation philosophy and
program objectives. Detailed descriptions of the Company's compensation programs
are provided as well as information on the Company's 1998 pay levels for the
CEO.
Overall Objectives of the Executive Compensation Program
The Company's compensation philosophy and program objectives are directed
by two primary guiding principles. First, the program is intended to provide
fully competitive levels of compensation - at expected levels of performance -
in order to attract, motivate and retain talented executives. Second, the
program is intended to create an alignment of interests between the Company's
executives and stockholders such that a significant portion of each executive's
compensation is directly linked to maximizing stockholder value.
In support of this philosophy, the executive compensation program is
designed to reward performance that is directly relevant to the Company's
short-term and long-term success. As such, the Company attempts to provide both
short-term and long-term incentive pay that varies based on corporate and
individual performance.
To accomplish these objectives, the Committee has structured the executive
compensation program with three primary underlying components: base salary,
annual incentives, and long-term incentives (i.e., stock options). Certain
10
<PAGE>
other executive benefits are also provided. The following sections describe the
Company's plans by element of compensation and discuss how each component
relates to the Company's overall compensation philosophy.
In reviewing this information, reference is often made to the use of
competitive market data as criteria for establishing targeted compensation
levels. The Company targets the market 50th percentile for its total
compensation program for planned levels of performance. Actual total
compensation rates in 1998 in aggregate were slightly above the targeted level
because of larger stock option grants to reward consistent achievement of
aggressive growth targets. (However, the Company's competitive pay posture
varies by pay element, as described below.) Several market data sources are used
by the Company, including energy industry norms for selected publicly traded
peer companies, as reflected in these companies' proxy statements. There is no
effort made to assess how the Company's executive pay levels compare to the
levels of pay provided by the companies in Value Line's Diversified Natural Gas
Group which is used in Coastal's total shareholder return graph since these
companies vary significantly in size and scope of operations. In addition, we
utilize published survey data and data obtained from independent consultants
that are for general industry companies similar in size (i.e., revenues) to the
Company. The published surveys include data on over 50 companies of comparable
size to the Company, as measured by revenues. Greater emphasis is placed on the
published data and data obtained from consultants than on the data for proxy
peers, since the published data and consulting data are reflective of company
size.
Base Salary Program
The Company's base salary philosophy is to provide base pay levels that
fall between the market 50th and 75th percentiles. The Company periodically
reviews its executive pay levels to assure consistency with the external market.
Generally, the Company's actual base salary levels for 1998 for executives as a
group were consistent with the targeted percentiles. We believe it is crucial to
provide strongly competitive salaries over time in order to attract and retain
executives who are highly talented and capable of creating added stockholder
value.
Annual salary adjustments for the Company are based on several factors:
general levels of market salary increases, individual performance, competitive
base salary levels, and the Company's overall financial results. The Company
reviews performance qualitatively considering total shareholder returns, the
level of earnings, return on equity, return on total capital and individual
business unit performance. These criteria are assessed qualitatively and are not
weighted. All base salary increases are based on a philosophy of
pay-for-performance and perceptions of an individual's long-term value to the
Company. As a result, employees with higher levels of performance sustained over
time will be paid correspondingly higher salaries.
Annual Bonus Plan
The Company's Annual Bonus Plan is intended to (1) reward key employees
based on company/business unit and individual performance; (2) motivate key
employees; and (3) provide competitive cash compensation opportunities to plan
participants. Under the plan, target award opportunities vary by individual
position and are expressed as a percent of base salary. The individual target
award opportunities, which are slightly below market median levels, are then
aggregated into a total target pool which is adjusted as described below. The
amount a particular executive may earn is directly dependent on the individual's
position, responsibility, and ability to impact our financial success.
The actual bonus pool is established each year by modifying the target
pool based on the Company's overall performance against measures established by
the Committee. In fiscal year 1998, the key performance measure considered was
earnings before interest and taxes ("EBlT") against plan. This measure was
weighted 50% of the total bonus program. In 1998 the Company's EBlT performance
was slightly below target, resulting in the EBlT portion of the bonus paid being
slightly below target. The remaining 50% of the annual bonus opportunity in 1998
is a discretionary annual bonus pool. As a result, no formula performance
measures were used in establishing the size of awards under this portion of the
plan. However, in establishing the size of the discretionary bonus pool, the
Committee considered the Company's return on equity relative to industry peers
(using selected peers from among Value Line's Diversified Natural Gas Group
included in the shareholder return graph), return on total capital compared to
this selected group of industry peers, the EBlT performance of each business
unit, progress made toward improving the Company's operational and financial
performance, and the need to reward unique individual contributions. These
measures were not formally weighted by the Committee. The size of the
discretionary bonus pool element was established slightly below target by the
Committee, in spite of the fact that the Company's return on equity and return
on total capital levels were actually
11
<PAGE>
significantly above the peer group average. The Committee established the pool
slightly below target in light of declining commodity prices. As a result,
actual bonus payments for 1998 were slightly below target and median market
levels.
Individual awards from the established bonus pool are recommended by
senior management, with advice and consent from the Committee. Individual awards
from the pool are based on business unit and individual employee performance,
future potential, and competitive considerations. All individual performance
assessments are conducted in a non-formula fashion without specific goal
weightings. The total bonus awards made may not exceed the amount of funds in
the bonus pool.
Long-Term Incentive Plan
The Company's Long-Term Incentive Plan ("LTIP") is designed to focus
executive efforts on the long-term goals of the Company and to maximize total
return to our shareholders. While the Company's LTIP allows the Committee to use
a variety of long-term incentive devices, the Committee has relied solely on
stock option awards to provide long-term incentive opportunities in recent
years.
Stock options align the interests of employees and shareholders by
providing value to the executive through stock price appreciation only. All
stock options have a ten-year term before expiration and the most recent grants
are fully exercisable within 5 years of the grant date.
Stock options were granted to certain of the Named Executive Officers in
1998 and it is anticipated that stock option awards will be made periodically at
the discretion of the Committee in the future. As in past years, the number of
shares actually granted to a particular participant is also based on the
Company's financial success, its future business plans, and the individual's
position and level of responsibility within the Company. All of these factors
are assessed subjectively and are not weighted. The number of stock options
granted by the Company in 1998, overall, fell between market median and 75th
percentile levels.
The Committee believes stock options are an important part of the
Company's total executive pay program, since employees only receive income from
the options if the Company's share price rises.
1998 Chief Executive Officer Pay
As previously described, the Committee considers several factors in
developing an executive's compensation package. For the CEO, these include
competitive market practices (consistent with the philosophy described for other
executives), experience, achievement of strategic goals, and the financial
success of the Company (considering the factors described under the annual bonus
plan above).
Mr. Arledge's annual salary was not adjusted in 1998, at his request. This
leaves the CEO's base salary below the market median.
Mr. Arledge's bonus for 1998 was $400,000, payable in 1999. This award was
slightly below targeted levels (and below market median levels) since the
Company's aggregate performance on the measures described in the annual bonus
section of this report were slightly below the aggressive Company targets.
In 1998, the Committee granted stock options for 100,000 shares (adjusted
for the July 1, 1998 stock split) to Mr. Arledge in recognition of his
performance and as an incentive to continue his efforts to increase shareholder
value. These awards are tied to performance in that the executive only realizes
income from stock options if the stock price rises. The grant is well below
market median level for the executive position held by him.
$1 Million Pay Deductibility Cap
Under Section 162(m) of the Internal Revenue Code, public companies are
precluded from receiving a tax deduction on compensation paid to executive
officers in excess of $1 million. To address the $1 million pay deductibility
cap issue, the Company's 1998 Incentive Stock Plan is structured so that stock
option awards (which are intended to be the primary long-term incentive vehicle
for the present time) qualify for an exemption from the $1 million pay
deductibility limit.
12
<PAGE>
Also, at the present time, the CEO is the only executive whose base salary
plus target bonus exceeds $1 million. In order to preserve the Company's tax
deduction for base salary plus bonus for this individual, the Company has
established a nonqualified deferred compensation program. Under this program,
any annual incentive awards that bring cash compensation to a level over $1
million may be deferred so that payments occur after the individual is no longer
a Named Executive Officer, thus preserving the deductibility of the pay for the
Company.
Compensation and Executive Development Committee
John M. Bissell, Chairman
Roy D. Chapin, Jr.
Jerome S. Katzin
Pension Plan Table
The Employee Retirement Income Security Act of 1974, as amended by
subsequent legislation, limits the retirement benefits payable under the
Company's tax-qualified Pension Plan. Where this occurs, the Company provides
additional nonqualified retirement benefits under the Company Replacement
Pension Plan. These benefits, plus payments under the Pension Plan, will not
exceed the maximum amount which the Company would have been required to provide
under the Pension Plan before application of the legislative limitations. The
following table shows for illustration purposes the estimated annual benefits
payable currently under the Pension Plan and the Company's Replacement Pension
Plan upon retirement at age 65 based on the five years final average pay and the
years of credited service indicated.
<TABLE>
<CAPTION>
Years of Credited Service
5-Year Final --------------------------------------------------------------------
Average Pay 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000................. $ 33,793 $ 45,057 $ 56,322 $ 67,586 $ 66,762
150,000................. 41,293 55,057 68,822 82,586 81,762
175,000................. 48,793 65,057 81,322 97,586 96,762
200,000................. 56,293 75,057 93,822 112,586 111,762
225,000................. 63,793 85,057 106,322 127,586 126,762
250,000................. 71,293 95,057 118,822 142,586 141,762
300,000................. 86,293 115,057 143,822 172,586 171,762
350,000................. 101,293 135,057 168,822 202,586 201,762
400,000................. 116,293 155,057 193,822 232,586 231,762
450,000................. 131,293 175,057 218,822 262,586 261,762
500,000................. 146,293 195,057 243,822 292,586 291,762
600,000................. 146,293 195,057 243,822 292,586 291,762
700,000................. 146,293 195,057 243,822 292,586 291,762
800,000................. 146,293 195,057 243,822 292,586 291,762
900,000................. 146,293 195,057 243,822 292,586 291,762
<FN>
(A) Compensation covered under the Pension Plan and the Replacement Pension Plan, including the compensation of
the individuals listed in the Summary Compensation Table, generally includes only base salary and was limited to
a maximum of $160,000 for 1997 and $150,000 for the three prior years. During 1997 the Board of Directors
amended the Company's Replacement Pension Plan to include compensation (generally base salary only) of up to
$500,000 (indexed for inflation) on a prospective basis in the five year average compensation used to calculate
benefits. The individuals named in the Summary Compensation Table had the following current compensation (i.e.,
five-year average compensation) covered by the Plans (which is not necessarily indicative of their final pension
amount): Mr. Arledge - $222,000; Mr. Hesse - $192,719; Mr. King - $194,406; Mr. Connelly - $184,977 and Mr.
Corrallo - $183,980.
(B) At December 31, 1998 the individuals named in the Summary Compensation
Table had the following years of credited service: Mr. Arledge - 18; Mr.
Hesse - 12; Mr. King - 6; Mr. Connelly - 31 and Mr. Corrallo - 12.
13
<PAGE>
(C) The normal form of retirement income is a straight life annuity. The
calculation of benefits payable under the Pension Plan includes an offset
of 1.5% of applicable monthly social security benefits multiplied by the
number of years of credited service (up to 331/3 years).
</FN>
</TABLE>
PERFORMANCE GRAPH - SHAREHOLDER RETURN ON COMMON STOCK
[GRAPH]
<TABLE>
Five-Year Cumulative Values
$100 Invested 12/31/93
Dividends Reinvested
<CAPTION>
DOLLAR VALUE OF $100 INVESTMENT AT DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Company $ 100 $ 93 $ 134 $ 177 $ 225 $ 256
S&P 500 100 101 139 171 229 294
Index<F1><F2> 100 92 145 173 182 166
<FN>
<F1>
Value Line's Diversified Natural Gas Group - the Performance Graph reflects
total shareholder returns weighted to reflect the market capitalizations of the
peer companies. This peer group is comprised of: Cabot, Columbia Gas,
Consolidated Nat'l Gas, Devon Energy, Dynegy, Inc., Eastern Enterprises, El Paso
Nat'l Gas, Enron, Equitable Resources, KN Energy, Mitchell Energy, National
Fuels Gas, Questar, Seagull Energy, Sonat, Southwestern Energy, Union Pacific,
Vintage Petroleum and Williams' Co's.
<F2>
Coastal is excluded from the Index.
</FN>
</TABLE>
TRANSACTIONS WITH OFFICERS AND DIRECTORS
In 1987, Coastal Mart, Inc. ("Coastal Mart"), a subsidiary of the Company,
entered into a ten-year lease/purchase agreement with Pester Marketing Company
("Pester Marketing") for 220 gasoline service stations (subsequently reduced to
182 stations through disposition of assets) located in the midwestern region of
the United States. Jack Pester, a principal stockholder and Chief Executive
Officer of Pester Marketing, subsequently became an employee, officer and
director of Coastal Mart and was elected a Senior Vice President of the Company.
Mr. Pester is no longer active in the management of Pester Marketing, and his
stock interest in that company has been placed in trust. In 1994, the lease
transaction was terminated pursuant to an agreement under which Coastal Mart
acquired ownership of and title to 175 of the gasoline service stations and
Pester Marketing retained the seven remaining stations. During 1998, the Company
and/or its subsidiaries sold approximately 15.6 million gallons of gasoline to
Pester Marketing at prevailing market prices totaling approximately $8.42
million.
During 1998, Company subsidiaries sold a total of approximately 5.8
million gallons of jet fuel to Laker Airways, Inc. ("Laker") and L. B. Limited,
a charter airline, at prevailing market prices totaling approximately $3.4
million. O. S. Wyatt, Jr. owned approximately 51% of the stock of Laker which he
disposed of in 1997; and he owns approximately one-third of the shares of L. B.
Limited. A balance of approximately $2.1 million of Laker indebtedness to
Coastal is guaranteed by Mr. Wyatt.
14
<PAGE>
PROPOSAL 2 - BOARD OF DIRECTORS
PROPOSAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has unanimously approved a proposal to
increase the number of authorized shares of Common Stock from 250 million shares
to 500 million shares.
The Company's authorized capital stock consists of 250,000,000 shares of
Common Stock 2,700,000 shares of Class A Common Stock and 50,000,000 shares of
Preferred Stock. The Board of Directors is authorized to approve the issuance of
shares of Preferred Stock in one or more series and to fix the dividend rate,
conversion rights, voting rights, terms of redemption, redemption price or
prices, liquidation preferences and qualifications, limitations and restrictions
thereof with respect to each series.
As of March 10, 1999 there were issued and outstanding 212,461,400 shares
of common stock of the Company, and 14,730,121 shares were reserved for issuance
upon conversion of shares of Class A Common Stock, Series A, B and C Preferred
Stock and upon the exercise of executive stock options.
The shares of Common Stock are listed on the New York Stock Exchange and
on the London, Amsterdam, Dusseldorf, Frankfort, Hamburg and Munich Stock
Exchanges and the shares of Series A and Series B Preferred Stock are listed on
the New York Stock Exchange.
At this time, the Company has no present plans, understandings, or
agreements for the issuance or use of the proposed additional shares of Common
Stock. Nevertheless, the Board of Directors believes that it is prudent to have
available additional shares of Common Stock for such purposes as it may deem
necessary and advisable (which could have a dilutive effect on shares held by
existing stockholders) including equity financings, acquisitions, stock splits,
and benefit plans.
If the proposed amendment is approved, additional shares of Common Stock
may be issued for proper purposes without further stockholder approval, except
as such approval may be required by law or the rules of the New York Stock
Exchange.
VOTE REQUIRED FOR APPROVAL
The nominees for director receiving a majority of the votes cast at the
Meeting by stockholders present in person or by proxy and entitled to vote shall
be elected. The proposal to increase the authorized shares of Common Stock
requires the affirmative vote of a majority of the votes cast attributable to
shares present in person or by proxy at the Meeting and entitled to vote. For
purposes of counting the vote, abstentions, broker non-votes and other votes not
cast will not be counted as voted, and the number of votes of which a majority
is required will be reduced by the number of votes not cast.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file reports of ownership and changes in ownership of shares of the
Company's stock with the S.E.C. Directors and officers are required by S.E.C.
regulations 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, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, from January 1 through
December 31, 1998, its directors and officers complied with all applicable
filing requirements.
INDEPENDENT AUDITORS
The Board of Directors of Coastal has designated Deloitte & Touche LLP to
audit the books and accounts of the Company for the year ending December 31,
1999. Deloitte & Touche LLP have been auditors for the Company since 1957. It is
anticipated that representatives of such firm will be present at the Annual
Meeting for the purpose of making a statement, should they desire, and
responding to appropriate stockholder questions.
15
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders who desire to submit proposals to the Company for
consideration for inclusion in the Company's Proxy Statement and form of proxy
for the 2000 Annual Meeting of Stockholders of Coastal must submit such
proposals to the Secretary of the Company by November 26, 1999.
OTHER MATTERS
Management does not intend to present any business at the Annual Meeting
other than as set forth in the Notice of Annual Meeting and knows of no other
business to be presented for action at the Meeting. If, however, any other
business should properly come before the Annual Meeting or any adjournments
thereof, it is intended that all proxies will be voted with respect thereto in
accordance with the best judgment of the persons named in the proxies.
AVAILABILITY OF FORM 10-K ANNUAL REPORT
Copies of Coastal's Annual Report to Stockholders or its Annual Report on
Form 10-K for the year ended December 31, 1998, as filed with the Securities and
Exchange Commission, are available without charge to stockholders upon request
to Mr. Austin M. O'Toole, Senior Vice President and Secretary, The Coastal
Corporation, Coastal Tower, Nine Greenway Plaza, Houston, Texas 77046-0995.
16
<PAGE>
PRELIMINARY COPY
PROXY
THE COASTAL CORPORATION
Proxy solicited by the Board of Directors for the May 6, 1999 Annual Meeting
The undersigned hereby appoints O. S. WYATT, JR., HAROLD BURROW and DAVID A.
ARLEDGE, and each of them, proxies, with power of substitution, to vote all
stock owned by the undersigned of THE COASTAL CORPORATION at the Annual Meeting
of its Stockholders to be held on May 6, 1999, and at any and all adjournments
thereof, hereby revoking any proxy heretofore given.
Please sign, date and return your Proxy
promptly in the enclosed envelope. Sign
exactly as name(s) appear(s) hereon.
Joint owners should each sign. When
signing in a fiduciary capacity, please
give full title.
-----------------------------
Date
--------------------------------------------
Signature(s)
- CONTINUED ON REVERSE SIDE -
- - -------------------------------------------------------------------------------
PLEASE DETACH, SIGN, DATE AND MAIL YOUR PROXY
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE
ANNUAL MEETING OF STOCKHOLDERS AND SAVE THE EXPENSE
OF A SECOND MAILING, WOULD YOU PLEASE RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY
This Proxy will be voted as directed, but if not otherwise directed, it will be
voted FOR all nominees named below and FOR Proposal 2. The class of stock voted
by this proxy is shown on the reverse side, and the shares will be voted (Common
Stock and Preferred Stock - one vote per share, and Class A Common Stock - one
hundred votes per share) as follows:
Directors (1) Elect three Class I directors to terms of office expiring at the
Recommend 2002 Annual Meeting of Stockholders as follows:
Election of one director by holders of Common and Preferred Stock
voting together as a class:
Harold Burrow
Election of two directors by holders of Common, Class A Common
and Preferred Stock voting together as a class:
John M. Bissell and Jerome S. Katzin
FOR - FOR [ ] all persons named above WITHHOLD [ ] authority to
except, authority withheld as to vote for all persons named
the following person(s), if any. above.
---------------------------------
FOR - (2) FOR [ ] AGAINST [ ] ABSTAIN [ ] proposal to increase the
authorized shares of Common
Stock
(3) In their discretion on such other matters as may properly come
before the meeting.
- - ------------------------------------------------------------------------------
PLEASE DETACH, SIGN AND DATE (ON REVERSE) AND MAIL YOUR PROXY
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE
ANNUAL MEETING OF STOCKHOLDERS AND SAVE THE EXPENSE
OF A SECOND MAILING, WOULD YOU PLEASE RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PRELIMINARY COPY
THE COASTAL CORPORATION
Voting Instructions for the May 6, 1999 Annual Meeting
The undersigned hereby instructs Chase Bank of Texas, N. A., the Plan Trustee of
the securities identified below, to vote all stock beneficially owned by the
undersigned in such plan of THE COASTAL CORPORATION at the Annual Meeting of
Stockholders to be held on May 6, 1999, and at any and all adjournments thereof,
hereby revoking any instructions heretofore given.
Please sign, date and return your INSTRUCTIONS
promptly in the enclosed envelope. Sign exactly
as name appears hereon. When signing in a
fiduciary capacity, please give full title.
-----------------------------
Date
--------------------------------------------
Signature(s)
- CONTINUED ON REVERSE SIDE -
- - -------------------------------------------------------------------------------
PLEASE DETACH, SIGN, DATE AND MAIL YOUR INSTRUCTIONS
YOUR INSTRUCTIONS ARE IMPORTANT
To secure the largest possible representation at the
Annual Meeting of Stockholders and save the expense
of a second mailing, would you please return your
Instructions promptly in the enclosed envelope which
requires no postage if mailed in the United States.
<PAGE>
These INSTRUCTIONS will be followed as directed, but if not otherwise directed,
the shares will be voted FOR all nominees named below and FOR Proposal 2.
Directors (1) Elect three Class I directors to terms of office expiring at the
Recommend 2002 Annual Meeting of Stockholders as follows:
Election of one director by holders of Common and Preferred Stock
voting together as a class:
Harold Burrow
Election of two directors by holders of Common, Class A Common
and Preferred Stock voting together as a class:
John M. Bissell and Jerome S. Katzin
FOR - FOR [ ] all persons named above WITHHOLD [ ] authority to
except, authority withheld as to vote for all persons named
the following person(s), if any. above.
---------------------------------
FOR - (2) FOR [ ] AGAINST [ ] ABSTAIN [ ] proposal to increase the
authorized shares of Common
Stock
(3) In their discretion on such other matters as may properly come
before the meeting.
- - ------------------------------------------------------------------------------
PLEASE DETACH, SIGN AND DATE (ON REVERSE) AND MAIL YOUR INSTRUCTIONS
YOUR INSTRUCTIONS ARE IMPORTANT
To secure the largest possible representation at the
Annual Meeting of Stockholders and save the expense
of a second mailing, would you please return your
Instructions promptly in the enclosed envelope which
requires no postage if mailed in the United States.
