<PAGE>
SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or Section
240.14a-12
GATEWAY ENERGY CORPORATION
- --------------------------------------------------------------------------------
(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):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
GATEWAY ENERGY CORPORATION
June 11, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Gateway Energy Corporation to be held at the DoubleTree Hotel,
400 Dallas Street, Houston, Texas 77002 on July 22, 1999, at 10:00 a.m. local
time. The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be transacted at the meeting.
During the meeting the Board of Directors will report to you on the
Company's progress during this past year and will discuss plans for the current
year. We welcome this opportunity to share our progress with you and look
forward to your comments and questions.
The Board of Directors appreciates and encourages stockholder
participation in the Company's affairs and we hope you can attend in person.
Whether or not you plan to attend the meeting, it is important that your shares
be represented. Therefore, please sign, date, and mail the enclosed proxy in the
envelope provided at your earliest convenience.
Sincerely,
/s/ Michael T. Fadden
---------------------
Michael T. Fadden
CHAIRMAN OF THE BOARD
<PAGE>
GATEWAY ENERGY CORPORATION
500 DALLAS STREET, SUITE 2615
HOUSTON, TEXAS 77002
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 22, 1999
To the Stockholders of Gateway Energy Corporation:
The Annual Meeting of Stockholders of Gateway Energy Corporation (the
"Company") will be held at the DoubleTree Hotel, 400 Dallas Street, Houston,
Texas 77002 on July 22, 1999, at 10:00 a.m. local time for the following
purposes:
1. To elect a Board of Directors to serve until the next annual meeting
of stockholders.
2. To ratify the appointment of Grant Thornton LLP as independent public
accountants.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on May 31, 1999, (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of the number of shares you hold and whether or not you are
personally able to attend. Accordingly, please sign the enclosed proxy and
return it as soon as possible in the enclosed envelope provided for your
convenience.
By Order of the Board of Directors
/s/ Michael T. Fadden
---------------------------
Michael T. Fadden
Chairman, President and CEO
Houston, Texas
June 11, 1999
<PAGE>
GATEWAY ENERGY CORPORATION
500 DALLAS STREET, SUITE 2615
HOUSTON, TEXAS 77002
------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 22, 1999
---------------
GENERAL INFORMATION
This Proxy Statement is furnished to the holders of the Common Stock, $.25
par value per share ("Common Stock") in connection with the solicitation of
proxies by the Board of Directors of Gateway Energy Corporation (the "Company")
to be voted at the Annual Meeting of Stockholders to be held on July 22, 1999,
or any adjournment thereof. The first mailing of the proxy material to the
holders of the Common Stock will be made on approximately June 11, 1999.
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or electronic media by regular employees of the Company. The Company
will reimburse brokers and other custodians, nominees or fiduciaries for their
expenses in forwarding proxy material to security owners and obtaining their
proxies.
Stockholders of record at the close of business on May 31, 1999, are
entitled to vote on matters to come before the meeting. On that date there were
outstanding and entitled to vote 15,242,494 shares of Common Stock. Each share
is entitled to one vote on each matter presented.
Any proxy may be revoked by a stockholder at any time before it is
exercised by giving written notice to that effect to the Secretary of the
Company or by signing a later-dated proxy. Stockholders who attend the Annual
Meeting may revoke any proxy previously granted and vote in person.
All properly executed proxies will be voted in accordance with the
instructions contained thereon, and if no instruction is specified, the proxies
will be voted for the election of the eight directors named elsewhere in the
Proxy Statement, for ratification of the appointment of Grant Thornton LLP as
independent public accountants, and in accordance with the instruction of the
Board of Directors as to any other matters. Abstentions do not constitute a vote
"FOR" or "AGAINST" any matter listed in the accompanying Notice of Annual
Meeting, but will be included in determining the number of shares present for
purposes of obtaining a quorum. Also broker "non-votes" (i.e. proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will be treated as present for purposes of determining the presence of a
quorum at the Annual Meeting. If such a quorum should not be present, the Annual
Meeting may be adjourned from time to time until the necessary quorum is
obtained.
-1-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Following is a list of the names, addresses, and ages of the eight
nominees, all of whom, except Scott D. Heflin, are presently serving as
Directors. Also included in the chart is the year in which each became a
Director of the Company. Footnoted below is the past five-year business history
of each Director nominee and any public company directorships held by such
persons. The proxy holders named in the proxy intend to vote "FOR" the election
of the eight nominees listed below unless authority to so vote is withheld. In
the unexpected event that any of the nominees are unable to serve or for good
cause will not serve as Directors, the proxy holders reserve the right to vote
for such substitute nominees that are designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE EIGHT
NOMINEES LISTED BELOW.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND ADDRESS AGE SINCE
- ------------------------ ---- ---------
<S> <C> <C>
Charles A. Holtgraves 34 1988
6510 Indian Lane
Mission Hills, KS 66208
John B. Ewing, Jr 77 1988
1621 Bay Point Court
Sarasota, FL 34236
Larry J. Horbach 57 1990
10842 Old Mill Road, Suite 5A
Omaha, NE 68154
Scott D. Heflin 41 Nominee
12422 Rip Van Winkle Drive
Houston, TX 77024
Abe Yeddis 82 1997
9505 Stateline, Cartwell #6
Kansas City, MO 64114
Michael T. Fadden 58 1997
1701 Hermann #905
Houston, TX 77004
Gary A. McConnell 58 1998
12516 Shamrock Rd
Omaha, NE 68154
Earl P. Hoffman 57 1998
2 Northpoint Drive, Ste. 820
Houston, TX 77060-3237
</TABLE>
-2-
<PAGE>
CHARLES A. HOLTGRAVES. Mr. Holtgraves currently serves as a Director of
the Company and served as Secretary of the Company from June 1988 to 1995. He
also served as Treasurer of the Company from 1988 to 1994. Mr. Holtgraves is the
CFO and Vice President of First Mortgage Investment Company.
JOHN B. EWING, JR. Mr. Ewing currently serves as a Director of the
Company. He served as in-house counsel for the Company from June 1988 to 1995.
He has been in private practice for the past five years.
LARRY J. HORBACH. Mr. Horbach currently serves as Director and as the
Executive Vice President - Shareholder Relations of the Company. He has served
as Chairman, President and CEO of the Company from June 1990, resigning as
President in August 1997, CEO in July 1998 and Chairman in February 1999. Mr.
Horbach is the owner of L.J. Horbach & Associates, a Director of Regency
Affiliates, Inc. and Templeton Savings Bank.
SCOTT D. HEFLIN. Mr. Heflin is a nominee for election as a Director of the
Company. He has served as chief financial officer of the Company since September
1998 and Treasurer and Secretary of the Company since November 1998. Mr. Heflin
was controller of Monteray Resources, Inc. from 1997 to September 1998,
assistant controller of Santa Fe Energy Resources, Inc. from 1996 to 1997 and
controller of Transfuel, Inc. from 1994 to 1995.
ABE YEDDIS. Mr. Yeddis currently serves as a Director of the Company. He
is Chairman, President and CEO of Promotional Headwear International and has
served in such capacity since 1979.
MICHAEL T. FADDEN. Mr. Fadden currently serves as Chairman of the Board of
Directors (since February 1999), CEO (since July 1998) and President (since
August 1997). Prior to becoming CEO, he served as COO from August 1997 until his
election as CEO in July 1998. Mr. Fadden served as President of Abtech
Resources, Inc. from September 1993 to August 1997 and Executive Vice President
of American Oil and Gas Corporation from January 1990 to August 1993.
GARY A. MCCONNELL. Mr. McConnell currently serves as a Director. He served
as Vice President of Finance and Administration for Northern Plains Natural Gas
Company, an Enron Corp. subsidiary and operator for Northern Border Pipeline
Company from 1987 to July 1994. He served as Chief Financial and Accounting
Officer for Northern Border Partners, L.P., the parent company of Northern
Border Pipeline Company from July 1993 to July 1994. Mr. McConnell retired from
Enron Corp. and became a private investor in July 1994.
EARL P. HOFFMAN. Mr. Hoffman currently serves as a Director. He has served
as Vice Chairman and CEO of Advanced Extraction Technologies, Inc., a technology
licensing company serving the natural gas, refining and petrochemical industries
since October 1992.
-3-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of May 31, 1999, there were no persons who are known to the Company to
be beneficial owners of more than five percent (5%) of the Company's voting
Common Stock. The following table sets forth information concerning the shares
of Common Stock beneficially owned by (i) each nominee for director and each
director of the Company; (ii) each of the executive officers of the Company; and
(iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME NO. OF SHARES % (1)
---- ------------- -----
<S> <C> <C>
Michael T. Fadden, Chairman, President and CEO 705,750 (2) 4.6%
Larry J. Horbach, Director, Executive Vice President - 74,864 (3) *
Shareholder Relations
Charles A. Holtgraves, Director 248,075 (4) 1.6%
John B. Ewing, Director 40,847 (5) *
Abe Yeddis, Director 80,004 (6) *
Earl P. Hoffman, Director 18,000 (7) *
Gary A. McConnell, Director 38,000 (8) *
Scott D. Heflin 50,000 (10) *
</TABLE>
* Indicates less than 1% ownership.
All directors and officers as a group beneficially own 1,255,540 shares,
including currently exercisable options or warrants, or 8.2% of the outstanding
Common Stock as of May 31, 1999. (1)(9)
(1) Based upon 15,242,494 shares of Common Stock outstanding as of May 31,
1999. Each named person is deemed to be the beneficial owner of shares of
Common Stock that may be acquired within 60 days upon exercise of stock
options and shares or options owned indirectly through a partnership or
corporation. Accordingly, the number of shares and percentage set forth
next to the name of such person and all officers and directors as a group
include the shares of Common Stock issuable upon presently exercisable
stock options and any shares or options owned indirectly. However, the
shares of Common Stock so issuable upon such exercise by any such person
are not included in calculating the percentage of Common Stock
beneficially owned by any other stockholder.
(2) This number of shares beneficially owned includes 225,750 shares
purchasable pursuant to presently exercisable options or warrants.
(3) This number of shares beneficially owned includes 25,096 shares and a
warrant to purchase 12,000 shares owned by H & F Investments, a
partnership in which Mr. Horbach has a 50% interest and 23,677 shares
owned by H & H Investments, a partnership in which Mr. Horbach also has a
50% interest.
(4) This number of shares beneficially owned includes 23,677 shares owned by H
& H Investments, a partnership in which Mr. Holtgraves has a 50% interest.
It also includes 10,000 shares purchasable pursuant to currently
exercisable options or warrants.
(5) This number of shares beneficially owned includes 10,000 shares
purchasable pursuant to currently exercisable options or warrants.
(6) This number of shares beneficially owned includes 10,000 shares
purchasable pursuant to currently exercisable options or warrants.
(7) This number of shares includes 10,000 shares purchasable pursuant to
currently exercisable options or warrants.
(8) This number of shares includes 10,000 shares purchasable pursuant to
currently exercisable options or warrants.
-4-
<PAGE>
(9) The number of shares and percentage calculation includes 25,096 shares and
a warrant to purchase 12,000 shares owned by H & F Investments, the full
amount of shares and options being beneficially owned for reporting
purposes by both Mr. Horbach and Mr. Fortkamp; 23,677 shares owned by H &
H Investments, the full amount of shares being beneficially owned for
reporting purposes by both Mr. Horbach and Mr. Holtgraves; and 298,250
shares of Common Stock beneficially owned by directors and officers,
purchasable pursuant to presently exercisable options or warrants.
(10) This number represents shares purchasable pursuant to currently
exercisable options.
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. There were five meetings in the fiscal year ended February 28, 1999.
There was also one occasion in which matters were decided using a Consent of
Directors. During the last fiscal year, no director attended fewer than 75% of
all of the meetings of the Board of Directors. The Board of Directors has
established an Audit Committee, and a Compensation and Stock Option Committee.
The Board of Directors does not have a Nominating Committee. The Executive
Committee currently comprised of Messrs. Fadden and Hoffman oversees and
administers the Outside Directors Stock Option Plan.
AUDIT COMMITTEE
The primary purpose of the Audit committee is to protect the interest of
the Company's shareholders and directors by assisting the Board of Directors in
fulfilling its responsibility over the financial reporting process, financial
policies and the internal control structure. Among other things, the committee
reviews the independent audit of the Company and meets with independent auditors
as necessary to discuss matters pertaining to the audit and any other matters
which the Audit Committee or the auditors may wish to discuss. Messrs.
Holtgraves, McConnell and Yeddis comprise the Audit Committee.
The Committee met four times during the fiscal year ended February 28, 1999.
COMPENSATION AND STOCK OPTION COMMITTEE
The primary purpose of the Compensation and Stock Option Committee is to
recommend to the Board of Directors compensation for officers of the Company and
to administer the Company's Stock Option Plan. Among other things, the Committee
recommends to the board the executives to be included in the Company's Executive
Compensation Plan, the annual base salary for covered executives and the number
of shares subject to option for the Executive and Middle Management Compensation
Plan Pools. Messrs. Ewing, Hoffman and Pilger currently serve on the Committee.
The Committee met four times during the fiscal year ended February 28, 1999.
COMPENSATION OF DIRECTORS
The Company does not compensate employee-directors in their capacity as
directors of the Company. All Directors were reimbursed for reasonable travel
and lodging expenses incurred while attending Board, Committee or Annual
meetings. In the fiscal year ended February 28,1999, non-employee directors
(i.e. "Outside Directors") were compensated as follows:
- A one-time grant of an option to purchase 10,000 shares of
Common Stock, at fair market value on date of grant, which
options were granted pursuant to the Outside Directors Stock
Option Plan.
- An annual retainer of $10,000, one-half in Common Stock,
valued and payable at the market price on the date of the
Annual Meeting of Stockholders, and one-half in cash payable
at a rate of $1,250 each quarter.
- A cash payment of $125 per hour for each Board, Committee or
Annual Meeting attended; provided that multi-day meetings and
specific consultations with the Company's executive management
lasting at least eight hours are compensated on a flat per
diem rate of $1,000.
-5-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth information with respect to unexercised
options and SARs at fiscal year end. No stock options were exercised during the
fiscal year ended February 28, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END
(#) ($) (1)
NAME SHARES ------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE ("EX") EXERCISABLE ("EX")
EXERCISE (#) REALIZED ($) UNEXERCISABLE ("UN") UNEXERCISABLE ("UN")
(A) (B) (C) (D) (E)
- --------------------- ------------ ------------ -------------------- --------------------
<S> <C> <C> <C> <C>
Michael T. Fadden 0 0 50,000 ("Ex") 0 ("Ex")
173,500 ("Ex") 0 ("Ex")
2,250 ("Ex") 0 ("Ex")
- --------------------- ------------ ------------ -------------------- --------------------
Neil A. Fortkamp 0 0 500 ("Ex") 0 ("Ex")
</TABLE>
- ------------------------------------------------------------------------------
(1) The value of the options was determined by using the average of the high
and low price of the Company's Common Stock ($.47) on February 28, 1999.
-6-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. Individual executive officer compensation for
the fiscal year ended February 28, 1999, includes base salary, certain expense
allowances provided by the Company and matching contributions of the Company to
its 401(k) Savings Plan. No bonuses were payable for the year ended February 28,
1999 under the Executive Compensation Plan or the Middle Management Compensation
Plan. The following Summary Compensation Table includes compensation paid in
cash.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION Year Salary Other Bonus Long-Term
--------------------------- ---- ------ ----- ----- Compensation
Securities Underlying
Options/SAR's (#)
------------------------
<S> <C> <C> <C> <C> <C>
Michael T. Fadden 1999 $120,000 $7,200 $- $-
Chairman, CEO and President (1) 1998 $70,000 $600 $- $-
Larry J. Horbach (2) 1999 $110,800 $10,756 $- $-
Executive Vice President- 1998 $110,800 $14,600 $- $-
Shareholder Relations 1997 $110,800 $14,200 $- $-
Scott D. Heflin(3) 1999 $44,527 $3,000 $- $-
Chief Financial Officer,
Secretary and Treasurer
Neil Fortkamp 1999 $84,354(4) $7,917 $- $-
Executive Vice President 1998 $94,500(5) $8,700 $- $-
Treasurer and Chief Financial Officer 1997 $82,500 $8,700 $- $-
</TABLE>
(1) Michael T. Fadden joined the Company in August 1997.
(2) Larry J. Horbach served as CEO of the Company until July 1998, and
Chairman of the Board until February 1999.
(3) Mr. Heflin became Chief Financial Officer of the Company on September 9,
1998. He was elected Treasurer and Secretary in November 1998. His salary
began in September 1998.
(4) Mr. Fortkamp's salary for 1999 includes $20,625 paid in accordance with a
severance agreement effective November 1998. Also included is $1,824 as
payment for unused vacation as of November 30, 1998.
(5) Includes $12,000 not previously reported which was paid to Mr. Fortkamp
from a majority owned subsidiary for his services as interim Chief
Financial Officer of the subsidiary.
The Board of Directors and Compensation and Stock Option Committee
approved at the November 19, 1997 Board meeting, an Executive Compensation Plan
("Executive Plan") and a Middle Management Compensation Plan ("Middle Management
Plan") both to be effective March 1, 1998. The executives to be covered are
determined by the Compensation and Stock Option Committee of the Board. The
Middle Management employees to be covered are determined by the President.
Currently the CEO and CFO are covered by the Executive Plan and three employees
in the Company's subsidiary operations are covered by the Middle Management
Plan.
Both the Executive Plan and the Middle Management Plan have three
components: base salary, short term incentive and long term incentive. Base
salaries are set yearly. The short term incentive under both plans is a cash
-7-
<PAGE>
bonus to be paid upon attainment of certain goals, which goals are set by the
Board of Directors annually. The long term incentive portion is comprised of
incentive or non-qualified stock options on the Company's Common Stock. The
option pool, which includes options for both the Executive Plan and the Middle
Management Plan, shall be equal to two and one-half percent (2.5%) of the fully
diluted shares outstanding as of the Company's preceding fiscal year end. The
options are issued pursuant to the Company's 1998 Stock Option Plan described in
detail below.
The Compensation and Stock Option Committee and the Board of Directors
believe that the Executive Plan and the Middle Management Plan will help the
Company employ and retain key executive officers and employees, who will in turn
maximize the value of the Company's Common Stock.
OPTION/SAR GRANTS IN FISCAL 1999
The following table sets forth information with respect to individual
options and/or SAR grants during the fiscal year ended February 28, 1999.
<TABLE>
<CAPTION>
(INDIVIDUAL GRANTS)
- ---------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF TOTAL EXERCISE EXPIRATION
SECURITIES OPTIONS/SARS OR BASE DATE
UNDERLYING GRANTED TO PRICE
OPTIONS/SARS EMPLOYEES IN ($/SH)
GRANTED (#) FISCAL YEAR
(A) (B) (C) (D) (E)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scott D. Heflin, CFO, 50,000 45.5% $0.44 9/9/08
Secretary and Treasurer
</TABLE>
LIST OF CURRENT EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of the names and ages of the current executive
officers of the Company, their business history for the past five years and the
year in which each person became an Officer of the Company.
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION & PRINCIPAL OCCUPATION FOR LAST FIVE YEARS SINCE
---- --- --------------------------------------------------- -------
<S> <C> <C> <C>
Michael T. Fadden 58 Currently Chairman of the Board (since February 1999), 1997
CEO (since July 1998), and President (since August 1997);
COO of the Company from August 1997 until July 1998;
Served as President of Abtech Resources, Inc. from
September 1993 to August 1997.
Larry J. Horbach 56 Executive Vice President - Shareholder Relations of the 1990
Company since February 1999; Chairman from June 1990
to February 1999; CEO from June 1990 to
July 1998; President from June 1990
until August 1997.
Scott D. Heflin 41 Chief Financial Officer of the Company since September 1998
1998; Treasurer and Secretary since November 1998;
Controller of Monterey Resources, Inc. in 1997; Assistant
Controller of Sante Fe Energy Resources, Inc. in 1996;
Controller of Transfuel, Inc. 1994 -1995.
</TABLE>
-8-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 1998, the Board of Directors of the Company approved the
acquisition of Abtech Resources, Inc. ("Abtech") for stock and cash
consideration not to exceed 2.5% of the then current market capitalization of
the Company. Abtech was 82% owned by Michael T. Fadden, the President, Chief
Executive Officer and Chairman of the Company. Mr. Fadden received 82% of the
final consideration, upon completion of the merger which consideration consisted
of 275,000 Shares of Company Common Stock. The principal asset of Abtech was a
License Agreement between Abtech and Advanced Extraction Technologies, Inc.
("AET") which owns a patented process for the extraction of nitrogen from
natural gas. The License Agreement gives the Company the exclusive right to
utilize the extraction process developed by AET for conventional high nitrogen
natural gas in the Permian Basin (West Texas and Southeastern New Mexico) and
for all high nitrogen coalbed methane or landfill gas in the continental United
States. The Company intends to dedicate a meaningful portion of its business
over the next several years to developing projects which involve natural gas
production and extraction of nitrogen utilizing the AET process. AET owned 15%
of Abtech and received that percentage of the consideration in cash upon the
completion of the merger. Earl P. Hoffman, a Director of the Company, is the
Chief Executive Officer and a major stockholder in AET.
The Company is required under the License Agreement to pay AET a license
fee based upon volumes of gas processed through each unit so long as there are
any unexpired patents covering the AET technology. There are also certain
minimum installed capacity requirements which must be met in order to maintain
the exclusive nature of the license.
At the May 28, 1998 Board Meeting, the Board of Directors also approved an
agreement in principle with VRI Oil Company, a Texas corporation ("VRI") in
which Michael T. Fadden owns a controlling interest. Prior to Mr. Fadden's
association with the Company, VRI developed expertise in evaluating and
developing high nitrogen natural gas projects and in extracting and handling
nitrogen contained in natural gas streams. The Board of Directors determined
that the knowledge and experience of VRI was important to the Company's business
plan to develop or obtain high nitrogen natural gas production and utilize the
AET process to extract the nitrogen and resell the natural gas. The agreement in
principle provides that VRI will receive a 5% overriding royalty interest,
subject to proportionate reduction if the Company has less than a 100% working
interest, in each high nitrogen gas well acquired or drilled and completed by
the Company or its partners through the time period ending August 1, 2007 and in
the area defined by the continental United States. VRI will receive a 5% net
profits interest, also proportionately reduced if the Company has less than a
100% ownership interest, in each undertaking where either coalbed methane or
landfill gas is treated to remove nitrogen. VRI is obligated to utilize 1% of
its 5% overriding royalty interest to compensate AET for an amendment to the AET
License Agreement effective upon the Abtech acquisition. The amendment
lengthened the period of time required to meet the minimum installed capacity
requirements and is favorable to the Company. There were no overriding royalty
interest payments made during the fiscal year ended February 28, 1999.
PROPOSAL 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Grant Thornton LLP, independent
public accountants, to examine the financial statements of Gateway Energy
Corporation for the year ending February 29, 2000, and to perform other audit
and accounting related activities as may be requested from time to time by
management or the Board of Directors.
The Board has directed that the appointment of Grant Thornton LLP be
submitted to the stockholders for approval. The affirmative vote of a majority
of the shares of Common Stock present or represented and entitled to vote on the
proposal at the Annual Meeting is required for approval. If the stockholders do
not approve, the Audit Committee and the Board will reconsider the appointment.
Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting. They will be available to respond to appropriate questions and
will have an opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
-9-
<PAGE>
OTHER BUSINESS
Management does not intend to bring any business before the Annual Meeting
other than the matters referred to in the accompanying notice and at this date
has not been informed of any matters that may be presented to the Annual Meeting
by others. If, however, any other matters properly come before the Annual
Meeting, it is intended that the persons named in accompanying proxy will vote
in accordance with the instructions of the Board of Directors on such matters.
ANNUAL REPORT
The Company's Annual Report, including the Form 10-KSB for the year ended
February 28, 1999, is being mailed to all stockholders concurrently herewith.
The Annual Report is not a part of the proxy solicitation material. Additional
copies of the Annual Report which includes the Form 10-KSB for the year ended
February 28, 1999, will be provided, without charge, upon written request from
any stockholder to: Gateway Energy Corporation, Attention: Larry J. Horbach,
Executive Vice President - Shareholder Relations, 10842 Old Mill Road, Suite 5,
Omaha, Nebraska 68154.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than 10% of the registered class of the Company's equity securities to
file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5
with the Securities and Exchange Commission (the "SEC"). Such officers,
directors, and 10% stockholders are also required by the SEC rules to furnish
the Company with copies of all Section 16(a) forms they file. For the year ended
February 28, 1999, Directors Pilger and Ewing failed to timely file Form 4's.
STOCKHOLDER PROPOSALS FOR 2000
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meeting, consistent with regulations adopted by
the Securities and Exchange Commission. Proposals to be considered for inclusion
in the Proxy Statement for the 2000 Annual Meeting must be received by the
Company not later than February 15, 2000. Proposals should be directed to the
attention of the Secretary, Gateway Energy Corporation, 500 Dallas Street, Suite
2615, Houston, Texas 77002.
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<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR, FOR THE RATIFICATION OF
THE INDEPENDENT PUBLIC ACCOUNTANTS, AND WITH DISCRETIONARY AUTHORITY ON ALL
OTHER MATTERS.
Please mark your votes as indicated in this example /X/
1. Election of Directors Larry J. Horbach, Charles A. Holtgraves, Scott D.
Heflin, John B. Ewing, Jr., Abe Yeddis,
Michael T. Fadden, Gary A. McConnell and
Earl P. Hoffman
FOR the eight nominees WITHHOLD
(except as marked to the AUTHORITY
contrary to the right to vote for eight
nominees listed to
the right.
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- ------------------------------------------------------------------------------
2. Ratification of independent public accountants
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: , 1998
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Signature of Shareholder
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Signature of Shareholder
Please sign exactly as your name appears at the left. When signing as
attorney, executor, administrator, trustee, guardian or conservator, five
full title. All joint trustees must sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
GATEWAY ENERGY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS JULY 22, 1999
The undersigned hereby constitutes and appoints Michael T. Fadden and Earl
P. Hoffman, with full power to act alone or together, or any substitute
appointed by either of them as the undersigned's agent, attorney and proxy to
vote the number of shares the undersigned would be entitled to vote if
personally present at the Annual Meeting of the Stockholders of Gateway
Energy Corporation to be held at the Double Tree Hotel, 400 Dallas Street,
Houston, Texas 77002 on the 22nd day of July, 1999 at 10:00 a.m. local time
or at any adjournments thereof, as indicated hereon.
