<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
COMMISSION FILE NUMBER 0-18691
NORTH COAST ENERGY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1594000
(State of incorporation) (I.R.S. Employer
Identification No.)
1993 CASE PARKWAY
TWINSBURG, OHIO 44087-2343
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(216) 425-2330
The undersigned registrant hereby amends and restates in their entirety
the following items, financial statements, exhibits or other portions of its
Annual Report on Form 10-K for the fiscal year ended as set forth in the pages
attached hereto:
PART III, Items 10, 11, 12 and 13
<PAGE> 2
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Board of Directors is divided into three classes, with
each class currently consisting of three Directors. One class of Directors is
elected at each Annual Meeting to serve a three-year term. At the Annual
Meeting, stockholders will be asked to elect three Directors whose term will
expire at the 2000 Annual Meeting.
CHARLES M. LOMBARDY, JR., age 47, is Chief Executive Officer; Director. Mr.
Lombardy has served as an executive officer and as a Director of the Company's
predecessor since 1981 and has been Chief Executive Officer and a Director of
the Company since August, 1988. Mr. Lombardy holds a B.B.A. from Kent State
University and is a member of the Ohio Oil & Gas Association and the Independent
Petroleum Association of America. Mr. Lombardy also serves as
Secretary/Treasurer of NCE Securities, Inc., a wholly-owned subsidiary of the
Company and a registered broker-dealer.
CHARLES K. EBINGER, age 49, has served as a Director of the Company since
August, 1988. Dr. Ebinger has over 15 years experience in conventional energy
policy planning, energy pricing analysis, economic and political risk analysis,
market forecasting and energy project feasibility assessment, design, and
implementation for international corporations, banks and governments. From 1979
through 1987, Dr. Ebinger was the Director of the Energy and Strategic Resources
Program at the Georgetown University for Strategic and International Studies.
From 1987 to 1988, he was senior consultant to Putnam Hayes and Bartlett, Inc.
Since January, 1988 he has served as Executive Vice President of the
International Resources Group. He holds a B.A. from Williams College and Masters
and Doctorate Degrees from the Fletcher School of Law and Diplomacy, Tufts
University.
GEORGE R. BEGLEY, age 54, was elected as a Director of North Coast in September
1994. Mr. Begley holds a B.A. from New York University. Mr. Begley joined the
investment banking firm of Prescott, Ball and Turben in 1971 and worked in both
its Cleveland and London, England offices. In 1974, in conjunction with two
partners he established McKinley Allsopp Inc. ("McKinley"), an investment
banking firm with offices in London, Paris and New York. Mr. Begley remained
with McKinley until 1990. In 1990, he became Vice Chairman of the Forthill
Group, based in New York, which specializes in both raising capital for
companies and acquiring companies for its own account. In 1995, Mr. Begley
formed his own private investment banking office to assist select companies in
financing projects.
ROBERT L. BAUMAN, age 56, was elected as a Director of North Coast in June 1996.
Mr. Bauman is Chairman, President and Chief Executive Officer of Hickok
Incorporated, a publicly traded leader in automotive electronic diagnostic
technology. Mr. Bauman is a graduate engineer from Case Institute of Technology
and received his MBA from Case Western Reserve University.
GARRY REGAN, age 47, is President; Director. Mr. Regan served as an executive
officer and Director of the Company's predecessor since 1981 and has been
President and Director of the Company since August 1988. He holds a B.S. Degree
from Ohio State University and a Masters Degree from Indiana University. Mr.
Regan is a member of the Independent Petroleum Association of America. Mr. Regan
also serves as President of NCE Securities, a wholly-owned subsidiary of the
Company and a registered broker-dealer.
W. DALE WEGRICH, age 68, has served as a Director of the Company since August,
1988. From 1955 until his retirement in 1985, Mr. Wegrich was employed by
Diamond Shamrock Corporation (now Maxus Energy) in a variety of executive
positions, including service as Chairman, President or Board Member of a number
of Diamond Shamrock subsidiaries. From January, 1986 until his retirement in
1991 he served as the Director of Public Utilities of the City of Cleveland. Mr.
Wegrich received a B.A. Degree from Baylor University and has completed the
advanced management program at The Harvard School of Business.
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JOHN H. PINKERTON, age 42, was appointed by the Board of Directors of North
Coast in 1996. Mr. Pinkerton is President, Chief Executive Officer and a
Director of Lomak Petroleum, Inc. and joined Lomak Petroleum in 1988. He was
appointed President of Lomak Petroleum Inc. In 1990 and Chief Executive Officer
of Lomak Petroleum, Inc. in 1992. Previously, Mr. Pinkerton was Senior Vice
President-Acquisitions of SOCO. Prior to joining SOCO in 1980, Mr. Pinkerton was
with Arthur Andersen & Co. Mr. Pinkerton received his B.A. in Business
Administration from Texas Christian University and his Master of Arts Degree in
Business Administration from the University.
STEVEN L. GROSE, age 47, was elected as a Director of North Coast in 1996. Mr.
Grose is Vice President-Appalachian Region of Lomak Petroleum, Inc. and joined
Lomak Petroleum in 1980. Previously, Mr. Grose was employed by Halliburton
Services, Inc. as a Field Engineer from 1971 until 1974. In 1974 he was promoted
to District Engineer and in 1978 was named Assistant District Superintendent
based in Pennsylvania. Mr. Grose is a member of the Society of Petroleum
Engineers and trustee of The Ohio Oil and Gas Association. Mr. Grose received
his B.S. in Petroleum Engineering from Marietta College.
C. RAND MICHAELS, age 58, was elected as a Director of North coast in 1996. Mr.
Michaels, who holds the office of Vice Chairman of Lomak Petroleum, Inc. and is
a Director of Lomak Petroleum, Inc., served as President and Chief Executive
Officer of Lomak Petroleum, Inc. from 1976 through 1988 and Chairman of the
Board from 1984 through 1988, when he became Vice chairman of Lomak Petroleum,
Inc. Mr. Michaels is also a director of American Business Computers Corporation
of Akron, Ohio, a public company serving the beverage dispensing and fast foods
industries.
Executive Officers of the Registrant*
TIMOTHY WAGERS, age 37, joined North Coast in 1983 and currently is Treasurer
and Chief Financial Officer. Mr. Wagers is also responsible for overseeing the
accounting for partnership distributions, oil and gas production and tax
reporting, and for monitoring well costs. He received a Bachelor of Science in
Accounting from the University of Akron. From 1982 through 1983, Mr. Wagers was
employed by Hausser + Taylor, independent certified public accountants, as a
staff accountant auditing various entities including oil and gas partnerships.
Mr. Wagers is a certified public accountant, a member of the Ohio Society of
Certified Public Accountants, the Ohio Petroleum Accountants Society, and the
American Institute of Certified Public Accountants.
ANTHONY R. KOVACEVICH, age 43, joined North Coast in October 1994 as Senior Vice
President of Exploration and Production. Mr. Kovacevich graduated from Marietta
College with a BS degree in Petroleum Engineering and has over 20 years of oil
and gas experience, with over 15 years in the Appalachian Basin. Prior to
joining North Coast, from November 1984 to October 1994, Mr. Kovacevich was Vice
President of Exploration and Production with Resource America, Inc., a publicly
held oil and gas company conducting operations in the Appalachian Basin, and had
overall responsibility for drilling, production, exploration, land department
and gas marketing activities. Mr. Kovacevich is a member of the Ohio Oil and Gas
Association and the Society of Petroleum Engineers.
THOMAS A. HILL, age 39, was elected Secretary and General Counsel of North Coast
Energy in August, 1987. Mr. Hill joined Capital Oil & Gas, Inc. in 1984, prior
to its acquisition by North Coast. He graduated from Hiram College with a
Bachelor of Arts degree in History and Political Science and from George
Washington University National Law Center with a Juris Doctor degree. Mr. Hill
is a member of the Mahoning County Bar Association and Eastern Mineral Law
Foundation.
*The description of the Company's executive officers called for in this item is
included herein pursuant to instruction 3 to Section (b) of Item 401 of
Regulation S-K.
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<PAGE> 4
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the Stock Option Committee.
The Audit Committee, of which Dr. Ebinger and Messrs. Begley and
Wegrich are members, oversees the accounting functions of the company, including
matters related to the appointment and activities of the Company's auditors. The
Audit Committee met once during the year ended March 31, 1997.
The Compensation Committee, of which Dr. Ebinger and Messrs. Wegrich
and Lombardy are members, reviews and makes recommendations concerning the
salaries of the Company's executive officers and administers the Company's
Profit Sharing Plan. The Compensation Committee met twice during the year ended
March 31, 1997.
The Stock Option Committee, of which Dr. Ebinger and Mr. Lombardy are
members, reviews and makes recommendations concerning the Company's Stock Option
Plan and Stock Bonus Plan. The Stock Option Committee met once during the year
ended March 31, 1997.
The Board of Directors of the Company held twelve meetings during the
year ended March 31, 1997. All of the Directors attended at least 75% of the
meetings of the Board of Directors and each committee on which they served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors includes Charles
M. Lombardy, Jr., the Chief Executive Officer of the Company.
UNTIMELY BENEFICIAL OWNERSHIP REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and Directors, and persons who beneficially own
more than 10% of any class of equity security to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, Directors and greater than 10% beneficial owners are required by SEC
regulation to furnish the company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that for the fiscal year ended March 31, 1997, all
Section 16(a) filing requirements applicable to its executive officers,
Directors and greater than 10% beneficial owners were complied with, with the
exception of eight reports pertaining to eight transactions which were filed
late on behalf of Messrs. Hill, Wagers, Kovacevich, Pinkerton, Grose, Michaels
and Begley.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for the Company's Chief Executive Officer and the two highest paid executives
(the "Named Executive Officers") earning in excess of $100,000 for fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Number of All
Securities Other
Underlying Compen-
Name and Principal Position Year Salary Bonus Options sation (1)
- --------------------------- ---- ------ ----- ------- ----------
<S> <C> <C> <C> <C> <C>
Charles M. Lombardy, Jr. 1997 $166,350 $ 0 -- $7,148
Chief Executive Officer; 1996 165,000 0 -- 6,308
Director 1995 165,635 0 -- 4,974
Garry Regan 1997 166,350 0 -- 6,188
Chairman of the Board; 1996 165,000 0 -- 5,348
President; Director 1995 165,635 0 -- 4,014
Anthony Kovacevich 1997 104,700 1,875 2,500 3,316
Vice President - Exploration 1996 100,000 1,000 -- 625
and Production 1995 45,327 0 20,000 625
</TABLE>
No Named Executive Officer received personal benefits or perquisites
during fiscal year 1997 in excess of the lesser of $50,000 or 10% of his
aggregate salary and bonus.
(1) The amounts set forth in the table include, with respect to Messrs.
Lombardy, Regan and Kovacevich $2,810, $1,850 and $625, respectively,
for fiscal years 1997, 1996, and 1995 in life insurance premiums paid
by the Company pursuant to the terms of employment agreements between
the Company and of such persons. See "Compensation of Directors and
Executive Officers -- Employment Agreements." With respect to all of
the Named Executive Officers, the amounts set forth in the table
reflect the following contributions under the Company's Profit Sharing
Plan and matching funds through the 401(K) Plan: Mr. Lombardy, $4,338,
$3,498, and $2,164; Mr. Regan, $4,338, $3,498, and $2,164 respectively;
Mr. Kovacevich $2,691 for March 31, 1997. Under the terms of the Profit
Sharing Plan, all employees of the Company who have completed a 12
month period with at least 1,000 hours of service for the Company or
its affiliates are eligible to participate in the plan. The amount of
the Company's contributions to the Profit Sharing Plan is determined by
the Board of Directors. Allocations of Company contributions under the
plan are made on the basis of a participant's total compensation and
are subject to a graded vesting schedule which allows 20% vesting after
two years of service with an additional 20% vesting for each complete
year of service thereafter.
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<PAGE> 6
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning Stock Options
granted during fiscal 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
Percent of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of Stock
Name Securities Granted to Price Appreciation
Underlying Employees Exercise or for Option Term
Options in Base Price Expiration ---------------
Granted(1) Fiscal Year ($/Share) Date 5% 10%
---------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles M. Lombardy, Jr. 0 N/A N/A N/A N/A N/A
Garry Regan 0 N/A N/A N/A N/A N/A
Anthony Kovacevich 2,500 13.81% $.78125 Sept. 4, 2006 $539 $1,193
</TABLE>
- ----------
Represents options granted by the Board of Directors on September 4, 1996
pursuant to the Company's Stock Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table summarizes options exercised during fiscal 1997 and
presents the value of unexercised options held by the Named Executive Officers
at fiscal year end:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year-End at Fiscal Year-End(1)
on Value -------------------------- ---------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Lombardy, Jr. -- $ 0 177,066 0 $ 0 $ 0
Garry Regan -- 0 177,066 0 0 0
Anthony Kovacevich -- 0 22,500 0 0 0
</TABLE>
(1) Based upon the closing bid price per share of Common Stock as reported
on the NASDAQ system on March 31, 1997. None of the options were
in-the-money at March 31, 1997.
Employment Agreements. On May 3, 1995, after being recommended and
approved by the Compensation Committee, the Company entered into employment
contracts with Messrs. Lombardy and Regan providing for the employment of these
officers through May 3, 2001. These agreements provide for base annual
compensation of $165,000 to each of Messrs. Lombardy and Regan, with increases
for cost of living based upon the Consumer Price Index. The base annual salary
of $165,000 is the same amount each executive was receiving under previous
employment contracts with the Company. Additional bonuses may be awarded from
time to time by the Board of Directors. In addition, the Board of Directors has
the authority to increase, but not decrease without the executive's consent, the
base salary of automobile expenses, disability coverage, death benefits, and
severance payments. Each agreement provides that for a period of two years from
the date of the termination of the executive's employment the executive will
not, directly or indirectly, engage in any business competitive with that of the
Company or otherwise interfere with the Company's business.
Each of the employment agreements contains provisions addressing a
possible change in control of the Company (the "change in control provisions").
The change in control provisions require the payment of certain benefits to
these executive officers upon the termination of the employment, other
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<PAGE> 7
than for good cause, after the occurrence of a change in control of the Company.
A "change in control of the Company" is defined to include a change in the
securities ownership of the Company's securities which would be required to be
reported as a change in control in a proxy statement filed under the Securities
Exchange Act of 1934, the Company's ceasing to have a class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934, or the
acquisition by any person or entity of 50% or more of the outstanding shares of
Common Stock of the Company (or its equivalent in voting power of any class or
classes of the Company's securities).
Under the change in control provisions, either of these two executive
officers who remains in the employ of the Company following the date of the
occurrence of a change in control of the Company and whose employment is
subsequently terminated other than for good cause would be entitled to receive a
lump sum payment from the Company, regardless of whether such executive officer
continues in the employ of the Company (the "change in control payment"). After
the occurrence of a change in control, "termination" is defined to include
relocation of the principal place at which the executive is to perform his
duties to a location outside the Cleveland, Ohio metropolitan area, a
substantial reduction in the benefits provided to the executive, a substantial
reduction in the executive's responsibilities or functions or a substantial
adverse change in the executive's working conditions. It should be noted that
the Change in control Provisions provide for the payment of the change in
control payment in the event of a termination of the executive's employment
after any change in control of the Company, regardless of whether such change in
control is approved by the Board of Directors and/or stockholders of the
Company.
Under such change in control provisions, in the event of a termination
of employment after a change in control, other than for good cause, each of
Messrs. Lombardy and Regan would be entitled to change in control payments in
the amount equal to six times the average annual salary, bonus, and incentive
compensation amounts paid during the three year period immediately proceeding
the termination after a Change in Control. Also, at the executive's election, he
could elect to receive seventy-two equal payments for a period of seventy-two
months or a lump sum equal to the aggregate of the monthly amounts payable
discounted to present value at a discount rate of 7% per annum.
The change in control provisions will make more difficult or may
discourage a proxy contest, the assumption of control of the Company by a
substantial shareholder or shareholder group, or the removal of incumbent
management. Additionally, the change in control provisions may have the effect
of discouraging a third party from making a tender offer or otherwise attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and its stockholders. Accordingly, stockholders of the
Company may be deprived of certain opportunities to sell their shares of Common
Stock at temporarily higher market prices often associated with actual or
rumored takeover attempts.
On October 11, 1994, Mr. Kovacevich entered into a three year
employment agreement with the Company providing for base compensation of
$100,000 per year. The agreement also provides for life insurance.
Directors Fees. The Company pays its Directors who are not employees of
the Company an annual retainer of $3,500 and a fee of $500 for attendance in
person, or by telephone if substantive matters are discussed, at each meeting of
the Board of Directors, plus reimbursement of expenses. On May 28, 1997, the
Board of Directors adopted a plan that allows the Directors to be paid their
director fees in the form of Common Stock of the Company. The Company retains
the right, with consultation of the Board Members, to make any payments in cash.
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ITEM 12. SECURITY OWNERSHIP
The following table sets forth information with respect to the Common
Stock, Series A Preferred Stock (the "Series A Preferred Stock") and Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock" and,
collectively with the Series A Preferred Stock, the "Preferred Stock") owned on
July 10, 1997 by: (i) each person known by the Company to own beneficially more
than 5% of the Company's outstanding Common Stock and Preferred Stock at such
date; (ii) each Director of the Company; (iii) each of the executive officers
listed in the Summary Compensation Table included elsewhere herein; and (iv) all
Directors and executive officers as a group, and the percentage of the
outstanding shares represented thereby.
<TABLE>
<CAPTION>
COMMON STOCK(1)(2)
---------------------------------------
Nature and Address (3) Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
-------------------------------- -------------------- --------
<S> <C> <C>
Charles M. Lombardy, Jr ........ 727,307 Shares (4) (5) 6.63%
Garry Regan(10)................. 723,771 Shares (4) 6.60%
Charles K. Ebinger.............. 17,695 Shares (6) .16%
W. Dale Wegrich................. 32,875 Shares (6) .30%
George R. Begley................ 27,125 Shares (6) (7) .25%
Robert L. Bauman(10)............ 3,695 Shares .03%
Anthony Kovacevich.............. 24,500 Shares (4) .23%
Eugene Hershman................. 487,013 Shares 4.50%
Steven L. Grose................. 3,692 Shares .03%
C. Rand Michaels................ 2,815 Shares .03%
John H. Pinkerton............... 3,185 Shares .03%
Lomak Petroleum, Inc............ 4,079,874 Shares (8) 37.79%
All Directors and executive
officers as a group (12 persons) 1,631,163 Shares (9) 14.89%
persons)
--------------------------------
</TABLE>
(1) Each share of Series A Preferred Stock is currently convertible into
2.3 shares of Common Stock. On July 10, 1997, there were 75,351 shares
of Series A Preferred Stock outstanding.
(2) Each share of Series B Preferred Stock is currently convertible into
5.75 shares of Common Stock. On July 10, 1997, there were 268,264
shares of Series B Preferred Stock outstanding.
(3) The address of Messrs. Lombardy and Regan is 1993 Case Parkway,
Twinsburg, Ohio 44087. The address of Lomak Petroleum, Inc. is 125
State Route 43, Hartville, Ohio 44632.
(4) Includes 404,582 shares of Common Stock, in the aggregate, which could
be acquired by Messrs. Regan (177,066 shares), Lombardy (177,066
shares) and Kovacevich (22,500 shares) upon the exercise of
immediately exercisable stock options which they hold.
(5) The share ownership figures for Mr. Lombardy include 13,738 shares of
Common Stock owned by a trust for which Mr. Lombardy is the trustee
and as to which he disclaims any beneficial interest.
(6) Includes 10,000 shares of Common Stock which may be acquired upon the
exercise of immediately exercisable options.
(7) Does not include 8,050 shares of Common Stock issuable upon exercise
of 7,000 Series B Warrants held by Mr. Begley's spouse. Mr. Begley
disclaims beneficial ownership of such shares.
(8) Does not include 500,000 shares of Common Stock which may be acquired
upon the exercise of certain Warrants to purchase Common Stock nor
does it include debt of $1,170,746 at June 30, 1997 which is
convertible into shares of Common Stock at $1.00 per share.
(9) Includes 450,156 shares of Common Stock which may be acquired by all
Directors and executive officers as a group upon the exercise of
immediately exercisable stock options.
(10) Messrs. Regan and Bauman are brothers-in-law.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All future transactions between the Company and its affiliates will be
on terms no less favorable to the Company than those that could be obtained from
unaffiliated parties and all loans to Company officers, affiliates and
stockholders will be approved by a majority of disinterested directors, if any.
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH COAST ENERGY, INC.
July 25, 1997 /s/ Charles M. Lombardy, Jr.
------------------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer
