<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
North Coast Energy, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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> 2
NORTH COAST ENERGY, INC.
An Affiliate of [NUON LOGO] International
The Netherlands
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO BE HELD DECEMBER 16, 1998
To Our Stockholders:
The Annual Meeting of Stockholders (the "Meeting") of North Coast
Energy, Inc. (the "Company") will be held at Holiday Inn Hudson, Route 8 and
Turnpike Exit 12, Hudson, Ohio, on Wednesday, December 16, 1998 at 9:00 a.m.,
EST, to consider and act upon the following:
1. An amendment to the Certificate of Incorporation increasing the authorized
number of Directors from nine (9) to thirteen (13) and fixing the existing
number of Directors at eleven (11);
2. The election of four Directors whose term of office will expire in 2001;
3. The election of one Director whose term of office will expire in 1999; and
4. The transaction of such other business as may properly come before the
Meeting or any adjournments thereof.
Holders of Common Stock and Series A Preferred Stock of record at the
close of business on October 31, 1998 are entitled to notice of and to vote at
the Meeting. Stockholders owning Units and separate shares of Series A
Preferred Stock or Common Stock will receive multiple proxies, one blue
(Units), one white (Common Stock) and one pink (Series A Preferred Stock), and
should execute and return all proxies. Stockholders holding only either Units
or Common Stock will receive only one proxy and should execute and return it.
Whether or not you expect to be personally present at the Meeting,
please be sure that the enclosed proxy is properly marked, signed and dated,
and returned without delay in the enclosed prepaid envelope. Such action will
not limit your right to vote in person or to attend the Meeting, but will
ensure your representation if you cannot attend.
By Order of the Board of Directors,
THOMAS A. HILL
Secretary
November 30, 1998
<PAGE> 3
NORTH COAST ENERGY, INC.
1993 Case Parkway
Twinsburg, Ohio 44087-2343
-------------------------
PROXY STATEMENT
MAILED ON NOVEMBER 30, 1998
--------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 16, 1998
Proxies in the form enclosed with this Proxy Statement are solicited
by the Board of Directors of North Coast Energy, Inc., a Delaware corporation
(the "Company"), for use at the Annual Meeting of Stockholders (the "Meeting")
to be held on Wednesday, December 16, 1998, and any adjournments thereof. The
time, place and purposes of the Meeting are stated in the Notice of Annual
Meeting which accompanies this Proxy Statement.
Only stockholders of record as of October 31, 1998 will be entitled to
vote at the Meeting or any adjournments thereof. As of that date, 22,757,168
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
74,491 shares of Series A, 6% Convertible Preferred Stock (the "Series A
Preferred Stock"), of the Company were issued and outstanding. Each share of
Common Stock outstanding as of the record date will be entitled to one vote,
and each share of Series A Preferred Stock outstanding as of the record date
will be entitled to 2.3 votes. Stockholders may vote in person or by proxy. The
Company's Certificate of Incorporation does not provide for cumulative voting
rights. Execution of a proxy will not in any way affect a stockholder's right
to attend the Meeting and vote in person. Any stockholder has the right to
revoke a proxy by written notice to the Secretary of the Company at any time
before it is exercised, including by executing another bearing a later date, or
by attending the Meeting and voting in person. Stockholders owning Units and/or
separate shares of Common Stock and Series A Preferred Stock will receive
multiple proxies, one blue (Units), one white (Common Stock) and one pink
(Series A Preferred Stock), and should execute and return all proxies that they
receive. Stockholders holding only Units or Common Stock or Series A Preferred
Stock will receive only one proxy and should execute and return it.
A properly executed proxy returned in time to be cast at the Meeting
will be voted in accordance with the instructions contained thereon, if it is
not revoked. If no choice is specified on the proxy, it will be voted "FOR" the
amendment to the Certificate of Incorporation and "FOR" the election of each of
the five individuals nominated by the Board of Directors.
The cost of soliciting proxies in the form accompanying this Proxy
Statement will be borne by the Company. In addition to solicitation by mail,
proxies may be solicited by Directors, officers and employees of the Company in
person or by mail, telephone, facsimile or telegraph, following the original
solicitation.
At the Annual Meeting, in accordance with the Delaware General
Corporation Law and the Company's Certificate of Incorporation, the inspectors
of election appointed by the Board
1
<PAGE> 4
of Directors for the Annual Meeting will determine the presence of a quorum and
will tabulate the results of stockholder voting. Pursuant to the Company's
By-Laws, at the Annual Meeting the holders of a majority of the outstanding
shares of the Company's Common Stock entitled to vote at the meeting, present
in person or by proxy, will constitute a quorum. The shares represented at the
Annual Meeting by proxies which are marked, with respect to the election of
Directors, as "withheld" or, with respect to any other proposals, "abstain",
will be counted as shares present for purposes of determining whether a quorum
is present.
Under the rules of the New York Stock Exchange, brokers who hold
shares in street name for beneficial owners have the authority to vote on
certain items when they have not received instructions from such beneficial
owners. Under applicable Delaware law, if a broker returns a proxy and has not
voted on a certain proposal, such broker non-votes will count for purposes of
determining a quorum.
Pursuant to the provisions of the Delaware Corporation Law, a majority
of the outstanding shares of Common Stock and Series A Preferred Stock, voting
in the aggregate, is required to approve the amendment to the Certificate of
Incorporation. Abstentions or broker non-votes will have the practical effect
of voting against the proposal to amend the Certificate of Incorporation since
they are included in the number of shares entitled to vote on the proposal.
Pursuant to the Company's By-Laws, at the Annual Meeting, a majority
of the votes cast is sufficient to elect a nominee as a Director. In the
election of Directors, votes may be cast in favor or withheld; votes that are
withheld or broker non-votes will have no effect on the outcome of the election
of Directors.
Pursuant to the Company's By-Laws, all other questions and matters
brought before the meeting will be decided by the vote of the holders of a
majority of the outstanding shares entitled to vote thereon present in person
or by proxy at the meeting, unless otherwise provided by law or by the
Certificate of Incorporation. In voting for such other matters, votes may be
cast in favor, against or abstained. Abstentions will count as present for
purposes of the proposal on which the abstention is noted and will have the
effect of a vote against the proposal. Broker non-votes, however, are not
counted as present and entitled to vote for purposes of determining whether a
proposal has been approved and will have no effect on the outcome of such
proposal.
THE COMPANY
North Coast Energy, Inc. and its subsidiaries ("North Coast" or the
"Company") are engaged in the business of oil and gas exploration, development
and production. The Company was incorporated under the laws of Delaware in
August, 1988 as a successor to and for the purposes of continuing the business
and operations of an existing corporation and combining the assets and
properties of North Coast with those to be acquired through an acquisition
conducted as an exchange offer.
2
<PAGE> 5
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information with respect to the Common
Stock, 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 October 31, 1998 by: (1) 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
--------------------------------------
Amount and
Nature
Nature and Address (1) of Beneficial Percent of
of Beneficial Owner Ownership Class
---------------------- --------- ----------
<S> <C> <C> <C>
Charles M. Lombardy, Jr. 665,242 Shares (2)(3) 2.91%
Garry Regan 685,424 Shares (2) 3.00%
Saul Siegel 358,600 Shares (2) 1.57%
Leo J. M. J. Blomen 0 Shares *%
Jos J. M. Smits 0 Shares *%
NUON Projects 11,494,254 Shares (4) 50.51%
International bv
Ralph L. Bradley 33,333 Shares (2) *%
Steven L. Grose 8,971 Shares *%
C. Rand Michaels 8,094 Shares *%
John H. Pinkerton 8,464 Shares *%
Range Resources Corporation 3,967,374 Shares (5) 17.43%
All Directors and
executive officers as a 1,832,631 Shares (6) 8.01%
group (11 persons)
----------------------------
<FN>
Less than one percent*
(1) The address of NUON Projects International is Utrechtsweg 68, 6812 AH
Arnhem, The Netherlands. The address of Range Resources Corporation is
125 State Route 43, Hartville, Ohio 44632.
(2) Includes 330,333 shares of Common Stock, in the aggregate, which could
be acquired by Messrs. Regan (115,000 shares) Lombardy (115,000
shares), Siegel (134,000 shares) and Bradley (33,333 shares) upon the
exercise of immediately exercisable stock options or warrants which
they hold. Does not include 67,000 shares of Common Stock that may be
acquired through the exercise of a warrant which may be issued upon
the purchase of additional Common Stock by NUON Projects International
bv (see footnote 4).
(3) 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.
(4) Does not include 5,747,127 shares of Common Stock that may be
immediately acquired by NUON Projects International bv upon exercise
of an outstanding warrant for $0.87 per share.
(5) Does not include 200,000 shares of Common Stock which may be acquired
upon the exercise of certain Warrants to purchase Common Stock.
(6) Includes 440,858 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 or warrants.
</TABLE>
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
Article VI of the Company's Certificate of Incorporation currently
provides in relevant part that the Board of Directors shall consist of not less
that five (5) nor more than nine (9) members and shall be divided into three
classes, Class I, Class II, and Class III. The Board currently has nine members
with three directors in each of the three classes.
3
<PAGE> 6
Pursuant to Section 3.1 of the Stock Purchase Agreement dated August
1, 1997 by and between the Company and NUON International bv., the latter
stockholder having made its second installment pursuant to the Agreement, is
entitled to designate a majority of the members of the Board of Directors until
such time as NUON's ownership of the Company's outstanding shares of Common
Stock falls below thirty-three and one-third percent (33 1/3%). NUON's
designees currently constitute one-third of Board membership. To comply with
the majority designation clause in the Stock Purchase Agreement it would have
been necessary for NUON to designate five of the current nine Board positions.
However, the establishment of that specific Board configuration was rendered
impractical by the existence of the staggered classes and the general desire of
current Directors to serve out the remainder of their terms. In order to avoid
the unwanted effects of soliciting resignations from valued members of the
current Board of Directors, it is proposed that an Amendment to the Articles of
Incorporation be adopted (1) to provide that the Board of Directors shall
consist of not less than seven (7) or more than thirteen (13) members; and (2)
to increase the current size of the Board of Directors from nine (9) to eleven
(11) with the vacancies created in the classes of directors whose terms expire
in 1998 and 1999.
The proposed Amendment has been authorized by unanimous consent of the
Board of Directors and, accordingly, requires a simple majority of stockholder
votes in favor of adoption. The proposed increase in Board size would enable
the Company to honor the majority designation provision contained in the NUON
Stock Purchase Agreement and at the same time enable current Directors to serve
out the balance of their terms. The Company recommends adoption of the
Amendment.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
each class currently consisting of three Directors. One class of directors is
generally elected at each Annual Meeting to serve a three-year term. Upon
stockholder approval of the recommended amendment to the Company's Certificate
of Incorporation, classes one and two which have expirations in 2001 and 1999,
respectively, will be expanded to consist of four Directors each. At the 1998
Annual Meeting, stockholders will be asked to elect four Directors whose terms
will expire at the 2001 Annual Meeting and one Director who will be placed in
the expanded class two and whose term will, accordingly, expire at the 1999
Annual Meeting.
Unless otherwise directed, the persons named in the accompanying proxy
will vote for the election of the nominees set forth in the table below as
Directors of the Company. In the event of the death of or inability to act of
such nominees, the proxies will be voted for the election as a Director of such
other persons as the Board of Directors may recommend. The Board of Directors
has no reason; however, to anticipate that this will occur. In no event will
the accompanying proxy be voted for persons other than those named below and
any such substitute nominee. Under applicable provisions of Delaware law and
the Company charter documents, the nominees receiving the greatest number of
votes cast at a meeting at which a quorum is present will be elected as
Directors of the Company.
4
<PAGE> 7
<TABLE>
<CAPTION>
NOMINEES TO TERM EXPIRING IN 2001
Name Age Principal Occupation and History
---- --- --------------------------------
<S> <C> <C>
Garry Regan (1) 49 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 and 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.
Leo J.M.J. Blomen (1) 43 Mr. Blomen was appointed to the Board of Directors in September
1997. Mr. Blomen has been Director of International Division of
NUON Energy Group since March 1997. Since July 1996 Mr. Blomen has
been Managing Director of NUON Projects International bv. Mr.
Blomen is also the founder and, from January 1993 to July 1996, the
Managing Director of Blomenco b.v. Mr. Blomen is also on the
Boards of: DATTEL a.s, a cable company in Prague (Czech Republic);
Calortex, Ltd., a gas company in the U.K.; and the Sino-foreign
company Shantou Da Nan Windpower Development Company, Ltd., a joint
venture which is currently constructing the largest windfarm in
China. Mr. Blomen holds a degree in Chemical Engineering and a
Ph.D. in Medicine.
Frank R. Bakos (1) 61 Mr. Bakos has been an advisor to the Board since August 1998. He
retired in early 1997 from his position as president of the Power
Generation Business Unit and vice president of Westinghouse
Electric Corporation where he was responsible for Westinghouse's
global interests in the power generation business. Mr. Bakos began
his career with Westinghouse in 1956, was awarded the Westinghouse
Order of Merit in 1977, has served as Chairman of the Board of ITI,
a Westinghouse-Asea atom joint venture company, and also ENWESA, a
Spanish-based company.
Carel W.J. Kok (1) 31 Mr. Kok has been Manager of Business Development with the
International Division of the NUON Energy Group since October
1996. From 1990 to 1995 he was with the Royal Dutch Shell Group
working in a variety of downstream commercial, trading and new
business development functions in East Asia, the Middle East, as
well as Western and Eastern Europe. Mr. Kok was co-founder of Lone
Star Europe Holding, a US-Dutch joint venture with the American
chain Lone Star Steakhouse & Saloon. Mr. Kok is also on the Boards
of Calortex Ltd., a retail gas distribution company in the UK
serving nearly 500,000 customers, and is Chairman of the Board of
the Sino-foreign joint venture company Shantou Dan Nan Windpower
Development Company, Ltd., a joint venture now operating the
largest windfarm in China. Mr. Kok holds a B.A. degree from
Princeton University and a M.B.A. degree from the Rotterdam School
of Management at Erasmus University.
NOMINEE TO TERM EXPIRING IN 1999
S.F.E. (Bas) Rosenbaum(2) 49 Since 1993, Mr. Rosenbaum has been BU-manager Olefins for Tolson
Holland BV. He is responsible for global coverage, turnover and
results. From 1990 until 1993 Mr. Rosenbaum was managing director
Europe/Partner for JLM Industries where he founded branches in
France and the Netherlands. He was
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Name Age Principal Occupation and History
---- --- --------------------------------
<S> <C> <C> <C>
responsible for all trading activities in NEW on hydrocarbons and
other petrochemicals. Mr. Rosenbaum received his B.A. in Business
Administration from HEAO-CE in Holland.
DIRECTORS CONTINUING IN OFFICE
Charles M. Lombardy, Jr. (2) 48 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.
C. Rand Michaels (2) 61 Mr. Michaels was elected as a Director of North Coast in 1996. Mr.
Michaels, retired from the office of Vice Chairman of Range Resources
Corporation (formerly Lomak Petroleum, Inc.) in 1998 and is a Director
of Range Resources Corporation. He served as President and Chief
Executive Officer of Lomak from 1976 through 1988 and Chairman of the
Board from 1984 through 1988, when he became Vice Chairman of Lomak. 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.
John H. Pinkerton (2) 45 Mr. Pinkerton was appointed by the Board of Directors of North
Coast in 1996. Mr. Pinkerton is President, Chief Executive Officer and a
Director of Range Resources Corporation (formerly Lomak Petroleum, Inc.)
and joined Lomak in 1988. He was appointed President of Lomak in 1990
and Chief Executive Officer of Lomak 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 of Texas. Mr. Pinkerton will serve out the unexpired term
of current Director Steven L. Grose, a Vice President of Range Resources
Corporation, who has indicated that he will resign his position prior to
the 1998 Annual Meeting.
Saul Siegel (3) 68 Mr. Siegel was appointed as a Director and Chief Operating Officer
of North Coast in September 1997. Since July 1996 Mr. Siegel has been
President and owner of Clark Engineering Services, Inc., a Buchanan,
Michigan testing facility for off-road vehicles. In addition, for more
than five years Mr. Siegel has been President of Metalworking
International Corporation, a Cleveland, Ohio company that purchases
manufacturing plants and new and used metalworking equipment. Since May
1996, Mr. Siegel has also been Treasurer of Precision Rebuilders, Inc.,
a New Orleans, Louisiana company which is engaged in the remanufacturing
of oil and gas valves.
Jos J.M. Smits (3) 49 Mr. Smits was appointed to the Board of Directors in September
1997. Mr. Smits has been Manager-Purchasing and Trade for NUON Energy
Group since July 1994. From October 1992 until
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
Name Age Principal Occupation and History
---- --- --------------------------------
<S> <C> <C>
July 1994, Mr. Smits was Managing Director of Fels B.V., a Dutch
manufacturer of building materials. Mr. Smits holds a degree in
Economics from the University of Amsterdam, the Netherlands.
Ralph L. Bradley (3) 57 Mr. Bradley was elected to the Board of Directors on December 5,
1997. Mr. Bradley is currently President of Bradley Energy
International, which provides energy solutions for the world market, and
Bradley Energy USA, which provides individuals with the opportunity to
own various aspects of natural gas production. Prior to forming these
entities, Mr. Bradley was chief executive officer of The Eastern Group,
Inc., and its predecessor, Eastern States Exploration Company, Inc.
<FN>
(1) Nominee for election. Term as a Director expires in 2001.
(2) Term as a Director expires in 1999.
(3) Term as a Director expires in 2000.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, of which Messrs. Blomen, Grose, Michaels,
Pinkerton, Bradley and Smits are currently 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, 1998.
The Compensation and Stock Option Committee, of which Messrs. Blomen,
Pinkerton and Smits are members, reviews and makes recommendations concerning
the salaries of the Company's executive officers, reviews and makes
recommendations concerning the Company's Stock Option Plan and Stock Bonus Plan
and administers the Company's Profit Sharing Plan. The Compensation and Stock
Option Committee met once during the year ended March 31, 1998.
The Board of Directors of the Company held fifteen meetings during the
year ended March 31, 1998. All of the Directors attended at least 75% of the
meetings of the Board of Directors and each committee on which they served
except Mr. Smits.
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, 1998,
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: (a) reports which were filed late on behalf of Messrs. Blomen,
Smits and Bradley each pertaining to one transaction; (b) three reports
7
<PAGE> 10
which were filed late on behalf of Mr. Siegel pertaining to six transactions;
(c) two reports which were filed late by Range Resources Corporation involving
seven transactions.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following tables sets forth the annual and long-term compensation
for the Company's Chief Executive Officer and the two other executives (the
"Named Executive Officers") earning in excess of $100,000 for fiscal 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Other Number of
Annual Securities All Other
Compen- Underlying Compen-
Name and Principal Position Year Salary Bonus sation Options sation (1)
- --------------------------- ---- ------ ----- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Lombardy, Jr. 1998 $173,740 N/A -- $9,576
Chief Executive Officer; 1997 166,350 $0 N/A -- 7,148
Director 1996 165,000 0 N/A -- 6,308
0
Garry Regan 1998 173,740 0 N/A -- 8,616
President; Director 1997 166,350 0 N/A -- 6,188
1996 165,000 0 N/A -- 5,348
Saul Siegel 1998 102,733 0 N/A -- 0
Chief Operating
Officer;
Director
</TABLE>
No Named Executive Officer received personal benefits or perquisites
during fiscal year 1998 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 and Regan $2,810 and $1,850, respectively, for fiscal years
1998, 1997, and 1996 in life insurance premiums paid by the Company
pursuant to the terms of employment agreements between the Company and
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, $6,766, $4,338 and $3,498
and Mr. Regan, $6,766, $4,338 and $3,498 for fiscal years 1998, 1997
and 1996, respectively. Mr. Siegel was not eligible under the terms of
the plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table summarizes options exercised during fiscal 1998
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. -- $ 0 115,000 0 $ 0 $ 0
Garry Regan -- 0 115,000 0 0 0
Saul Siegel -- 0 67,000 0 0 0
<FN>
</TABLE>
8
<PAGE> 11
(1) Based upon the closing bid price of a share of Common Stock as
reported on the NASDAQ system on March 31, 1998. None of the options
were in the money at March 31, 1998.
Employment Agreements. Messrs. Lombardy and Regan each have an
employment agreement running through May 3, 2001, unless earlier terminated
pursuant to the terms of these agreements. These agreements provide for current
base annual compensation of $178,623 to each of Messrs. Lombardy and Regan,
with increases for cost of living based upon the Consumer Price Index.
Additional bonuses may be awarded from time to time by the Board of Directors.
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.
An employment agreement with Mr. Siegel is pending approval of the
Company's executive committee, effective May 3, 1998, with substantially the
same terms and conditions as Messrs. Lombardy and Regan's employment agreement
for a three-year period. Mr. Siegel's current base annual compensation of
$182,230 also includes payment in lieu of health and life insurance benefits.
Each of the employment agreements contains provisions addressing a
possible change in control of the Company (the "Change in Control Provisions").
The purchase of the Company's common stock by NUON Projects International bv
was exempted by separate agreement. The Change in Control Provisions provided
certain conditions which continue to exist. The Change in Control Provisions
require the payment of certain benefits to these executive officers upon the
termination of their employment, other 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, any of these three executive
officers who remain 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 in the Company, other than for good
cause, each of the three
9
<PAGE> 12
executive officers would be entitled to Change in Control Payments in the amount
equal either to 2.99 times the average annual salary, bonus, and incentive
compensation amounts paid during the three year period immediately preceding the
termination after a change in control in the Company, payable in 36 equal
monthly installments, 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.
Directors Fees. During fiscal 1998, the Board voted to discontinue the
payment of any Director Fees to any Board member. However, the Board made a
grant of options to purchase 99,999 shares at $.875 per share to Ralph L.
Bradley during the year ending March 31, 1998. The options vest over a
three-year period.
CERTAIN TRANSACTIONS
The Company believes that the terms of the following transactions were
as favorable to the Company as could have been obtained from unaffiliated third
parties. 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.
In connection with the sale of shares of Common Stock of the Company
to NUON Projects International, bv, Mr. Saul Siegel received cash payment of
$112,500 and five year warrants to purchase 134,000 shares of Common Stock of
the Company at a price of $0.875 per share. In addition, upon the exercise, by
NUON Projects International, bv, of its right to purchase additional shares of
Common Stock of the Company Mr. Siegel will receive an additional $37,500 and
five year warrants to purchase an additional 67,000 shares of Common Stock of
the Company at a price of $0.875 per share.
OTHER MATTERS
The Board of Directors is not aware of any matter to come before the
Meeting other than those mentioned in the Notice of Annual Meeting of
Stockholders. If other matters, however, properly come before the Meeting, it
is the intention of the persons named in the accompanying proxy to vote in
accordance with their best judgment on such matters insofar as the proxies are
not limited to the contrary.
A representative of the firm of Arthur Andersen LLP, the Company's
independent accountants, will be in attendance at the Annual Meeting, will have
an opportunity to make a statement if he so desires and will be available to
respond to questions from stockholders concerning the Company's audited
financial statements.
10
<PAGE> 13
Any stockholder who wishes to submit a proposal for inclusion in the
proxy materials to be distributed by the Company in connection with its Annual
Meeting of Stockholders to be held in 1999 must do so no later than April 10,
1999, which is 120 days in advance of the anticipated mailing date of the proxy
materials for the 1999 Annual Stockholders Meeting. To be eligible for
inclusion in the 1999 proxy materials of the Company, proposals must conform to
the requirements set forth in Regulation 14A under the Securities Exchange Act
of 1934.
Upon receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including financial statements and schedules required to
be filed with the Securities and Exchange Commission pursuant to Rule 13a-1
under the Securities Exchange Act of 1934, for the Company's most recent year.
Written request for such Report should be directed to:
North Coast Energy, Inc.
1993 Case Parkway
Twinsburg, Ohio 44087-2343
Attention: President
You are urged to sign and return your proxy promptly in the enclosed
return envelope to make certain your shares will be voted at the Meeting.
By Order of the Board of Directors,
Thomas A. Hill
Secretary
11
<PAGE> 14
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Charles M. Lombardy, Jr., Garry
Regan, and Saul Siegel, and each of them, as Proxy holders and
attorneys, with full power of substitution, to appear and vote all of
the shares of Common Stock of North Coast Energy, Inc. which the
undersigned shall be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Holiday Inn, Hudson, Route
8 and Turnpike Exit 12, Hudson, Ohio on Wednesday, December 16, 1998 at
9:00 A.M. (EST), and at any adjournments thereof, hereby revoking any
and all proxies heretofore given, and (ii) authorizes and directs said
Proxy holders to vote all of the shares of Common Stock of the Company
represented by this Proxy as follows, WITH THE UNDERSTANDING THAT IF NO
DIRECTIONS ARE GIVEN BELOW, SAID SHARES WILL BE VOTED "FOR" THE ELECTION
OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, AND "FOR" THE
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND
INCREASE THE CURRENT SIZE OF THE BOARD OF DIRECTORS FROM NINE (9) TO
ELEVEN (11) AND DESIGNATING CLASSES FOR THE NEW POSITIONS.
(1) Proposed to approve and adopt an amendment to the Company's
Certificate of Incorporation to provide that the Board of Directors
shall consist of not less than seven (7) or more than thirteen (13)
members and that the current size of the Board of Directors be
increased from nine (9) to eleven (11) and designating classes for
the new positions.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN
(Continued and to be signed on other side)
SHARES
(Proxy -- continued from other side)
<TABLE>
<S> <C> <C>
(2) ELECTION OF DIRECTORS [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
Leo J.M.J. Blomen, Garry Regan, Frank R. Bakos, Carel W.J. Kok and S.F.E. (Bas) Rosenbaum
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line)
--------------------------------------------------------------
(3) In their discretion to act on any other matter or matters which may
properly come before the Annual Meeting.
<TABLE>
<S> <C>
Dated: , 1998
---------------------------------------
Your signature to this Proxy form
should be exactly the same as the name
imprinted hereon. Persons signing as
executors, administrators, trustees or
in similar capacities should so
indicate. For joint accounts, the name
of each joint owner must be signed.
</TABLE>
PLEASE DATE, SIGN AND RETURN
PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
<PAGE> 15
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Charles M. Lombardy, Jr., Garry
Regan, and Saul Siegel, and each of them, as Proxy holders and
attorneys, with full power of substitution, to appear and vote all of
the Units of North Coast Energy, Inc. which the undersigned shall be
entitled to vote at the Annual Meeting of Stockholders of the Company to
be held at the Holiday Inn, Hudson, Route 8 and Turnpike Exit 12,
Hudson, Ohio on Wednesday, December 16, 1998 at 9:00 A.M. (EST), and at
any adjournments thereof, hereby revoking any and all proxies heretofore
given, and (ii) authorizes and directs said Proxy holders to vote all of
the shares of Common Stock and Preferred Stock of the Company
represented by this Proxy as follows, WITH THE UNDERSTANDING THAT IF NO
DIRECTIONS ARE GIVEN BELOW, SAID UNITS WILL BE VOTED "FOR" THE ELECTION
OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, AND "FOR" THE
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND
INCREASE THE CURRENT SIZE OF THE BOARD OF DIRECTORS FROM NINE (9) TO
ELEVEN (11) AND DESIGNATING CLASSES FOR THE NEW POSITIONS.
(1) Proposed to approve and adopt an amendment to the Company's
Certificate of Incorporation to provide that the Board of Directors
shall consist of not less than seven (7) or more than thirteen (13)
members and that the current size of the Board of Directors be
increased from nine (9) to eleven (11) and designating classes for
the new positions.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN
(Continued and to be signed on other side)
UNITS
(Proxy -- continued from other side)
<TABLE>
<S> <C> <C>
(2) ELECTION OF DIRECTORS [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
Leo J.M.J. Blomen, Garry Regan, Frank R. Bakos, Carel W.J. Kok and S.F.E. (Bas) Rosenbaum
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line)
--------------------------------------------------------------
(3) In their discretion to act on any other matter or matters which may
properly come before the Annual Meeting.
<TABLE>
<S> <C>
Dated: , 1998
---------------------------------------
Your signature to this Proxy form
should be exactly the same as the name
imprinted hereon. Persons signing as
executors, administrators, trustees or
in similar capacities should so
indicate. For joint accounts, the name
of each joint owner must be signed.
</TABLE>
PLEASE DATE, SIGN AND RETURN
PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
<PAGE> 16
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Charles M. Lombardy, Jr., Garry
Regan, and Saul Siegel, and each of them, as Proxy holders and
attorneys, with full power of substitution, to appear and vote all of
the shares of Preferred Stock of North Coast Energy, Inc. which the
undersigned shall be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Holiday Inn, Hudson, Route
8 and Turnpike Exit 12, Hudson, Ohio on Wednesday, December 16, 1998 at
9:00 A.M. (EST), and at any adjournments thereof, hereby revoking any
and all proxies heretofore given, and (ii) authorizes and directs said
Proxy holders to vote all of the shares of Preferred Stock of the
Company represented by this Proxy as follows, WITH THE UNDERSTANDING
THAT IF NO DIRECTIONS ARE GIVEN BELOW, SAID SHARES WILL BE VOTED "FOR"
THE ELECTION OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, AND
"FOR" THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
AND INCREASE THE CURRENT SIZE OF THE BOARD OF DIRECTORS FROM NINE (9) TO
ELEVEN (11) AND DESIGNATING CLASSES FOR THE NEW POSITIONS.
(1) Proposed to approve and adopt an amendment to the Company's
Certificate of Incorporation to provide that the Board of Directors
shall consist of not less than seven (7) or more than thirteen (13)
members and that the current size of the Board of Directors be
increased from nine (9) to eleven (11) and designating classes for
the new positions.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN
(Continued and to be signed on other side)
SHARES
(Proxy -- continued from other side)
<TABLE>
<S> <C> <C>
(2) ELECTION OF DIRECTORS [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
Leo J.M.J. Blomen, Garry Regan, Frank R. Bakos, Carel W.J. Kok and S.F.E. (Bas) Rosenbaum
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line)
--------------------------------------------------------------
(3) In their discretion to act on any other matter or matters which may
properly come before the Annual Meeting.
<TABLE>
<S> <C>
Dated: , 1998
---------------------------------------
Your signature to this Proxy form
should be exactly the same as the name
imprinted hereon. Persons signing as
executors, administrators, trustees or
in similar capacities should so
indicate. For joint accounts, the name
of each joint owner must be signed.
</TABLE>
PLEASE DATE, SIGN AND RETURN
PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
<PAGE> 17
NORTH COAST ENERGY, INC.
An Affiliate of [NUON LOGO] International
The Netherlands
Dear Shareholder:
Enclosed is a copy of your proxy material and our Annual Report on Form
10-K which was filed with the Securities and Exchange Commission at the end of
June. Please complete and return your proxy card(s) as soon as possible. Our
Annual Shareholder Meeting is scheduled for December 16, 1998 at the Holiday Inn
in Hudson, Ohio, at 9:00 a.m.
In September 1997, half way through fiscal 1998, your Company completed
perhaps the most important single transaction since we began operations in 1981.
The finalization of the equity investment and strategic alliance with the Dutch
multi-utility NUON nv set in motion what we believe will result in a "new" North
Coast Energy that has the technical and financial abilities to compete and win
in the dynamic world of energy.
NUON is a multi-service, multi-national, and multi-billion dollar
energy and water company serving 2.5 million households in Holland and is
seeking energy opportunities here in the United States and throughout the world.
Under the terms of the agreement, NUON will invest up to $15 million in North
Coast. NUON made its initial equity investment of $5 million by purchasing
approximately 5.7 million shares on September 4, 1997. The second $5 million
investment, again through the purchase of 5.7 million shares, was received in
September 1998, and the third equity investment of $5 million is expected in
September 1999.
The equity investment made by NUON has allowed North Coast to pursue
strategic acquisitions that provide the production and reserves to increase our
daily volume of natural gas and competitive position as a natural gas supplier.
After the close of fiscal 1998, we completed the acquisition of the assets of
Kelt Ohio, Inc. This strategic acquisition increased the number of wells in
which the Company owns interests to over 1,600 from 700 and more than doubled
our daily net production to 7,500 Mcf from 3,200 Mcf. The acquisition also
offers North Coast cost savings from improved economies of scale due to shared
personnel and equipment. Of Kelt's entire production, 40 percent is adjacent to
North Coast's existing Youngstown field operations. Additionally we have already
contracted Kelt's production through a one-year agreement at a very favorable
price of $2.85/Mcf.
North Coast's alliance with NUON creates several additional
opportunities. NUON offers North Coast a wealth of experience in marketing and
other downstream capabilities. Our goal is to utilize the combined expertise of
NUON and North Coast to supply energy to more end-users, particularly the
industrial and commercial sectors. To
"Your Partner in Energy Development"
193 Case Parkway - Twinsburg, Ohio 44087-2343
Telephone:(330) 425-2330 - (800) 645-6427 - Fax:(330) 405-3298 -
http://www.northcoastenergy.com
<PAGE> 18
achieve this goal, we are exploring many opportunities both inside and outside
our traditional exploration and production activities, including merchant
generation plants, district heating, and co-generation facilities.
Our financial results for the year ended March 31, 1998, reflect modest
net income of $262,138 before preferred dividends compared with $291,750 a year
ago. Revenues were negatively affected by decreased demand for natural gas
caused by record mild temperatures last winter. As a result, Appalachian natural
gas prices on average dropped $0.30 Mcf between 1997's and 1998's fiscal year
end. Our average gas price, however, increased $0.07 to $2.50/Mcf for the fiscal
year as a result of our strategy to target small-and medium-sized industrial and
commercial end users, and our balanced approach to gas marketing. We were
pleased our efforts produced the improved price, even though it was more than
offset by the decreased demand.
In fiscal 1998, revenues also were affected by lower drilling activity
as the number of wells developed under our drilling program declined to 20 from
29 in fiscal 1997. All 20 of these program wells are currently on line and
producing as we enter this winter's heating season. On a fully diluted basis for
fiscal 1998, the Company reported a $0.02 per share loss after preferred
dividends compared with breakeven for fiscal 1997.
NUON has become part of our daily operations and we are becoming part
of NUON. It is an exciting time for all of us. By the time you read this report
we will be more than half way through fiscal 1999. What we will soon be
reporting on will be significant increases in production and operations from our
exploration and production activities and opportunities downstream of the
wellhead.
Our overriding goal is to increase our shareholders' value by growing
North Coast and increasing our profitability. We want to thank all of our
shareholders for their continued support as we look to profitably grow our
Company.
Sincerely,
/s/ Garry Regan /s/ Charles M. Lombardy Jr. /s/ Saul Siegel
GARRY REGAN CHARLES M. LOMBARDY JR. SAUL SIEGEL
Chairman of the Chief Executive Officer Chief Operating Officer
Board, President
