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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, 1998
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: (330) 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
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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
Company's next Annual Meeting, stockholders will be asked to elect three
Directors whose term will expire at the 2001 Annual Meeting.
GARRY REGAN, age 48, is President, Chairman of the Board, 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 and
Chairman of the Board of Directors since November 1996. 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.
CHARLES M. LOMBARDY, JR., age 48, 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 a Director and
officer of NCE Securities, Inc., a wholly-owned subsidiary of the Company and a
registered broker-dealer.
SAUL SIEGEL age 68, is Chief Operating Officer, Director. 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
for oil and gas wells.
JOS J.M. SMITS, age 49, has served as Director since he was appointed to the
Board of Directors of North Coast in September 1997. He is Purchasing Manager
Energy for NUON Energy Group and is in charge of purchasing energy for NUON and
for sales to the liberalized large-scale consumption market. Mr. Smits has a
degree in Economics from the University of Amsterdam, the Netherlands.
LEO J.M.J. BLOMEN, age 43, was appointed to the Board of Directors in September
1997. Mr. Blomen has been Director of the International Division of NUON Energy
Group since March 1997. Since July 1997, Mr. Blomen has been Managing Director
of NUON International bv. Mr. Blomen is also the founder and, from January 1993
to July 1996, the Managing Director of Blomenco bv. 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 Dan 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.
RALPH BRADLEY, age 57, was elected as a Director 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.
Executive Officers of the Registrant*
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TIMOTHY WAGERS, age 38, joined North Coast in 1983 and has served as Treasurer
and Chief Financial Officer since August 1991. From August 1988 until August
1990, he served as Vice President and Treasurer of the Company. From August 1990
to August 1991, he was the Company's Vice President, 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.
THOMAS A. HILL, age 40, 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 bars of Ohio, Pennsylvania, Oklahoma, Texas, the District of Columbia and
the U.S. Supreme Court and is a member of the 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, of which Messrs. Blomen, Grose, Michaels,
Pinkerton, Bradley and Smits 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,
1998. The members of the Audit Committee prior to October 1, 1997 were Dr.
Ebinger and Messrs. Begley and Wegrich (former members of the Company's Board).
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 Stock Option
and Compensation Committees were merged effective October 1, 1997. Prior to that
time the members of the Stock Option Committee were Dr. Ebinger and Mr. Lombardy
and the members of the Compensation Committee were Dr. Ebinger and Messrs.
Wegrich and Lombardy.
The Board of Directions 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors included
Charles M. Lombardy, Jr., the Chief Executive Officer of the Company until
October 1, 1997.
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.
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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
which were filed late on behalf of Mr. Siegel pertaining to six transactions;
(c) two reports which were filed late by Lomak Petroleum, Inc. involving seven
transactions.
ITEM 11. EXECUTIVE COMPENSATION
The following tables sets forth the annual and long-term
compensation for the Company's Chief Executive Officer and the three highest
paid 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 $0 N/A -- $9,576
Chief Executive Officer; 1997 166,350 0 N/A -- 7,148
Director 1996 165,000 0 N/A -- 6,308
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 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,
$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. 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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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
<FN>
(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.
</TABLE>
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, which includes the exercised option to extend for
a three year period, unless earlier terminated pursuant to the terms of these
agreements. 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. 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. 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 purchase of the Company's common stock by NUON International
bv is exempt by separate agreement from the Change in Control Provisions
provided certain conditions exist. The Change in Control Provisions require the
payment of certain benefits to these executive officers upon the termination of
the 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, either of these three
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
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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 Messrs. Lombardy, Regan and Siegel 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 in the
Company. Also, at Messrs. Lombardy or Regan election, each 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. Mr. Siegel could elect to receive
thirty-six equal payments for a period of thirty-six 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.
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. The
Board voted during the year to discontinue the payment of any Director Fees to
any Board member.
ITEM 12. SECURITY OWNERSHIP
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 July 29,1998 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 of Percent
Nature and Address (1) Beneficial of
Of Beneficial Owner Ownership Class
-------------------- --------- -----
<S> <C> <C> <C>
Charles M. Lombardy, Jr........................... 665,242 Shares (2) (3) 3.98%
Garry Regan....................................... 669,524 Shares (2) 4.00%
Saul Siegel....................................... 177,500 Shares (2) 6) 1.06%
Leo J. M. J. Blomen............................... 0 Shares *%
Jos J. M. Smits................................... 0 Shares *%
NUON International bv............................. 5,747,127 Shares (4) 34.59%
Ralph L. Bradley.................................. 33,333 Shares (2) *%
Steven L. Grose................................... 8,971 Shares *%
C. Rand Michaels.................................. 8,015 Shares *%
John H. Pinkerton................................. 8,464 Shares *%
Lomak Petroleum, Inc.............................. 3,967,374 Shares (5) 23.88%
All Directors and executive officers as a group
(11 persons)...................................... 1,635,631 Shares (7) 9.58%
--------------------------------------------------------
</TABLE>
[FN]
Less than one percent*
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(1) The address of NUON International is Utrechtsweg 68, 6812 AH
Arnhem, The Netherlands. The address of Lomak Petroleum, Inc.
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 (67,000 shares) and
Bradley (33,333 vested shares) upon the exercise of immediately
exercisable stock options or warrants which they hold. Mr.
Bradley was granted 99,999 shares which vest over a three year
period.
(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 11,494,254 shares of Common Stock that may be
immediately acquired by NUON International bv 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) Does not include 134,000 shares of Common Stock that may be
acquired through the exercise of a warrant which may be issued
upon the purchase of Common Stock by NUON International bv (see
footnote 4 above).
(7) Includes 373,858 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 International, bv, Mr. Saul Siegel received cash payment of
$75,000 and a five year warrant to purchase 67,000 shares of Common Stock of the
Company at a price of $0.875 per share. In addition, upon the exercise, by NUON
International, bv, of its right to purchase additional shares of Common Stock of
the Company Mr. Siegel will receive an additional $75,000 and five year warrants
to purchase an additional 134,000 shares Common Stock of the Company at a price
of $0.875 per share.
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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 30, 1998 /s/ Charles M. Lombardy, Jr.
------------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer and Director
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