<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
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 Rule 14a-11(c) or Rule 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. LETTERHEAD]
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO BE HELD DECEMBER 13, 1999
To Our Stockholders:
The Annual Meeting of Stockholders (the "Meeting") of North Coast
Energy, Inc. (the "Company") will be held at Hilton Garden Inn, Twinsburg, Ohio,
on Monday, December 13, 1999 at 9:00 a.m., EST, to consider and act upon the
following:
1. The election of two (2) Directors whose term of office will expire in 2002;
2. To consider and act upon a proposal to authorize, approve and adopt the
North Coast Energy, Inc. 1999 Employee Stock Option Plan to replace a
similar plan that expired on August 17, 1999; and
3. 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 29, 1999 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, 1999
<PAGE> 3
NORTH COAST ENERGY, INC.
1993 Case Parkway
Twinsburg, Ohio 44087-2343
-------------------------
PROXY STATEMENT
MAILED ON NOVEMBER 30, 1999
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 13, 1999
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 Monday, December 13, 1999, 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 29, 1999 will be entitled to
vote at the Meeting or any adjournments thereof. As of that date, 5,599,600
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
73,386 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 .46 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
adoption of the North Coast Energy, Inc. 1999 Employee Stock Option Plan and
"FOR" the election of each of the two 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, the
affirmative vote of the majority of the shares cast affirmatively or negatively
at the meeting is required to approve the adoption of the Stock Option Plan.
Abstentions or broker non-votes will have no effect on the proposal to adopt the
Stock Option Plan.
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 22, 1999 by: (i) each
person known by the Company to own beneficially more than 5% of the 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.
Common Stock_____________________________
------------
<TABLE>
<CAPTION>
Nature and Address (1) (2) Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
-------------------------- -------------------- --------
<S> <C> <C>
Garry Regan 114,665 Shares 2.05%
Omer Yonel 5,000 Shares(3) *%
Jos J. M. Smits 0 Shares *%
Cok van der Horst 0 Shares *%
Carel W. J. Kok 0 Shares *%
S.F.E. Rosenbaum 0 Shares *%
NUON (1) 3,448,277 Shares 61.58%
Ralph L. Bradley 20,000 Shares(4) *%
C. Rand Michaels 1,619 Shares *%
John H. Pinkerton 1,693 Shares(5) *%
Range Resources Corporation (1) 831,975 Shares(6) 14.75%
Charles M. Lombardy, Jr. 62,478 Shares(7) 1.10%
Saul Siegel 100,280 Shares(8) 1.78%
All Directors and executive officers
as a group (12 persons) 161,107 Shares(9) 2.88%
</TABLE>
Less than one percent*
(1) The address of NUON is Utrechtseweg 68, 6812 AH Arnhem, The
Netherlands. The address of Range Resources Corporation is 125 State
Route 43, Hartville, Ohio 44632.
(2) Messrs. Leo J.M.J. Blomen, Saul Siegel and Dominic A. Visconsi
resigned as Directors on October 18, 1999.
(3) Includes 5,000 shares of Common Stock that Mr. Yonel could acquire
upon the exercise of immediately exercisable stock options that he
holds.
(4) Includes 20,000 shares of Common Stock, which Mr. Bradley could
acquire upon the exercise of stock options that he holds. The
remaining one third of options will vest in April 2000.
(5) John H. Pinkerton resigned as a Director on October 25, 1999.
(6) Includes 40,000 shares of Common Stock, which may be acquired upon the
exercise of certain warrants to purchase Common Stock.
(7) Charles M. Lombardy, Jr. resigned as a Director and Chief Executive
Officer on April 30, 1999, and received as a part of the consideration
for his separation from employment a ten year warrant to purchase
60,000 shares of the Company's Common Stock at $5.00 per share. The
share ownership figures for Mr. Lombardy includes 2,748 shares of
Common stock owned by a trust for which Mr. Lombardy is the trustee
and as to which he disclaims any beneficial ownership.
(8) Includes 40,200 shares of Common Stock, which could be acquired by Mr.
Siegel upon the exercise of immediately exercisable warrants which he
holds.
(9) Includes 37,134 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.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
Classes II and III consisting of two Directors and Class I consisting of three
members effective as of the Annual Meeting. One class of directors is generally
elected at each Annual Meeting to serve a three-year term. At the 1999 Annual
Meeting, stockholders will be asked to elect two Directors whose terms will
expire at the 2002 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.
NOMINEES TO TERM EXPIRING IN 2002
Name Age Principal Occupation and History
---- --- --------------------------------
C. Rand Michaels (1) 62 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.
Cok van der Horst (1) 54 Mr. van der Horst was appointed to the
Board of Directors on October 18, 1999,
to fill the unexpired term of Mr.
Charles M. Lombardy, Jr. who resigned
effective April 1999. Mr. van der Horst
is the Director, NUON East and North
Holland, where he is in charge of
finance, economic and technical
affairs, information technology,
personnel and organization and
activities in the national energy
market. Prior to joining NUON in
January of 1993, Mr. van der Horst was
chairman of the board of PEB, the
energy distribution company of the
province of Friesland (a regional
government in the Netherlands). At PEB
he was responsible for the financial
and economical policy.
DIRECTORS CONTINUING IN OFFICE
Jos J.M. Smits (2) 50 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 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.
4
<PAGE> 7
Name Age Principal Occupation and History
---- --- --------------------------------
Ralph L. Bradley (2) 58 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.
Omer Yonel (3) 36 Mr. Yonel was appointed Executive Vice
President-Corporate Development in
January 1999, in May 1999 was promoted
to Chief Operating Officer and in
October 1999 was promoted to Chief
Executive Officer. He was appointed to
the Board of Directors on October 18,
1999, to fill the unexpired term of Dr.
Leo J.M.J. Blomen. Mr. Yonel has ten
years' experience in project
engineering management in the European
oil and gas industry. Prior to joining
NUON in January 1998, he was a project
manager for the construction of
co-generation plants at Schelde
Engineering & Contractors bv. Previous
to his service with Schelde, Mr. Yonel
held various project engineering,
project management sales positions at
ABB Lummus, an Asea Brown Boveri
subsidiary that provides engineering
services to chemical, petrochemical,
petroleum refining, oil and gas and
other industries.
Garry Regan (3) 50 Mr. Regan had 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, Inc., a
wholly owned subsidiary of the Company
and a registered broker-dealer.
Carel W.J. Kok (3) 32 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.
Mr. Kok currently serves as Chairman of
the Board of Directors of the Company.
(1) Nominee for election. Term as a Director expires in 2002. (Class II)
(2) Term as a Director expires in 2000. (Class III)
(3) Term as a Director expires in 2001. (Class I)
5
<PAGE> 8
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, of which Messrs. Michaels, Bradley and van der
Horst are currently members, oversees the accounting functions of North Coast,
including matters related to the appointment and activities of North Coast's
auditors. The Audit Committee met twice during the year ended March 31, 1999.
The Stock Option and Compensation Committee, of which Messrs. Bradley,
Smits and Kok are members, reviews and makes recommendations concerning the
salaries of North Coast's executive officers, reviews and makes recommendations
concerning the Company's stock option plan and stock bonus plan and administers
North Coast's profit sharing plan. The Stock Option and Compensation Committee
met once during the year ended March 31, 1999.
The Executive Committee, formerly consisting of Messrs. Blomen, Siegel,
Kok, Rosenbaum and Regan, was eliminated by resolution of the Board adopted on
October 18, 1999. The Executive Committee met once during the year ended March
31, 1999.
The Board of Directors of the Company held seven meetings during the
year ended March 31, 1999. 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. Pinkerton.
UNTIMELY BENEFICIAL OWNERSHIP REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, 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, 1999, 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 reports which were filed late on behalf of Messrs. Kok and Visconsi
each pertaining to one transaction.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table 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 1999.
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Number of
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. 1999 $178,050 $0 N/A -- $11,654
Former Chief 1998 173,740 0 N/A -- 9,576
Executive Officer 1997 166,350 0 N/A 7,148
Garry Regan 1999 $178,050 0 N/A -- $10,694
President; Director 1998 173,740 0 N/A -- 8,616
1997 166,350 0 N/A -- 6,188
Saul Siegel 1999 $190,223 0 N/A -- $ 4,451
Former Chief Executive Officer 1998 102,733 0 N/A -- 0
</TABLE>
No Named Executive Officer received personal benefits or perquisites
during fiscal year 1999 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
1999, 1998, and 1997 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, $8,844, $6,766, and $4,338
and Mr. Regan, $8,844, $6,766, and $4,338 for fiscal years 1999, 1998
and 1997, respectively. Mr. Siegel was not eligible under the terms of
the plan for every year presented except 1999, $4,451.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table summarizes options exercised during fiscal 1999 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 0 0 $ 0 $ 0
Garry Regan -- 0 0 0 0 0
Saul Siegel -- 0 0 0 0 0
</TABLE>
7
<PAGE> 10
(1) Based upon the closing bid price of a share of Common Stock as reported
on the NASDAQ system on March 31, 1999. No options were in the money at
March 31, 1999.
Employment Contracts. Mr. Lombardy had, and Mr. Regan has, an
employment agreement running through May 3, 2001, unless terminated earlier
under the terms of the agreement. The agreement provides for base annual
compensation of $178,623 to Mr. 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. The agreements provide 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 North Coast or otherwise interfere with North Coast's business.
The Board of Directors conditionally approved the award of an
employment contract with Mr. Siegel at its meeting on March 16, 1998, with the
terms and conditions to be substantially the same as those contained in the
employment agreements with Messrs. Lombardy and Regan. The agreement was to
commence May 3, 1998, for a three-year period, but was referred to the executive
committee for review and final approval. Mr. Siegel received a base annual
compensation of $182,230, which also included payment instead of health and life
insurance benefits. The executive committee did not approve the contract, and on
October 18, 1999, Mr. Siegel resigned and executed a separation agreement that
disclaimed any rights under the purported employment agreement.
Mr. Regan's employment agreement contains provisions addressing a
possible change in control of North Coast. The purchase of Common Stock by NUON
was exempted from the change of control provision by a separate agreement. The
change in control provisions provide conditions which continue to exist. The
change in control provisions require the payment of benefits to Mr. Regan upon
the termination of his employment, other than for good cause, after the
occurrence of a change in control of North Coast. A "change in control of North
Coast" includes a change in the ownership of North Coast's securities, which
would be required to be reported as a change in control in a proxy statement
filed under the Exchange Act, North Coast's ceasing to have a class of equity
securities registered under Section 12 of the Exchange Act, or the acquisition
by any person or entity of 50% or more of the outstanding shares of Common Stock
or its equivalent, through the acquisition of a combination of Preferred and
Common Stock, in voting power of North Coast's Common Stock.
Under the change in control provisions, if Mr. Regan remains in the
employ of North Coast following the date of the occurrence of a change in
control of North Coast and his employment is subsequently terminated other than
for good cause, he would be entitled to receive a lump sum payment from North
Coast, regardless of whether the executive officer continues in the employ of
North Coast. After the occurrence of a change in control of North Coast,
"termination" includes 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. 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 North Coast, regardless of whether such change in control is approved
by the Board of Directors and/or stockholders of North Coast.
8
<PAGE> 11
Under the change in control provisions, in the event of a termination
of Mr. Regan's employment after a change in control of North Coast, other than
for good cause, he 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 of North Coast, 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 North Coast 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 North Coast, even though such an attempt might be
beneficial to North Coast and its stockholders. Accordingly, stockholders of
North Coast 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 of Directors voted to
discontinue the payment of any director's fees to any board member. However, the
Board granted options to purchase 20,000 shares of Common Stock at $4.375 per
share to Ralph L. Bradley during the year ending March 31, 1999. These options
vest over a three-year period.
CERTAIN TRANSACTIONS
North Coast believes that the terms of the following transactions were
as favorable to North Coast as could have been obtained from unaffiliated third
parties. All future transactions between North Coast and its affiliates will be
on terms no less favorable to North Coast 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.
North Coast currently manages 28 Drilling Programs, and each Drilling
Program has been conducted as a separate limited partnership with North Coast
serving as managing general partner of each. North Coast contributes the drill
sites to each Drilling Program and agrees to contribute all tangible equipment
necessary to drill, complete and produce each well, as well as organizational
and syndication costs of each Drilling Program. Drilling programs raised $3.5
million during fiscal 1999, $2.7 million during fiscal 1998 and $3.0 million
during fiscal 1997.
Accounts receivable from affiliates consist primarily of receivables
from the partnerships managed by North Coast and are for administrative fees
charged to the partnerships and to reimburse North Coast for amounts paid on
behalf of the partnerships. Significantly all of North Coast's revenues, other
than oil and gas production revenue, are generated from or as a result of the
organization and management of oil and gas partnerships sponsored by North
Coast. During the year ended March 31, 1999, North Coast acquired limited
partnership interests in oil and gas drilling programs that it had sponsored at
a cost of approximately $450,000.
Pursuant to the terms of a stock purchase agreement by and between
North Coast and NUON dated August 1, 1997, North Coast agreed to sell up to
1,149,426 shares of Common Stock each year over a three year period. NUON
purchased 1,149,426 shares of North Coast Common Stock on September 4, 1997,
another 1,149,426 shares on September 30, 1998, and
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1,042,125 shares on September 30, 1999. All shares were purchased at a price of
$4.375 per share.
In connection with the sale of shares of Common Stock on September 30,
1998 and 1999 to NUON, Mr. Siegel received cash payment of $75,000 and five-year
warrants to purchase 26,800 shares of Common Stock at a price of $4.375 per
share. Mr. Siegel acted as a consultant to assist North Coast in finding a
partner in the energy industry. In addition, during fiscal year 1999 a company
of which Mr. Siegel is a principal repaired two compressors for North Coast at a
cost of $51,000.
Effective April 30, 1999, Charles M. Lombardy, Jr., the chief executive
officer of North Coast, was paid $370,000 and was granted 60,000 warrants at
$5.00 per share in exchange for canceling his employment agreement and for his
resignation as a director and officer. NUON also agreed to purchase Mr.
Lombardy's Common Stock at $4.375 per share; which directly reduced the amount
of Common Stock NUON was required to purchase in September, 1999 under its
August 1, 1997 stock purchase agreement.
Effective October 18, 1999, Saul Siegel resigned as an officer and
Director of the Company and entered into a separation agreement that provided
for the extension of the exercise period under three sets of warrants that had
been issued to Mr. Siegel in partial consideration of the finder's service he
provided in connection with the Stock Purchase Agreement between NUON
International Projects, b.v. and the Company. By the terms of the separation
agreement the exercise period for the 1997 and 1998 warrants was extended to
September 30, 2004. The agreement also provided for the reimbursement of certain
expenses that Mr. Siegel had incurred for the benefit of the Company.
PROPOSAL TO RATIFY THE COMPANY'S STOCK OPTION PLAN
At the Annual Meeting, the stockholders will be asked to consider and
act upon a proposal to authorize, approve and adopt the North Coast Energy, Inc.
1999 Employee Stock Option Plan (the "Plan"), providing for the granting to
selected key employees of the Company and its subsidiary corporations of options
to purchase not more than 400,000 shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock"). The Board of Directors of the
Company has adopted the Plan subject to approval by the stockholders of the
Company. A summary of the Plan is provided below. This summary description is
qualified in its entirety by reference to the text of the Plan which is attached
as Appendix A to this Proxy Statement.
BACKGROUND
In 1989, the Company adopted its original Stock Option Plan which
expired by its terms on August 17, 1999 (the "Old Plan"). Of the original
options representing 92,000 shares of common stock (post-reverse split)
available for issuance under the plan, 4,670 were granted and exercised, 16,420
were granted and remain outstanding, and the balance of 70,910 have expired with
the termination of the Old Plan. The Company's Board of Directors approved the
North Coast Energy, Inc. 1999 Employee Stock Option Plan, subject to stockholder
approval, on October 18, 1999. The terms of the Plan are essentially identical
to the original stock option plan with the exception of changing the composition
of the committee and the number of shares available to the Plan. Since approval
by the Board, options representing 5,715 shares have been conditionally granted
under the Plan.
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The Plan provides for the issuance of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code (the "Code"), and
nonqualified stock options, for federal income tax purposes, to key employees.
The Plan also provides for the granting of stock appreciation rights that give
the employee the right to elect a payment equal to the appreciation of the value
of the Common Stock over the option price. Payment of the stock appreciation
right may be made in cash, Common Stock of the Company or a combination thereof.
PURPOSE OF THE PLAN
The purpose of the Plan is to permit the Company to attract or retain
key employees and/or to provide additional incentive to such key employees of
the Company and its subsidiaries as may be designated for participation in the
Plan by encouraging them to acquire a new or an additional share ownership in
the Company, thus increasing their proprietary interest in the Company's
business and providing them with an increased personal interest in the Company's
continued success and progress. These objectives will be promoted through the
grant of options to acquire shares of the Company's Common Stock pursuant to the
terms of the Plan.
PLAN ADMINISTRATION
The Plan is administered by the Stock Option and Compensation Committee
of the Board of Directors of the Company (the "Committee"). The Committee will
be composed of no fewer than two members of the Board of Directors of the
Company who will be designated by the Board of Directors. The Committee will be
constituted such that each member will be (a) a "disinterested person" within
the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as
amended (the "34 Act") and (b) an "outside director" within the meaning of
Section 162(m)(4) of the Code. No person may be appointed to the Committee who
was eligible to receive an option or a stock appreciation right under the Plan
or any other plan of the Company or any of its subsidiary corporations during
the one-year period immediately preceding his appointment to the Committee.
Members of the Committee receive no additional compensation for their service on
the Committee.
The Committee is authorized: (i) to select the key employees to whom
options may be granted; (ii) to determine the number of shares of Common Stock
subject to any option; (iii) to determine the time or times when options will be
granted; (iv) to determine the option price of Common Stock subject to an
option; (v) to determine the time or times when each option may be exercised;
(vi) to determine at the time of the granting of an option under the Plan
whether and to what extent such option is an incentive stock option entitled to
the benefits of Section 422 of the Code; (vii) to determine whether stock
appreciation rights shall be made part of any option granted, for the method of
valuing the stock appreciation rights and whether the stock appreciation rights
may be exercised in lieu of or in addition to the related option; (viii) to
prescribe the form of the option agreements to be entered into under the Plan
and to establish such other provisions of the option agreements not contrary to
the terms and conditions of the Plan or, where the option is an incentive stock
option, of Section 422 of the Code as the Committee may deem necessary or
desirable; (ix) to adopt, amend and rescind such rules and regulations as, in
the Committee's opinion, may be advisable in the administration of the Plan; and
(x) to construe and interpret the Plan, the rules and regulations and the
instruments
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evidencing options granted under the Plan and to make all of the determinations
deemed necessary or advisable for the administration of the Plan.
PARTICIPATION IN THE PLAN
Options may be granted from time to time in the discretion of the
Committee only to such key employees of the Company or of a subsidiary
corporation of the Company whose initiative and efforts contribute or may be
expected to contribute to the Company's continued growth and future success,
including key employees who may also be members of the Board of Directors or
officers. Members of the Committee shall not be eligible to participate in the
Plan, or to receive options under it while serving on the Committee. The
Committee may grant more than one option, with or without stock appreciation
rights, to the same employee. No option may be granted to any employee during
any period of time when he is on leave of absence.
SHARES SUBJECT TO THE PLAN
The shares to be issued upon the exercise of options granted under the
Plan will be shares of Common Stock, par value $.01 per share, of the Company.
The aggregate number of shares of Common Stock for which options may be granted
under the Plan is 400,000. Either treasury or authorized and unissued shares, or
both, in such amount or amounts, within the maximum limits of the Plan, as the
Board of Directors shall from time to time determine, may be so issued. All
shares which are the subject of any lapsed, expired or terminated options may be
made available for re-offering under the Plan to any eligible employee. In the
event a stock appreciation right is granted and such stock appreciation right is
thereafter exercised in whole or in part, then such option or the portion
thereof to which the duly exercised stock appreciation right relates shall be
deemed to have been exercised. The shares of Common Stock which otherwise would
have been issued upon exercise of such option may be made available for
re-offering under the Plan to any eligible employee.
In the event that subsequent to the date of adoption of the Plan by the
Board of Directors the outstanding shares of Common Stock should, as a result of
a stock split, stock dividend, combination or exchange of shares, exchange for
other securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or other such change, be increased or decreased
or changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation, then (i) there
shall automatically be substituted for each share of Common Stock subject to an
unexercised option (in whole or in part) granted under the Plan and each share
of Common Stock available for additional grants of options under the Plan the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be changed or for which each such share
of Common Stock shall be exchanged, (ii) the option price per share of Common
Stock or unit of securities shall be increased or decreased proportionately so
that the aggregate purchase price for the securities subject to the option shall
remain the same as immediately prior to such option, and (iii) the Board shall
make such other adjustments to the securities subject to options and the
provisions of the Plan and option agreements as may be appropriate and
equitable. Any such adjustment may provide for the elimination of fractional
shares.
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OPTION PROVISIONS
Option Price. The option price per share which is the subject of an
incentive stock option under the Plan will be determined by the Committee at the
time of grant, but may not be less than 100% of the fair market value of a share
of Common Stock on the date such an option is granted. If the employee to whom
an option is granted, however, is at the time of such grant an owner of more
than 10% of the total combined voting power of all classes of the stock of the
Company (a "substantial shareholder"), the option price per share will not be
less than 110% of the fair market value of the shares on the date an option is
granted. The option price per share under each option granted pursuant to the
Plan which is not an incentive stock option will be determined by the Committee
at the time of grant and may be above or below the fair market value of the
Company's Common Stock on the date such option is granted. Notwithstanding the
foregoing, no option may be granted at an option price of less than 50% of the
fair market value of the Company's shares of Common Stock on the date such
option is granted.
Period of Option. The Committee determines when each option is to
expire, but no option may be exercisable for a period of more than ten years
from the date upon which the option is granted. No incentive stock option
granted to an employee who is a substantial shareholder at the time of the grant
of the option may be exercisable after the expiration of the five years from the
date of grant of the option.
Limitations on Exercise and Transfer of Options. Only the key employee
to whom the option is granted may exercise the option except where a guardian or
other legal representative has been duly appointed for such employee, and except
as otherwise provided in the case of such employee's death. No option is
transferable except by the Last Will and Testament of the employee to whom it is
granted, or, if the employee dies intestate, by the applicable laws of descent
and distribution or, subject to approval by the Committee, for transfers to
family members or charitable institutions. No option may be pledged or
hypothecated, nor may any option be subject to execution, attachment or similar
process.
Conditions Governing Exercise of Options. The Committee may, in its
absolute discretion, either require that, prior to the exercise of any option,
the optionee must have been an employee for a specified period after the date of
such option, or make any option immediately exercisable. Each option will be
subject to such additional restrictions or conditions with respect to the right
to exercise and the time and method of exercise as the Committee may prescribe.
Upon satisfaction of any such conditions, the option may be exercised in whole
or in part at any time during the option period, but this rate of exercise shall
be limited to whole shares, unless the Committee determines otherwise. Options
are exercisable by the optionee giving written notice to the Company of the
optionee's intention to exercise the same accompanied by full payment of the
purchase price in cash or, with the consent of a Committee, in whole or in part
in shares of Common Stock having a fair market value on the date the option is
exercised equal to that portion of the purchase price for which payment in cash
is not made.
Termination of Employment. If an optionee ceases to be an employee of
the Company and its subsidiaries, his option shall, unless otherwise provided in
the option agreement between the optionee and the Company, terminate on the date
he ceases to be so employed and neither he nor any other person will have any
rights after the date he ceases to be so employed to exercise all or any part of
the option. If, however, the cessation of employment is the result
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of an optionee's death, then the option may be exercised within twelve months
after the optionee's death by the optionee's estate or the person designated in
the optionee's Last Will and Testament or to whom transferred by the applicable
laws of descent and distribution. Notwithstanding the foregoing, in no event
will any option be exercisable after the expiration of the option period and not
to any greater extent than the optionee would have been entitled to exercise the
option at the time of his death.
In the event an employee of the Company or one of its subsidiaries is
granted a leave of absence by the Company or such a subsidiary to enter military
service or because of sickness, his employment with the Company or such
subsidiary shall not be considered as terminated and he shall be deemed an
employee of the Company or such subsidiary during such leave of absence or any
extension thereof granted by the Company or such subsidiary.
Limitations on Grant of Incentive Stock Options. During the calendar
year in which any incentive stock options granted under the Plan first become
exercisable by an optionee, the aggregate fair market value of the shares of
Common Stock which are subject to such incentive stock options (determined as of
the date the incentive stock options were granted) may not exceed the sum of
$100,000. Options which are not designated as incentive stock options will not
be subject to the limitation described in the preceding sentence and will not be
counted when applying such limitation.
Prohibition of Alternative Options. It is intended that key employees
may be granted, simultaneously or from time to time "incentive stock options"
under Section 422 of the Code, or other stock options, but no key employee shall
be granted alternative rights in incentive stock options and other stock options
so as to prevent options granted as incentive stock options under the Plan from
qualifying as such within the meaning of Section 422 of the Code.
Stock Appreciation Rights. A key employee may be awarded, either at the
time of grant or subsequently, the right to elect alternative payment in lieu of
exercising all or a portion of the options granted to him. Stock appreciation
rights must be specifically granted upon such terms and conditions as are
specified by the Committee, if the Company is the employer of the key employee,
or by the Board of Directors of a subsidiary corporation, subject to the
Committee's approval, if such a subsidiary corporation is the employer of the
key employee. No optionee shall be entitled to such rights solely as a result of
the grant of an option to him. Such right, if granted, may be exercised with
respect to all or any portion of the option to which it applies. Stock
appreciation rights, if granted, will be exercisable only during the periods
beginning on the third business day following the release of a summary statement
of the Company's quarterly or annual sales and earnings and ending on the
twelfth business day following said date. Any stock appreciation right shall
provide that an option holder will have the right to receive an amount equal to
100% of the excess, if any, of the fair market value of the shares of Common
Stock covered by the option, determined as of the date of exercise of the stock
appreciation right by the Committee, over the option price. Such amount will be
payable either by the Company or the subsidiary corporation, whichever is the
employer of the key employee, in one or more of the following manners, as
determined by the Committee: (i) in cash; (ii) in fully paid shares of Common
Stock having the fair market value equal to such amount; or (iii) in a
combination of a class of Common Stock.
In no event may any optionee exercise any stock appreciation rights
granted under the Plan unless such optionee is then permitted to exercise the
option or the portion thereof with respect to which such stock appreciation
rights relate and the fair market value of shares of
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Common Stock covered by the option exceeds the option price of such shares of
Common Stock. Upon the exercise of any stock appreciation rights, the option, or
that portion thereof to which such stock appreciation rights relate, will be
canceled and the optionee must surrender such option for cancellation and
reissuance, if appropriate. The terms of any stock appreciation rights granted
under the Plan will be incorporated in the option agreement which covers the
option with respect to which the stock appreciation rights are granted, and will
be such terms (not inconsistent with the Plan) as the Committee may prescribe.
The granting of an option or stock appreciation right will impose no obligation
upon the optionee to exercise such option or right and the Company's obligation
to satisfy the stock appreciation rights will not be funded or secured in any
manner.
AMENDMENTS TO THE PLAN
The Committee is authorized to interpret the Plan and from time to time
adopt any rules and regulations for carrying out the Plan that it may deem
advisable. Subject to the approval of the Board of Directors of the Company, the
Committee may at any time amend, modify, suspend or terminate the employee plan.
In no event, however, without the approval of shareholders, may any action of
the Committee or the Board of Directors result in: (i) amending, modifying or
altering the eligibility requirements; (ii) increasing or decreasing, except as
set forth in "Shares Subject to the Plan" above, the maximum number of shares as
to which options may be granted; (iii) decreasing the minimum option price per
share which options may be granted under the Plan; (iv) extending either the
maximum period during which an option is exercisable or the date on which the
Plan shall terminate; (v) changing the requirements relating to the Committee;
or (vi) making any other change which would cause any options granted under the
employee plan as incentive stock options not to qualify as such options within
the meaning of Section 422 of the Code, except to conform the employee plan and
the option agreements to changes in the Code or governing law.
TERMINATION OF THE PLAN
The Plan will terminate on October 18, 2009. All options outstanding at
the time of termination of the Plan will continue in full force and effect
according to their terms and the terms and conditions of the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. With respect to an incentive stock option, the
optionee will realize no income for federal income tax purposes upon the grant
or exercise of the option, but the difference between the option price and the
fair market value of the shares at the date of issuance of the shares to the
employee (following exercise of the incentive stock option) will constitute an
item of tax preference which may be subject to the alternative minimum tax.
If no disposition of shares acquired through the exercise of incentive
stock options is made by the optionee within one year after the issuance of the
shares to him, or within two years after the grant of the option, any amount
realized by the optionee in the event of a sale of the shares which is in excess
of his cost will be taxed as a long-term capital gain.
The Company is entitled to no deduction for federal income tax
purposes, either in connection with the granting of an incentive stock option or
the issuance of shares upon exercise. If, however, the optionee disposes of his
shares within the one year or two year
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periods mentioned above, he will be required to include in his income, as
compensation, the excess of the fair market value of the shares at the date of
issuance or, in certain cases, if less, the amount realized on disposition, over
the option price, and the Company will be entitled to a business expense
deduction in the year of disposition of the shares equal to any amount which the
optionee is required to treat as compensation income.
Nonqualified Stock Options. With respect to a nonqualified stock
option, an optionee will not realize income upon the granting of such option;
however, any year in which an optionee who is not an officer, director or owner
of 10% or more of the Company's Common Stock, exercises a part or all of such
option, the excess, if any, of the fair market value of the shares of Common
Stock at the date of exercise over the option price will be taxed as
compensation at ordinary income tax rates, and the Company will be entitled to a
tax deduction for a like amount in the same year. When an optionee who is an
officer, director or owner of 10% or more of the Company's Common Stock,
exercises a part or all of such option, the optionee will not realize income at
the time of exercise unless he makes the election discussed hereinafter, but the
excess, if any, of the fair market value of the shares on the date six months
after the date of exercise over the option price will be taxed at ordinary
income tax rates at that time, and the Company will be entitled to a tax
deduction for a like amount. The optionee may elect, within thirty days after
issuance of shares upon exercise of the option (which the Internal Revenue
Service may assert occurs on the date of exercise), to treat the excess, if any,
of the fair market value of the shares on the date of issuance over the option
price as ordinary income at that time, and the Company will be entitled to a tax
deduction for a like amount. If this election is made, no additional income will
be realized by the optionee on the date six months after the date of issuance.
RECOMMENDATION; REQUIRED VOTE
The Board of Directors recommends that the stockholders vote FOR the
proposal to ratify, confirm and adopt the Company's 1999 Employee Stock Option
Plan. The affirmative vote of the holders of shares entitled to exercise a
majority of the voting power of the Company and present at the Annual Meeting,
in person or by proxy, is required to approve and adopt the Plan.
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 Hausser + Taylor 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.
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
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held in 2000 must do so no later than April 10, 2000, which is 120 days in
advance of the anticipated mailing date of the proxy materials for the 2000
Annual Stockholders Meeting. To be eligible for inclusion in the 2000 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
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APPENDIX A
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NORTH COAST ENERGY, INC.
1999 EMPLOYEE STOCK OPTION PLAN
North Coast Energy, Inc. (the "Company") hereby adopts a stock option plan for
eligible employees of the Company and its subsidiary corporations pursuant to
the following terms and provisions.
1. PURPOSE OF THE PLAN. The purpose of this plan (the "Plan") is to provide
additional incentive to such key employees of the Company and its subsidiary
corporations as may be designated for participation herein by encouraging them
to acquire a new or an additional share ownership in the Company, thus
increasing their proprietary interest in the Company's business and providing
them with an increased personal interest in the Company's continued success and
progress and to attract and retain individuals with experience and/or ability
for the Company. These objectives will be promoted through the grant of options
to acquire shares of the Company's common stock pursuant to the terms of the
Plan. It is intended that eligible employees may be granted, simultaneously or
from time to time, "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or other stock options, but no
provision of the Plan is intended or shall be construed to grant employees
alternative rights in incentive stock options and other stock options so as to
prevent options granted as incentive stock options under the Plan from
qualifying as such options within the meaning of Section 422 of the Code. In
this Plan, the terms "employees of the Company", "employment by the Company",
and "in the employ of the Company", shall be deemed to include employees of,
employment by, and in the employ of, a "subsidiary corporation" or "parent
corporation" of the Company, as those terms are defined in Section 424 of the
Code.
2. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective as of October 18,
1999, the date of adoption by the Board of Directors of the Company, subject to
approval by holders of shares representing a majority of the outstanding voting
stock of the Company present at a meeting of stockholders called for that
purpose.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Stock
Option and Compensation Committee of the Board of Directors of the Company (the
"Committee") as appointed from time to time by the Board of Directors from among
its members, none of whom shall be eligible to be granted stock options under
the Plan and each of whom shall be (a) a "disinterested person" within the
meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as
amended (the "34 Act") and (b) an "outside director" within the meaning of
Section 162(m)(4) of the Code.
Subject to the terms and conditions of the Plan, the Committee shall be
authorized:
(a) To select the key employees to whom options
may be granted;
(b) To determine the number of shares of Common
Stock to be covered by any option;
(c) To determine the time or times when options
will be granted;
(d) To determine the time or times when each
option may be exercised;
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(e) To determine at the time of grant of an option
under the Plan whether and to what extent such option
is an incentive stock option entitled to the benefits
of Section 422 of Code;
(f) To determine whether stock appreciation rights
shall be made part of any option grant to any key
employee employed by the Company and to approve such
stock appreciation rights made part of any option
grant to any key employee employed by any subsidiary
corporation of the Company pursuant to Section 8
hereof;
(g) To prescribe the form of the option agreements
to be granted under the Plan; and
(h) To establish such other provisions of the
option agreements not contrary to the terms and
conditions of the Plan or, where the option is an
incentive stock option, of Section 422 of the Code as
the Committee may deem necessary or desirable.
4. EMPLOYEES ELIGIBLE FOR OPTIONS. Options may be granted from time to time in
the discretion of the Committee only to such key employees of the Company or of
a subsidiary corporation of the Company as may be designated by the Committee
whose initiative and efforts contribute or may be expected to contribute to the
Company's continued growth and future success, including key employees who may
also be members of the Board of Directors or officers, subject to the
restrictions herein contained. Members of the Committee shall not be eligible to
participate in this Plan, or to receive options under it, while serving on the
Committee. The Committee may grant more than one option, with or without stock
appreciation rights, to the same employee. No option shall be granted to any
employee during any period of time when he is on leave of absence.
5. SHARES SUBJECT TO THE PLAN. The shares to be issued upon the exercise of
options granted under the Plan shall be shares of common stock, par value $.01
per share of the Company ("Common Stock"). Either treasury or authorized and
unissued shares of Common Stock, or both, in such amount or amounts, within the
maximum limits of the Plan, as the Board of Directors shall from time to time
determine, may be so issued. All shares of Common Stock which are the subject of
any lapsed, expired or terminated options may be made available for reoffering
under the Plan to any eligible employee. In the event a stock appreciation right
is granted in conjunction with an option pursuant to Section 8 and such stock
appreciation right is thereafter exercised in whole or in part, then such option
or the portion thereof to which the duly exercised stock appreciation right
relates shall be deemed to have been exercised. The shares of Common Stock which
otherwise would have been issued upon exercise of such option may be made
available for reoffering under the Plan to any eligible employee.
Subject to the provisions of the next succeeding paragraph of this Section 5,
the aggregate number of shares of Common Stock for which options may be granted
under the Plan shall be four hundred thousand (400,000) shares of Common Stock.
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In the event that subsequent to the date of adoption of the Plan by the Board of
Directors the authorized number of shares of Common Stock should, as a result of
a stock split, stock dividend, combination or exchange of shares, exchange for
other securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or other such change, be increased or decreased
or changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation, then (i) there
shall automatically be substituted for each share of Common Stock subject to an
unexercised option (in whole or in part) granted under the Plan and each share
of Common Stock available for additional grants of options under the Plan the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be changed or for which each such share
of Common Stock shall be exchanged, (ii) the option price per share of Common
Stock or unit of securities shall be increased or decreased proportionately so
that the aggregate purchase price for the securities subject to the option shall
remain the same as immediately prior to such event, and (iii) the Board shall
make such other adjustments to the securities subject to options and the
provisions of the Plan and option agreements as may be appropriate and
equitable. Any such adjustment may provide for the elimination of fractional
shares.
6. OPTION PROVISIONS.
(a) OPTION PRICE. The option price per share of Common Stock which is the
subject of an incentive stock option under the Plan shall be determined by the
Committee at the time of grant but shall not be less than one hundred percent
(100%) of the fair market value of the Company's shares of Common Stock on the
date such an option is granted; provided, however, that if the employee to whom
an option is granted is at the time of the grant of the option an owner as
defined in Section 425(d) of the Code of more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
subsidiary corporation (a "Substantial Shareholder") the option price per share
of Common Stock shall be determined by the Committee from time to time but shall
never be less than one hundred ten percent (110%) of the fair market value of
the Company's shares of Common Stock on the date such an option is granted. The
option price per share of Common Stock under each option granted pursuant to the
Plan which is not an incentive stock option shall be determined by the Committee
at the time of grant but shall not be less than fifty percent (50%) of the fair
market value of the Company's shares of Common Stock on the date such option is
granted. Such fair market value shall be determined in accordance with
procedures to be established by the Committee. The day on which the Committee
approves the granting of an option shall be considered the date on which such
option is granted.
(b) PERIOD OF OPTION. The Committee shall determine when each option is to
expire but no option shall be exercisable for a period of more than ten (10)
years from the date upon which the option is granted; provided, however, no
incentive stock option granted to an employee who is a Substantial Shareholder
at the time of the grant of such option shall be exercisable after the
expiration of five (5) years from the date of the grant of the option.
(c) LIMITATION ON EXERCISE AND TRANSFER OF OPTIONS. No option granted hereunder
shall be transferable except (i) by the Last Will and Testament of the employee
to whom it is granted or, if the employee dies intestate, by the applicable laws
of descent and distribution, or (ii) subject to the prior approval of the
Committee, for transfers to "family members" (as defined below) or charitable
institutions (subject to such limitations as the Committee in its discretion
20
<PAGE> 23
may impose, if necessary, to comply with applicable securities laws), in each
case subject to the condition that the Committee be satisfied that such transfer
is being made by the participant for estate planning, tax planning or donative
purposes and no consideration (other than nominal consideration or interests in
a family partnership, family corporation or other family-related entity) is
received by the participant therefor. Except as provided above, during the
lifetime of a participant, awards hereunder are exercisable only by, and payable
only to, the participant.
For purposes hereof, a "family member" shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the participant's household (other than a tenant or employee) a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the participant) control the management of
assets, and any other entity in which these persons (or the participant) own
more than fifty percent of the voting interests. No option granted hereunder may
be pledged or hypothecated, nor shall any such option be subject to execution,
attachment or similar process.
(d) EMPLOYMENT REQUIRED BEFORE EXERCISE OF OPTION. The Committee may, in its
absolute discretion, require that prior to the exercise of all or any part of
any option granted hereunder, the optionee shall have remained in the employ of
the Company or any subsidiary corporation for a specified period after the date
of such option, but always subject to the right of the Company or any such
subsidiary corporation to terminate his employment during such period, or the
Committee may determine to make any option granted hereunder immediately
exercisable. Each option shall be subject to such additional restrictions as to
the time and method of exercise as shall be prescribed by the Committee. Upon
completion of the required period or periods of employment, if any, the option
or the appropriate portion thereof may be exercised in whole or in part from
time to time during the option period, but this right of exercise shall be
limited to whole shares. Options shall be exercised by the optionee giving
written notice to the Company of intention to exercise the same accompanied by
full payment of the purchase price in cash or, with the consent of the
Committee, in whole or in part through the delivery of shares of Common Stock
having a fair market value on the date the option is exercised equal to that
portion of the purchase price for which payment in cash is not made.
(e) TERMINATION OF EMPLOYMENT. If the optionee ceases to be an employee of the
Company or one of its subsidiary corporations, his option shall, unless extended
by the Committee on or before his date of termination of employment, terminate
on the effective date of termination of his employment and neither he nor any
other person shall have any right after such date to exercise all or any part of
his option. If, however, the cessation of employment is because of such
optionee's death, then the option may be exercised within twelve (12) months
after the optionee's death by the optionee's estate or the person designated in
the optionee's Last Will and Testament or to whom transferred by the applicable
laws of descent and distribution. Notwithstanding the foregoing, in no event
shall any option be exercisable after the expiration of the option period and
not to any greater extent than the optionee would have been entitled to exercise
the option at the time of his death.
In the event an employee of the Company or one of its subsidiaries is granted a
leave of absence by the Company or such subsidiary to enter military service or
because of sickness, his employment with the Company or such subsidiary shall
not be considered as terminated and he shall be deemed an employee of the
Company or such subsidiary during such leave of absence or any extension thereof
granted by the Company or such subsidiary.
21
<PAGE> 24
(f) LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS. The aggregate fair market
value, determined as of the date an incentive stock option is granted, of the
shares of Common Stock for which any employee may be granted incentive stock
options which are exercisable for the first time in any calendar year shall not
exceed One Hundred Thousand Dollars ($100,000).
7. AMENDMENTS TO PLAN. The Committee is authorized to interpret the Plan and
from time to time adopt any rules and regulations for carrying out the Plan that
it may deem advisable. Subject to the approval of the Board of Directors of the
Company, the Committee may at any time amend, modify, suspend or terminate the
Plan. In no event, however, without the approval of shareholders, shall any
action of the Committee or the Board of Directors result in:
(a) Amending, modifying or altering the eligibility
requirements provided in Section 4 hereof;
(b) Increasing or decreasing, except as provided in Section
5 hereof, the maximum number of shares as to which
options may be granted;
(c) Decreasing the minimum option price per share at which
options may be granted under the Plan as provided in
Section 6(a) hereof;
(d) Extending either the maximum period during which an
option is exercisable as provided in Section 6(b)
hereof or the date on which the Plan shall terminate as
provided in Section 11 hereof;
(e) Changing the requirements relating to the Committee; or
(f) Making any other change which would cause any options
granted under the Plan as incentive stock options not
to qualify as such options within the meaning of
Section 422 of the Code;
except to conform the Plan and the option agreements to changes in the Code or
governing law.
8. STOCK APPRECIATION RIGHTS. A key employee may be awarded, either at the time
of grant or subsequently, the right to elect alternative payment in lieu of
exercising all or a portion of the options granted to him. Stock appreciation
rights must be specifically granted upon such terms and conditions as specified
by the Committee, if the Company is the employer of the key employee, or by the
Board of Directors of a subsidiary corporation subject to the Committee's
approval, if such subsidiary corporation is the employer of the key employee. No
optionee shall be entitled to such rights solely as a result of the grant of an
option to him. Such right if granted, may be exercised by said option holder
either with respect to all or a portion of the option to which it applies. Stock
appreciation rights are exercisable only during the periods beginning on the
third business day following the release of a summary statement of the Company's
quarterly or annual sales and earnings and ending on the twelfth business day
following said date. The stock appreciation right shall provide that an option
holder shall have the right to receive an amount equal to one hundred percent
(100%) of the excess, if any, of the fair market value of the shares of Common
Stock covered by the option, determined as of the date of exercise of the stock
appreciation right by the Committee in the same manner as such
22
<PAGE> 25
value is determined for purposes of the granting of options, over the option
price. Such amount shall be payable by either the Company or the subsidiary
corporation, whichever such corporation is the employer of the key employee, in
one or more of the following manners, as shall be determined by the Committee,
if the Company is the employer of the key employee, or by the Board of Directors
of the subsidiary corporation subject to the Committee's approval, if such
subsidiary corporation is the employer of the key employee:
(a) cash;
(b) fully-paid shares of Common Stock having a fair market
value equal to such amount; or
(c) a combination of cash and shares of Common Stock.
In no event may any person exercise any stock appreciation rights granted
hereunder unless (i) such person is then permitted to exercise the option or the
portion thereof with respect to which such stock appreciation rights relate, and
(ii) the fair market value of the shares of Common Stock covered by the option,
determined as provided above, exceeds the option price of such shares of Common
Stock. Upon the exercise of any stock appreciation rights, the option, or that
portion thereof to which such stock appreciation rights relate, shall be
cancelled and such person shall surrender such option for cancellation and
reissuance, if appropriate. Stock appreciation rights granted hereunder shall be
made a part of the option agreements in such form as the Committee shall approve
from time to time and which shall not be inconsistent with this Plan. The
granting of an option or stock appreciation right shall impose no obligation
upon the optionee to exercise such option or right. The Company's or a
subsidiary corporation's obligation to satisfy stock appreciation rights shall
not be funded or secured in any manner.
9. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Committee may, if it
deems appropriate, condition its grant of any option hereunder upon receipt of
the following investment representation from the optionee:
"I further agree that any shares of Common Stock of North
Coast Energy, Inc. which I may acquire by virtue of this
option shall be acquired for investment purposes only and not
with a view to distribution or resale; provided, however, that
this restriction shall become inoperative in the event the
said shares of Common Stock subject to this option shall be
registered under the Securities Act of 1933, as amended, or in
the event there is presented to North Coast Energy, Inc. an
opinion of counsel satisfactory to North Coast Energy, Inc. to
the effect that the offer or sale of the shares of Common
Stock subject to this option may lawfully be made without
registration of the said shares of stock under the Securities
Act of 1933, as amended."
The Company shall not be required to issue any certificate or certificates for
shares of Common Stock upon the exercise of an option or a stock appreciation
right granted under the Plan prior to (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion, determine
to be necessary or advisable, (ii) the admission of such shares to listing on
any national securities exchange on which the shares of Common Stock may be
listed, (iii) the completion of any registration or other qualification of the
shares of Common Stock under any state or federal law or ruling or regulations
of any governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable or the
23
<PAGE> 26
determination by the Company, in its sole discretion, that any registration or
other qualification of the shares of Common Stock is not necessary or advisable
and (iv) the obtaining of an investment representation from the optionee in the
form stated above or in such other form as the Company, in its sole discretion,
shall determine to be adequate.
10. GENERAL PROVISIONS. The form and substance of option agreements and grants
of stock appreciation rights, whether granted at the same or different times,
need not be identical.
Nothing in the Plan or in any option agreement shall confer upon any employee
any right to continue in the employ of the Company or any of its subsidiary
corporations, to be entitled to any remuneration or benefits not set forth in
the Plan or such option, or to interfere with or limit the right of the Company
or any subsidiary corporation to terminate his employment at any time, with or
without cause. No employee of the Company or other person shall have any right
to be granted an award under the Plan except in the discretion of the Committee.
Nothing contained in the Plan or in any option agreement shall be construed as
entitling any optionee to any rights of a shareholder as a result of the grant
of an option until such time as shares of Common Stock are actually issued to
such optionee pursuant to the exercise of an option or stock appreciation
rights.
The Plan may be assumed by the successors and assigns of the Company.
The liability of the Company under the Plan and any distribution of Common Stock
made hereunder is limited to the obligations set forth herein with respect to
such distribution and no term or provision of the Plan shall be construed to
impose any liability on the Company in favor of any person with respect to any
loss, cost or expense which the person may incur in connection with or arising
out of any transaction in connection with the Plan, including, but not limited
to, any liability to any federal, state, or local tax authority and/or any
securities regulatory authority.
The cash proceeds received by the Company from the issuance of shares of Common
Stock pursuant to the Plan will be used for general corporate purposes or in
such other manner as the Board of Directors deems appropriate.
The expense of administering the Plan shall be borne by the Company.
The captions and section numbers appearing in the Plan are inserted only as a
matter of convenience. They do not define, limit, construe or describe the scope
or intent of the provisions of the Plan.
11. TERMINATION OF THE PLAN. The Plan shall terminate on the tenth (10th)
anniversary of the adoption hereof by the Board of Directors, and thereafter no
options shall be granted hereunder. All options outstanding at the time of
termination of the Plan shall continue in full force and effect according to
their terms and the terms and conditions of the Plan. The Board may at any time
terminate or from time to time amend the Plan in whole or in part, but no such
action shall adversely affect any rights or obligations with respect to any
awards theretofore made under the Plan.
12. TAXES. Appropriate provisions shall be made for all taxes required to be
withheld and/or paid in connection with the options or the exercise thereof and
the transfer of Common
24
<PAGE> 27
Stock pursuant thereto, under the applicable laws or other regulations of any
governmental authority, whether federal, state, or local and whether domestic or
foreign. In its discretion, the Company may permit the optionee to satisfy such
withholding requirements by (a) the Company withholding from issuance to the
optionee such number of Common Stock otherwise issuable upon exercise of the
option as the Company and the optionee may agree, provided, however, that the
optionee must have had on file with the Company, for at least six (6) months
prior thereto, an effective standing election to satisfy said optionee's tax
withholding obligations in such a fashion, which election form by its terms
shall not be revocable or amendable for at least six (6) months, or (b) with the
consent of the Board, in whole or in part, in Common Stock having a fair market
value on the date the option is exercised equal to that portion of the
withholding obligation for which payment in cash is not made.
13. CHANGES IN GOVERNING RULES AND REGULATIONS. All references herein to the
Internal Revenue Code of 1986, as amended, or sections thereof, or to rules and
regulations of the Department of Treasury or of the Securities and Exchange
Commission, shall mean and include the Code sections thereof and such rules and
regulations as are now in effect or as they may be subsequently amended,
modified, substituted or superseded.
25
<PAGE> 28
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Omer Yonel and Garry Regan, 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 Hilton Garden
Inn, Routes 82 and 480, Twinsburg, Ohio on Monday, December 13, 1999, 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 AUTHORIZE, APPROVE AND ADOPT THE
NORTH COAST ENERGY, INC. 1999 EMPLOYEE STOCK OPTION PLAN TO REPLACE A
SIMILAR PLAN THAT EXPIRED ON AUGUST 17, 1999.
(1) Proposed to authorize, approve and adopt the North Coast Energy,
Inc. 1999 Employee Stock Option Plan.
[ ] 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 (2) directors [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
whose term of office will (except as marked to the contrary below) to vote for all nominees listed
expire in 2002.
Cok van der Horst and C. Rand Michaels
</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.
Dated: , 1999
------------------------
---------------------------------------
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.
PLEASE DATE, SIGN AND RETURN PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
1 -- Units
<PAGE> 29
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Omer Yonel and Garry Regan, 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
Hilton Garden Inn, Routes 82 and 480, Twinsburg, Ohio on Monday,
December 13, 1999, 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 AUTHORIZE, APPROVE AND
ADOPT THE NORTH COAST ENERGY, INC. 1999 EMPLOYEE STOCK OPTION PLAN TO
REPLACE A SIMILAR PLAN THAT EXPIRED ON AUGUST 17, 1999.
(1) Proposed to authorize, approve and adopt the North Coast Energy,
Inc. 1999 Employee Stock Option Plan.
[ ] 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 two (2) directors [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
whose term of office will ex- (except as marked to the contrary below) to vote for all nominees listed
pire in 2002.
Cok van der Horst and C. Rand Michaels
</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.
Dated: , 1999
--------------------------
---------------------------------------
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.
PLEASE DATE, SIGN AND RETURN PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
2 -- Preferred Stock
<PAGE> 30
NORTH COAST ENERGY, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Omer Yonel and Garry Regan, 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
Hilton Garden Inn, Routes 82 and 480, Twinsburg, Ohio on Monday,
December 13, 1999, 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 AUTHORIZE, APPROVE AND ADOPT THE
NORTH COAST ENERGY, INC. 1999 EMPLOYEE STOCK OPTION PLAN TO REPLACE A
SIMILAR PLAN THAT EXPIRED ON AUGUST 17, 1999.
(1) Proposed to authorize, approve and adopt the North Coast Energy,
Inc. 1999 Employee Stock Option Plan.
[ ] 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 two (2) directors [ ] FOR all of the nominees listed [ ] WITHHOLD AUTHORITY
whose term of office will ex- (except as marked to the contrary below) to vote for all nominees listed
pire in 2002.
Cok van der Horst and C. Rand Michaels
</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.
Dated: , 1999
-------------------------
---------------------------------------
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.
PLEASE DATE, SIGN AND RETURN PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
3 -- Common Stock
