1
UNITED STATES
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, 2001
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
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of class)
SERIES A 6% CONVERTIBLE NON-CUMULATIVE PREFERRED STOCK, $0.01 PAR VALUE
(Title of class)
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE
(Title of class)
WARRANTS TO PURCHASE COMMON STOCK, $0.01 PAR VALUE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all Reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes X . No .
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _______
As of June 15, 2001, the Registrant had outstanding 15,208,031 shares of Common
Stock, 73,096 shares of Series A Preferred Stock, and 232,864 shares of Series B
Preferred Stock. All shares reflect the 1 for 5 reverse Common Stock split
effective June 7, 1999.
The aggregate market value of Common Stock held by non-affiliates of the
Registrant at June 15, 2001, was $10,017,535 which value was computed on the
basis of $4.68 per share of Common Stock, the mean between the closing bid and
ask price as reported for that day on NASDAQ.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers and directors of the Company as of June 15, 2001 were as
follows:
NAME AGE POSITION
- ---- --- --------
Omer Yonel 37 President, Chief Executive Officer and Director
Dale E. Stitt 56 Chief Financial Officer
Thomas A. Hill 43 Secretary and General Counsel
Thomas S. Liberatore 44 Vice President of Exploration and Production
Carel W.J. Kok 35 Chairman of the Board and Director
Cok van der Horst 56 Director
Ron L. Langenkamp 56 Director
Ralph L. Bradley 60 Director
C. Rand Michaels 64 Director
Garry Regan 51 Director
OMER YONEL was appointed Executive Vice President-Corporate Development of
North Coast Energy, Inc. in January 1999; in May 1999 he was promoted to Chief
Operating Officer and in October 1999 Mr. Yonel was promoted to Chief Executive
Officer and appointed as a Director. In May 2001, he was appointed to the
additional position of President. Prior to his election as an officer of North
Coast Energy, Inc., Mr. Yonel was employed by n.v. NUON, the largest public
utility in The Netherlands, and the parent of the Company's majority
shareholder. Previous to his tenure at NUON, Mr. Yonel was a project manager for
the construction of co-generation and power plants at Schelde Engineering &
Contractors bv, a Netherlands company. Prior to his service with Schelde, Mr.
Yonel held various project-engineering, management and sales positions at ABB
Lummus, an Asea Brown Boveri subsidiary that provides engineering, management
and consultancy services to global chemical, petrochemical, petroleum refining,
oil and gas and other industries.
Mr. Yonel holds a B.S. as well as a MSc. degree in Engineering from Delft
University of Technology in The Netherlands. Additionally, Mr. Yonel has a
certification of Project Management, is a certified Cost Engineer through the
International Cost Engineering Council and holds several certifications from
executive education programs and post-graduate programs, including Mergers &
Acquisitions from Columbia University and Finance for Senior Executives from
Harvard University. He is a member of the Ohio Oil and Gas Association and the
Cleveland Engineering Society.
DALE E. STITT has served as Chief Financial Officer since January 2001. He
is a Certified Public Accountant, and was previously employed by Ernst & Young
LLP from June 1967 to December 2000, serving most recently as an audit partner.
Mr. Stitt has extensive experience in the oil and gas industry, where he has
specialized in mergers and acquisitions, transaction financing and the public
offering of securities. He holds a Bachelor of Science degree in Accounting from
Miami University, and attended the Executive Program at the J.L. Kellogg
Graduate School of Management at Northwestern University. Mr. Stitt is a member
of the American Institute of Certified Public Accountants, the Ohio Society of
Certified Public Accountants, the Independent Petroleum Association of America,
the Ohio Oil & Gas Association, the Ohio Petroleum Producers Accountants Society
and the Miami University Business Advisory Council.
THOMAS A. HILL served as Secretary and General Counsel of North Coast
Energy from August 1988 until his resignation from the Company in June 2001. Mr.
Hill joined Capital Oil & Gas, Inc. in 1984 before 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 state bars of Ohio,
Pennsylvania, Texas, Oklahoma and the District of Columbia and the Energy Bar
Association.
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THOMAS S. LIBERATORE was appointed to the position of Vice President of
Exploration and Production in January 2001. He joined the company in March 2000
as a result of North Coast Energy's acquisition of Peake Energy, Inc. Mr.
Liberatore served as the Vice President and General Manager of Peake Energy from
1993 through March 2000. He held a variety of positions with increasing
responsibility at Peake Operating Company under the ownership of Presidio Oil
Company of Denver, Colorado during the period 1981 through 1992. Mr. Liberatore
started with Peake Operating Company as a petroleum geologist and served lastly
as Operations Manager, Eastern Division. He holds a B.S. degree in Geology from
West Virginia University. He is a past president and Board Member of The
Independent Oil & Gas Association of West Virginia and is a member of the
American Association of Petroleum Geologists.
CAREL W.J. KOK was elected as a Director in December 1998 and currently
serves as Chairman of the Board of Directors of the Company. Mr. Kok has been
Chief Growth Officer and a member of the Nuon Executive Management Board since
July 1, 2000. Previously he was Director of Mergers & Acquisitions and Strategy
with the Nuon Energy Group. Prior to that he held various positions with Nuon's
International Division. From 1990 to 1995, he was with 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 Europe. Mr. Kok
holds various board positions with subsidiaries of the Nuon Group and is a
Supervisory Board Member of the Amsterdam Power Exchange (APX). Mr. Kok holds a
B.A. from Princeton University and an M.B.A. from the Rotterdam School of
Management at Erasmus University.
COK VAN DER HORST was appointed to the Board of Directors in October 1999.
Mr. van der Horst is currently Advisor to the Management Board of nv NUON. He
previously served as the Director, NUON East and North Holland, where he was the
Chief Financial Officer between 1993 and 1999, and was also in charge of
technical affairs, information technology, personnel and activities in the
national energy market. He has recently assumed responsibilities in the area of
regulatory affairs, mergers, acquisitions and divestments for the parent
company, nv NUON. 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 financial and economic policy. Mr. van der Horst holds a
Master's degree in business administration from Erasmus University in Rotterdam.
RON L. LANGENKAMP is currently Manager of Energy and Wholesale Trading for
NUON. Mr. Langenkamp most recently served for two years as an external
consultant to Reliant Energy, Inc. and supervised all European commercial
activities in his role as Acting Chief Commercial Officer. From 1994 to 1997 Mr.
Langenkamp served in various capacities, including President, of Norstar, a
natural gas retail sales partnership between Orange and Rockland Utilities, Inc.
and Shell Oil Company. From 1977 to 1994 Mr. Langenkamp held various management
positions in the energy industry including the office of President of Cabot
Transmission Company and then as President of Chippewa Gas Corporation. Mr.
Langenkamp received his B.A. degree from Sam Houston State University and a
Master's degree from the University of Texas at Austin.
RALPH L. BRADLEY was elected as a Director in December 1997. Mr. Bradley is
currently President of Bradley Energy USA, which provides energy solutions for
the oil and gas industry. Prior to forming this entity, Mr. Bradley was chief
executive officer of The Eastern Group, Inc., and its predecessor, Eastern
States Exploration Company, Inc. Mr. Bradley currently chairs the Stock Option
and Compensation Committee of the Board of Directors.
C. RAND MICHAELS was elected a Director of North Coast in 1996. Mr.
Michaels retired from the office of Vice Chairman of Range Resources Corporation
(formerly Lomak Petroleum, Inc.) and is Chairman Emeritus of Range Resources
Corporation. He served as the President and Chief Executive Officer of Lomak
Petroleum, Inc. from 1976 through 1988 and Chairman of the Board from 1984
through 1988, when he became Vice Chairman of Lomak Petroleum, Inc. Mr. Michaels
received his B.S. from Auburn University and his M.B.A. from the University of
Denver. Mr. Michaels currently chairs the Audit Committee of the Board of
Directors.
GARRY REGAN participated in the organization of North Coast's predecessor
in 1981, and served as an executive officer and Director since that time,
serving as President from August 1988 through April 2001. 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.
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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 once during the year ended March 31, 2001.
On June 7, 2000, the Audit Committee approved a formal written Audit
Committee Charter in response to changes in the Nasdaq listing standards that
had been approved by the Securities and Exchange Commission (the "Commission")
on December 14, 1999. Under the new rules companies were given six months in
which to adopt a charter for the Audit Committee and were directed to publish
the charter in a proxy statement once every three years. The action of the Audit
Committee was ratified by the Board of Directors by unanimous written consent
effective June 7, 2000, and a certification was filed with Nasdaq on June 13,
2000. The text of the charter was attached to the proxy statement mailed to
Stockholders on September 15, 2000 in compliance with Nasdaq listing standards,
and the Company has certified to Nasdaq that it is in compliance with the Audit
committee structure and membership requirements and is published in compliance
with the new standard. No action on the part of stockholders is required, and no
action is being requested in connection with the adoption of the charter of the
Audit Committee. The charter's adequacy will be reviewed by the Board of
Directors on at least an annual basis.
The Stock Option and Compensation Committee, of which Messrs. Bradley,
Langenkamp 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, 2001, and took action by unanimous
written consent on two separate occasions.
The Board of Directors of the Company held two meetings during the year
ended March 31, 2001. 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.
van der Horst who was unavailable for one Board of Directors meeting and for the
Audit Committee's annual meeting.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows the annual and long-term compensation for the
Company's Chief Executive Officer and two executives (the "Named Executive
Officers") earning in excess of $100,000 for fiscal 2001.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation ------------
-------------------- Number of
Securities All Other
Other Annual Underlying Compensation
Name and Principal Position Year Salary Bonus Compensation Options (1)
--------------------------- ---- ------ ----- ------------ ------- ---
Omer Yonel 2001 $179,233 $60,000 N/A 30,000 $23,638
President and Chief 2000 109,550 20,000 N/A 5,000 0
Executive Officer; 1999 0 0 N/A 0
Director
Garry Regan (2) 2001 188,261 50,000 N/A 0 9,186
Former President; Director 2000 178,623 0 N/A 0 8,183
1999 178,050 0 N/A 0 10,694
No Named Executive Officer received personal benefits or perquisites during
fiscal year 2001 in excess of the lesser of $50,000 or 10% of his aggregate
salary and bonus.
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(1) The items in the following table represent All Other Compensation received
by Named Executive Officers and includes life insurance and other benefits
under contractual agreements and amounts approved by the Board of
Directors:
Profit Sharing &
Name Year Life Insurance 401(K) Stock Award Total
---- ---- -------------- ------ ----------- -----
Omer Yonel 2001 $1,185 $ 0 $20,300 $21,485
Garry Regan 2001 1,850 7,336 0 9,186
2000 1,850 6,333 0 8,183
1999 1,850 8,844 0 10,694
(2) Garry Regan's employment agreement with North Coast expired on May 3, 2001
and was not renewed. Mr. Regan's term as a Director will expire on
September 21, 2001 at the beginning of this year's Annual Meeting.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table summarizes options granted to Named Executive
Officers during fiscal year 2001.
Individual Grants
----------------- Potential realizable
value at assumed
Percent of annual rates of
Number of total stock price
securities options/SARs appreciation for
underlying granted to Exercise option term
option/SARs employees in price per Expiration -----------
Name Year granted fiscal year share Date 5% (1) 10% (1)
- -------------------- --------- -------------- ---------------- ------------ -------------- ---------- -----------
Omer Yonel 2001 30,000 100% $3.47 10-5-2010 $65,460 $165,900
President & 2000 5,000 46.7% $4.38 10-18-2009 13,757 34,863
CEO; Director
(1) The potential realizable value of the options, if any, granted in fiscal
year 2001 and 2000 to the Named Executive Officers was calculated by
multiplying those options by the excess of (a) the assumed market value, as
of October 5, 2010 and October 18, 2009, of Common Stock if the market
value of Common Stock were to increase 5% or 10% in each year of the
option's 10-year term, over (b) the exercise price shown. This calculation
does not take into account any taxes or other expenses that might be owed.
The assumed market value at a 5% assumed annual appreciation rate over the
10-year term is $5.65 and $7.13 and such value at a 10% assumed annual
appreciation rate over that term is $9.00 and $11.35 for 2001 and 2000,
respectively. The 5% and 10% assumed appreciation rates are set forth in
the Commission rules and no representation is made that the Common Stock
will appreciate at these rates or at all.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table summarizes options exercised during fiscal 2001
and presents the value of unexercised options held by the Named Executive
Officers at fiscal year end:
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End June 30, 2001 (1)
-------------------------- -----------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Omer Yonel
President &
CEO; Director 0 $0 35,000 0 $31,850 $0
(1) Based upon the closing price of a share of Common Stock as reported on
Nasdaq on June 30, 2001.
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EMPLOYMENT CONTRACTS. CONSULTING AGREEMENT WITH GARRY REGAN. In December
2000, the Company, NUON and Mr. Regan entered into an agreement (the "Consulting
Agreement") pursuant to which Mr. Regan agreed to provide certain consulting
services to the Company for a period of eighteen months following May 2, 2001,
the expiration date of Mr. Regan's employment agreement with the Company. The
Consulting Agreement provides that, during the term of the Consulting Agreement,
Mr. Regan will receive monthly payment of $6,000, and that all reasonable
business expenses incurred by Mr. Regan in the performance of his services under
the Consulting Agreement will be reimbursed by the Company. Mr. Regan also
agreed to certain nondisclosure, noncompetition and noninterference provisions,
and each of the parties to the Consulting Agreement agreed to a mutual release
and covenant not to sue.
DIRECTORS FEES. During fiscal 1998, the Board of Directors voted to
discontinue the payment of Directors fees to any member of the Board of
Directors. However, the Board of Directors 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. Similarly, the Board of Directors granted options to
purchase 20,000 shares of Common Stock at $4.375 per share to C. Rand Michaels
during the year ending March 31, 2000. Mr. Bradley's options are fully vested
and two-thirds of Mr. Michaels' options are vested. The balance of Mr. Michaels
options will expire upon his retirement from the Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows 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 June 30, 2001 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 current executive officers listed in the Summary Compensation Table included
elsewhere in this Proxy Statement; and (iv) all Directors and executive officers
as a group, and the percentage of the outstanding shares represented thereby.
Common Stock
------------
Nature and Address (1) Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
NUON International Projects bv (1) 13,048,277 Shares 85.96%
Omer Yonel 35,000 Shares (2) *%
Carel W. J. Kok 0 Shares *%
Cok van der Horst 0 Shares *%
Ron L. Langenkamp 0 Shares *%
Ralph L. Bradley 30,000 Shares (3) *%
C. Rand Michaels 14,953 Shares (4) *%
Dale Stitt 500 Shares *%
Garry Regan 118,185 Shares *%
Thomas S. Liberatore 0 Shares *%
All Directors and executive officers as 198,638 Shares (5) 1.30%
a group (10 persons)
*Less than one percent
(1) The address of NUON International Projects bv is Spaklerweg 20, 1096 BA
Amsterdam, The Netherlands.
(2) Includes 35,000 shares of Common Stock that Mr. Yonel could acquire upon
the exercise of immediately exercisable stock options that he holds.
(3) Includes 30,000 shares of Common Stock that Mr. Bradley could acquire upon
the exercise of immediately exercisable stock options that he holds
pursuant to grants of 20,000 options on April 1, 1998 and 30,000 options on
October 5, 2000. A second and third tranche of the 30,000 options will vest
on April 1, 2002 and April 1, 2003 respectively.
(4) Includes 13,333 shares of Common Stock that Mr. Michaels could acquire upon
the exercise of immediately exercisable stock options that he holds
pursuant to a grant of options to acquire 20,000 shares. A third tranche of
options will vest in April 2002.
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(5) Includes 78,333 shares of Common Stock that 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
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 21 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 $6.5
million during fiscal 2001, $5.2 million during fiscal 2000, and $3.5 million
during fiscal 1999.
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. Substantially 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, 2001, North Coast acquired limited
partnership interests in oil and gas drilling programs that it had sponsored at
a cost of approximately $676,000.
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 1,042,125 shares on September 30,
1999. All shares were purchased at a price of $4.375 per share.
Effective March 14, 2000, the Stock Option and Compensation Committee,
pursuant to authority delegated to it by the Board of Directors, unanimously
approved the grant by the Company of a $96,000 loan to Mr. Omer Yonel, the Chief
Executive Officer, to facilitate the down payment on the purchase of a home in
the vicinity of the Company's headquarters and for related expenses. The loan
will mature and the principal and interest thereon, compounded monthly at the
Federal Fund's rate of 6.5% per annum, will be due in the form of a balloon
payment payable on the earlier of (i) May 1, 2004 (the fifth anniversary of Mr.
Yonel's employment with the Company), or (ii) one year after his employment with
the Company ceases.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ Omer Yonel President and Chief Executive Officer July 27, 2001
- ----------------------------------
Omer Yonel
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Chief Executive Officer July 27, 2001
/s/ Omer Yonel and Director (principal executive officer)
- ----------------------------------
Omer Yonel
Chief Financial Officer and Secretary July 27, 2001
/s/ Dale E. Stitt (principal accounting and financial officer)
- ----------------------------------
Dale E. Stitt
Chairman of the Board and Director July 27, 2001
- ----------------------------------
Carel W. J. Kok
/s/ Cok van der Horst Director July 27, 2001
- ----------------------------------
Cok van der Horst
Director July 27, 2001
- ----------------------------------
Ron L. Langenkamp
/s/ Ralph L. Bradley Director July 27, 2001
- ----------------------------------
Ralph L. Bradley
/s/ C. Rand Michaels Director July 27, 2001
- ----------------------------------
C. Rand Michaels
/s/ Garry Regan Director July 27, 2001
- ----------------------------------
Garry Regan