<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
---
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
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)
Registrants' telephone number, including area code: (216) 425-2330
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 such filing
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date. Indicate the number of shares
outstanding of each of the issuer's classes of Common Stock as the latest
practical date.
Class Outstanding at November 11, 1996
----- --------------------------------
Common Stock, $.01 par value 8,047,195
<PAGE> 2
<TABLE>
<CAPTION>
Page No.
--------
PART I - FINANCIAL INFORMATION
<S> <C>
Consolidated Balance Sheets -
March 31, 1996 (Audited) and September 30, 1996 (Unaudited) 2
Unaudited Consolidated Statements of Operations -
For the Three and Six Months Ended September 30, 1995 and 1996 4
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended September 30, 1995 and 1996 5
Unaudited Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION 18
</TABLE>
<PAGE> 3
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1996
---- ----
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and equivalents $ 1,551,748 $ 788,251
Accounts receivable:
Trade 1,339,601 1,635,635
Affiliates 97,993 84,124
Inventory 85,235 107,241
Deferred income taxes 41,000 41,000
Refundable income taxes 115,000 115,000
Other,net 22,097 60,000
------------ ------------
Total current assets 3,252,674 2,831,251
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 122,699 93,437
Oil and gas properties (successful
efforts) 23,769,853 24,579,678
Pipelines 3,696,277 4,101,187
Vehicles 427,920 487,503
Furniture and fixtures 453,718 498,326
Building and improvements 145,539 785,217
------------ ------------
28,616,006 30,545,348
Less-Accumulated depreciation, depletion,
amortization and impairment (11,879,077) (12,192,941)
------------ ------------
16,736,929 18,352,407
OTHER ASSETS, net 253,206 179,664
------------ ------------
$ 20,242,809 $ 21,363,322
============ ============
</TABLE>
The accompanying notes are an integral part of these Balance Sheets
2
<PAGE> 4
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1996
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 213,060 $ 251,100
Accounts payable 2,481,558 1,768,009
Accrued expenses 280,565 337,310
Billings in excess of costs on
uncompleted contracts 637,347 574,310
------------ ------------
Total current liabilities 3,612,530 2,930,729
------------ ------------
LONG-TERM DEBT, net of current portion 8,954,574 11,180,718
DEFERRED INCOME TAXES, net 357,100 333,100
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A, 6% Non-Cumulative Convertible Preferred
stock, par value $.01 per share; 563,270 shares
authorized; 305,200 and 303,265 issued and
outstanding (aggregate liquidation value of
$3,050,200 and $3,032,650, respectively) 3,052 3,033
Series B, Cumulative Convertible Preferred stock,
par value $.01 per share; 625,000 shares
authorized; 464,665 issued and outstanding
(aggregate liquidation value of $4,646,650) 4,647 4,647
Undesignated Serial Preferred stock, par
value $.01 per share; 811,730 shares
authorized; none issued and outstanding -- --
Common stock, par value $.01 per share;
40,000,000 shares authorized; 8,040,148
and 8,044,597 issued and outstanding 80,402 80,446
Additional paid-in capital 12,082,969 12,082,944
Retained deficit (4,852,465) (5,252,295)
------------ ------------
Total stockholders' equity 7,318,605 6,918,775
------------ ------------
$ 20,242,809 $ 21,363,322
============ ============
</TABLE>
The accompanying notes are an integral part of these Balance Sheets
3
<PAGE> 5
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Periods Ended September 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
1995 1996 1995 1996
---- ---- ---- ----
REVENUE:
<S> <C> <C> <C> <C>
Oil and gas production $ 576,508 $ 721,199 $ 1,320,880 $ 1,584,133
Drilling revenues 134,250 273,504 303,000 1,442,700
Well operating, transportation and other 408,809 574,978 868,419 1,046,785
Administrative and agency fees 238,782 221,483 431,523 424,961
----------- ----------- ----------- -----------
1,358,349 1,791,164 2,923,822 4,498,579
COSTS AND EXPENSES:
Oil and gas production expenses 209,795 182,305 411,539 408,115
Drilling costs 209,204 275,055 357,446 1,196,638
Oil and gas operations 171,116 392,027 403,435 641,466
General and administrative expenses 670,536 695,822 1,327,431 1,256,921
Depreciation, depletion, amortization,
impairment and other 468,225 278,942 963,460 579,632
Abandonment of oil and gas properties -- (3,692) -- 44,843
----------- ----------- ----------- -----------
1,728,876 1,820,459 3,463,311 4,127,615
----------- ----------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS (370,527) (29,295) (539,489) 370,964
----------- ----------- ----------- -----------
OTHER INCOME
Interest 16,188 13,174 36,961 27,135
Other 3,004 8,824 7,658 24,824
Gain (loss) on sale of property
and equipment -- (8,994) 8,943 (10,774)
----------- ----------- ----------- -----------
19,192 13,004 53,562 41,185
----------- ----------- ----------- -----------
OTHER EXPENSE
Interest 202,765 272,815 372,864 512,104
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (554,100) (289,106) (858,791) (99,955)
CREDIT FOR INCOME TAXES:
Current -- -- (61,000) --
Deferred (211,000) (61,000) (281,000) (24,000)
----------- ----------- ----------- -----------
(211,000) (61,000) (342,000) (24,000)
----------- ----------- ----------- -----------
NET LOSS $ (343,100) $ (228,106) $ (516,791) $ (75,955)
=========== =========== =========== ===========
NET LOSS PER SHARE
(primary and fully diluted) $ (.06) $ (.04) $ (.10) $ (.05)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements
4
<PAGE> 6
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended September 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (516,791) $ (75,955)
Adjustments to reconcile net loss
to cash provided by operating activities-
Depreciation, depletion, amortization, impairment and other 963,460 579,632
Abandonment of oil and gas properties -- 44,843
(Gain) loss on sale of property and equipment (8,943) 10,774
Deferred income taxes (281,000) (24,000)
Change in:
Accounts receivable (1,276,549) (282,165)
Other current assets 33,665 (59,909)
Other assets 14,964 22,809
Accounts payable (1,558,151) (727,619)
Current income taxes payable -- --
Accrued expenses (149,388) 56,745
Billings in excess of costs on uncompleted contracts 1,334,632 (63,037)
----------- -----------
Total adjustments (927,310) (441,927)
----------- -----------
Net cash used by operating activities (1,444,101) (517,882)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,217,218) (1,581,674)
Proceeds on sale of property and equipment -- 104,262
----------- -----------
Net cash used for investing activities (1,217,218) (1,477,412)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of accounts payable used to
finance property and equipment additions (236,422) (70,962)
Borrowings under revolving credit facility 1,000,000 1,660,000
Borrowings under note payable to stockholder 1,000,000 41,801
Repayments of borrowings under revolving credit facility (240,003) --
Payments on long-term debt (52,824) (75,167)
Cash paid for deferred financing cost (46,142) --
Distributions and dividends (325,171) (323,875)
----------- -----------
Net cash provided by financing activities 1,099,438 1,231,797
----------- -----------
DECREASE IN CASH AND EQUIVALENTS (1,561,881) (763,497)
</TABLE>
The accompanying notes are an integral part of these Financial Statements
5
<PAGE> 7
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For The Six Months Ended September 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD $2,366,660 $1,551,748
---------- ----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 804,779 $ 788,251
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for -
Interest $ 343,116 $ 395,823
Income taxes $ 71,135 $ --
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Long-term debt incurred for the purchase
of property and equipment $ 42,860 $ 637,549
Accounts payable incurred for the
purchase of property and equipment $ 233,552 $ 80,032
</TABLE>
The accompanying notes are an integral part of these Financial Statements
6
<PAGE> 8
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Accounting Policies
A. General
The consolidated financial statements included herein, have been
prepared by North Coast Energy, Inc. without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position have
been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements and notes thereto which are incorporated in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996.
The results of the operations for the interim periods may not
necessarily be indicative of the results to be expected for the full
year. In addition, the preparation of these financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities at the date of the consolidated
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B. Principles of Consolidation
The consolidated financial statements include the accounts of North
Coast Energy, Inc. and its wholly owned subsidiaries (the Company),
North Coast Operating Company (NCOC), and NCE Securities, Inc. (NCE
Securities). In addition, the Company's investments in oil and gas
drilling partnerships, which are accounted for under the proportional
consolidation method, are reflected in the accompanying financial
statements. The Company's ownership of revenues in these drilling
partnerships are as follows:
<TABLE>
<S> <C>
Capital Drilling Fund 1986-1 Limited Partnership 13.2%
North Coast Energy/Capital 1987-1 Appalachian Drilling Program Limited Partnership 33.7%
North Coast Energy/Capital 1987-2 Appalachian Drilling Program Limited Partnership 27.0%
North Coast Energy/Capital 1988-1 Appalachian Drilling Program Limited Partnership 25.5%
North Coast Energy/Capital 1988-2 Appalachian Drilling Program Limited Partnership 34.8%
North Coast Energy 1989 Appalachian Drilling Program Limited Partnership 30.0%
North Coast Energy 1990-1 Appalachian Drilling Program Limited Partnership 26.0%
North Coast Energy 1990-2 Appalachian Drilling Program Limited Partnership 25.7%
North Coast Energy 1990-3 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1991-1 Appalachian Drilling Program Limited Partnership 26.5%
North Coast Energy 1991-2 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1991-3 Appalachian Drilling Program Limited Partnership 25.3%
</TABLE>
7
<PAGE> 9
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. Summary of Accounting Policies (Continued)
<TABLE>
<S> <C>
North Coast Energy 1992-1 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1992-2 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1992-3 Appalachian Drilling Program Limited Partnership 39.5%
North Coast Energy 1993-1 Appalachian Drilling Program Limited Partnership 30.3%
North Coast Energy 1993-2 Appalachian Drilling Program Limited Partnership 31.0%
North Coast Energy 1993-3 Appalachian Drilling Program Limited Partnership 30.0%
North Coast Energy 1994-1 Appalachian Drilling Program Limited Partnership 30.0%
North Coast Energy 1994-2 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1994-3 Appalachian Drilling Program Limited Partnership 25.0%
North Coast Energy 1995-1 Appalachian Drilling Program Limited Partnership 20.0%
North Coast Energy 1995-2 Appalachian Drilling Program Limited Partnership 20.0%
North Coast Energy 1996-1 Appalachian Drilling Program Limited Partnership 20.0%
All significant intercompany accounts and transactions have been eliminated.
</TABLE>
Note 2. Long-Term Debt
<TABLE>
<CAPTION>
March 31, 1996 September 30, 1996
-------------- ------------------
<S> <C> <C>
Long-term debt consists of the following:
Revolving credit notes payable - bank $ 7,560,000 $ 9,220,000
Notes payable to stockholder with interest at prime
plus 1% and 8%. 1,386,842 1,410,593
Mortgage note payable to a bank, secured by land and
a building, requiring monthly payments of approximately
$1,019 (including interest at 8%) through July 2003. 67,842 63,827
Mortgage note payable to a bank, secured by land and a building,
requiring monthly payments of approximately $5,248 (including
interest at 8.58%) through May 2001 over a five year period,
at an interest rate to be renegotiated. - 532,561
Various installment notes payable, in aggregate monthly
installments (including interest) of $11,012 at March 31,
1996, and $10,122 at September 30, 1996. 152,950 204,837
-------- ---------
9,167,634 11,431,818
Less current portion 213,060 251,100
---------- ---------
$ 8,954,574 $ 11,180,718
========== ==========
</TABLE>
8
<PAGE> 10
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. Long-Term Debt (Continued)
The Company's credit agreement with its lender was amended August 30,
1996 increasing its reducing revolving line of credit to $20,000,000.
Available borrowings under this agreement are computed based on a
borrowing base determined semi-annually by the lender, based upon the
Company's financial position, and level of oil and gas and pipeline
based reserves and are further based upon the amount of outstanding
letters of credit used to support certain bonding requirements
($140,000 at September 30, 1996). The borrowing base is reduced monthly
by an amount determined by the lender at the semi-annual borrowing base
determination. The amendment also increased the Company's borrowing
base to $10,000,000, with required monthly reductions of $110,000
beginning on October 1, 1996. Available borrowings under the revolving
line of credit were $640,000 at September 30, 1996, and may
subsequently change based on the semi-annual reserve study and
borrowing base determination. The revolving line of credit can be
renewed annually or converted to a term loan at the Company's option
prior to its expiration in fiscal 1998.
Amounts outstanding under the reducing revolving line of credit, which
were $9,220,000 at September 30, 1996, bear interest at the lending
bank's prime rate plus 1-1/2%. The agreement requires the Company to
pay a commitment fee of 1/2% on the unused amount of the available
borrowings and closing costs of 1% on any increase in borrowing
availability. The agreement contains certain restrictive covenants,
including minimum working capital, minimum shareholders' equity and a
minimum debt coverage ratio, all as defined. The Company was in
compliance with all covenants as of September 30, 1996.
The revolving credit facility and the notes are collateralized by
substantially all of the Company's assets including receivables,
inventory, equipment and a first mortgage on certain of the Company's
interest in oil and gas wells and reserves.
The Company has two notes payable to a stockholder. One note is payable
out of future operating revenues, as defined. The note is subordinate
to the borrowings under the revolving credit notes payable - bank.
During fiscal 1996, the Company entered into an additional note payable
with the same stockholder for $1,000,000. This note can be repaid in
either shares of common stock or the proceeds of a public offering, as
defined. This note is also subordinated to the borrowings under the
revolving credit notes payable - bank. In connection with entering into
the Loan Agreement, the Company granted the stockholder certain
warrants to purchase 200,000 shares of common stock at $1.20 per share
and 300,000 shares of common stock at $1.00 per share, as defined. The
warrants may be redeemed by the Company for $.10 per share at its
option upon 30 days written notice.
On May 13, 1996, the company purchased a building for its headquarters
and entered into a mortgage note for $540,000 over a 15 year term with
an interest rate of 8.58% to be renegotiated every five years.
9
<PAGE> 11
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 3. Billings in Excess of Costs on Uncompleted Contracts
Billings in excess of costs on uncompleted contracts consist of:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1996
----------- -------------
<S> <C> <C>
Billings on uncompleted contracts $ 1,518,486 $ 700,826
Costs incurred on uncompleted contracts 881,139 126,516
----------- -----------
$ 637,347 $ 574,310
=========== ===========
</TABLE>
Note 4. Commitment and Contingencies
The Company and a commercial bank have issued standby letters of credit
which provide a guaranteed total amount of $140,000 in lieu of coverage
provided by insurance or road bond deposits against damage.
At September 30, 1996, the Company has committed to fund certain costs
of the North Coast Energy Appalachian Drilling Programs estimated to
be approximately $580,000 for tangible well equipment and pipeline
construction. This commitment is expected to be realized by March 1997.
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Coast Energy, Inc., (the "Company") a Delaware corporation, is an
independent natural gas and oil company engaged in exploration, development and
production activities primarily in the Appalachian Basin region of Ohio and
Pennsylvania. The Company's strategy focuses primarily on the acquisition of
proved undeveloped natural gas and oil properties and on the turnkey drilling
and development of such properties by the Company in conjunction with drilling
partnerships which the Company sponsors and manages (the "Drilling Programs").
The Drilling Programs are funded through the sale of partnership interests to
non-industry investors and by contributions from the Company.
Several factors may affect the amount and timing of the Company's
revenues with respect to the activities of the Drilling Programs. The amount of
funds raised for each Drilling Program determines the number of wells for which
the Company receives drilling revenues and the date at which the wells reach a
certain point in the completion process determines the timing of revenue
recognition. The Company continually monitors the cost incurred in drilling,
completion and production operations and reviews its turnkey drilling contract
prices for each Drilling Program in order to reduce the risk of unprofitable
drilling operations. The turnkey drilling contract price between the Drilling
Programs and the Company may vary from Drilling Program to Drilling Program
depending on competition, type of well drilled and other cost factors and the
returns sought by investors in the Drilling Programs. A change in the turnkey
price and the Company's percentage interest in future Drilling Programs may
affect the Company's capital availability, as well as revenues and profits.
The Company typically forms the Drilling Programs between August and
December of each year and conducts its drilling operations between September and
March. It generally requires nine months between the drilling of a well and the
generation of production revenue from that well. Drilling revenues are
predominantly recognized during the second half of the Company's fiscal year.
The following table is a review of the results of operations of the
Company for the six months ended September 30, 1995 and 1996. All items in the
table are calculated as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
------------- -------------
1995 1996 1995 1996
-------------- --------------
<S> <C> <C> <C> <C>
Revenues:
- ---------
Oil and gas production 42% 40% 44% 35%
Drilling revenues 10 15 10 32
Well operating, transportation and other 30 32 29 23
Administrative and agency fees 17 12 15 9
Other 1 1 2 1
---- ---- ---- ----
Total Revenues 100% 100% 100% 100%
--- --- --- ---
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Expenses:
Oil and gas production expenses 15% 10% 14% 9%
Drilling costs 15 15 12 26
Oil and gas operations 12 22 13 14
General and administrative expenses 49 39 45 28
Depreciation, depletion, amortization
impairment and other 34 15 32 13
Abandonment of oil and gas properties 0 0 0 1
Provision for taxes on income (15) (3) (11) 0
Other 15 15 12 11
----- ---- ----- -----
Total Expenses 125% 113% 117% 102%
--- --- --- ---
Net Loss (25%) (13%) (17%) (2%)
===== ==== ===== =====
</TABLE>
The following discussion and analysis reviews the results of operations
and the financial condition for the Company for the three and six months ended
September 30, 1996 and 1995. The review should be read in conjunction with the
financial information presented elsewhere herein.
COMPARISON OF SIX MONTHS ENDED SEPTEMBER 30, 1996 TO SIX MONTHS ENDED SEPTEMBER
30, 1995.
REVENUES
Oil and gas production revenues increased $263,253 (20%) to $1,584,133
for the six months ended September 30, 1996 compared to $1,320,880 for the prior
corresponding period. Revenues were enhanced by increases in both oil and gas
production from wells in the Appalachian area. In addition, the average gas
price the Company received for oil and natural gas increased approximately 16%.
The average gas price the Company received increased to $2.41 per Mcf for the
six months ended September 30, 1996 compared to $2.07 per Mcf for the six
months ended September 30, 1995. The average oil price the Company received
increased to $19.85 per Barrel for the six months ended September 30, 1996
compared to $16.99 per Barrel for the six months ended September 30, 1995.
Drilling Revenues for the period increased by $1,139,700 (376%) for
the six months ended September 30, 1996 compared to the six months ended
September 30, 1995 due to the increase in the number of wells recognized in
revenue for the period. The Company recognized revenues for the six months ended
September 30, 1996 on fourteen wells as compared to four wells for the six
months ended September 30, 1995. The increase in wells recognized in drilling
revenues was due to a larger number of wells in progress at the Company's fiscal
year end of March 31, 1996 compared to March 31, 1995.
Revenues generated from well operating, transportation and other
increased $178,366 (21%) for the six months ended September 30, 1996 compared to
the six months ended September 30, 1995. This increase was due to an increase in
unaffiliated third party gas sales. The unaffiliated third party gas sales
fluctuate from year to year based upon the availability of these types of
transactions and Company resources available. The increase in revenues in this
category was somewhat offset by a decrease in compression fees due to expenses
incurred with the placement of several new compression facilities into
operation.
EXPENSES
Drilling costs for the six months ended September 30, 1996 compared
to the six months ended September 30, 1995 increased $839,192 (235%) due to the
increased number of wells completed between comparable periods.
12
<PAGE> 14
Oil and gas operations expense increased $238,031 (59%) for the six
months ended September 30, 1996 as compared to the six months ended September
30, 1995. This increase was due to the increase in unaffiliated third party gas
purchases related to unaffiliated third party gas sales as discussed above.
General and administrative expenses decreased $70,510 (5%) for the six
months ended September 30, 1996 compared with the six months ended September 30,
1995. This decrease resulted from a change in the Company's allocation of
general and administrative costs to production and operation expenses. Without
this change in the allocation of costs, the Company's general and administrative
expenses would have remained relatively constant even with $89,000 in legal fees
pertaining to litigation with Lomak Petroleum, Inc. and other related issues.
Depreciation, depletion, amortization, impairment and other decreased
$383,828 (40%) for the six months ended September 30, 1996 compared to the six
months ended September 30, 1995. This decrease was primarily due to the
implementation of the Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" during fiscal 1996 which decreased the basis of the
properties being depleted for future periods.
Interest expense increased to $512,104 for the six months ended
September 30, 1996 from $372,864 for the six months ended September 30, 1995.
This increase was primarily due to the Company's additional borrowings on its
reducing revolving credit facility. At September 30, 1996, $9,220,000 was
outstanding under the Company's Credit Facility, as compared to $6,810,000 at
September 30, 1995.
Operating income for the six months ended September 30, 1996 increased
to $370,964 compared to an operating loss of $539,489 for the six months ended
September 30, 1995 primarily due to the decrease in depreciation, depletion,
amortization, impairment and other and increases in oil and gas production and
net drilling income. The Company's net loss was $75,955 for the six months ended
September 30, 1996 compared to a net loss of $516,791 for the six months ended
September 30, 1995.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THREE MONTHS ENDED
SEPTEMBER 30, 1995.
REVENUES
Oil and gas production revenues for the three months ended September
30, 1996 increased $144,691 (25%) to $721,199 compared to $576,508 for the prior
corresponding period. The primary reason for the increase in oil and gas
production revenues was a 19% increase between comparable periods in the average
natural gas price the Company received coupled with an increase of 7% in natural
gas production. The average price the Company received for natural gas increased
to $2.43 per Mcf for the three months ended September 30, 1996 from $2.04 per
Mcf for the three months ended September 30, 1995.
The Company recognized revenue on the drilling of three wells for the
three months ended September 30, 1996 compared to one well for the three months
ended September 30, 1995 resulting in an increase in drilling revenue of
$139,254 (104%).
Revenues generated from well operating, transportation and other
increased $166,169 (41%) for the three months ended September 30, 1996 as
compared to the three months ended September 30, 1995. This increase was due to
an increase in unaffiliated third party gas sales. The unaffiliated third party
gas sales fluctuate from year to year based upon the availability of these types
of transactions and resources available. The increase in revenues in this
category was somewhat offset by a decrease in compression fees due to expenses
incurred with the placement of several new compression facilities into
operation.
Revenue from administrative and agency fees decreased by 7% for the
three months ended September 30, 1996 compared to the three months ended
September 30, 1995. This decrease was due to the reduction of administrative
fees charged to certain of the Company's Drilling Programs. This reduction
followed the Company's policy of reviewing administrative fees and reducing
these fees when necessary.
13
<PAGE> 15
EXPENSES
Oil and gas operations expense increased $220,911 (129%) for the three
months ended September 30, 1996 as compared to the three months ended September
30, 1995. This increase was due to the increase in unaffiliated third party gas
purchases related to unaffiliated third party gas sales as discussed above.
General and administrative expenses increased $25,286 (4%) for the
three months ended September 30, 1996 compared to the three months ended
September 30, 1995. This increase was due to $89,000 in legal fees pertaining to
litigation with Lomak Petroleum, Inc. and other related issues.
Depreciation, depletion, amortization, impairment and other decreased
$189,283 (40%) for the three months ended September 30, 1996 compared to the
three months ended September 30, 1995. This decrease was primarily due to the
implementation of the Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" during fiscal 1996 which decreased the basis of the
properties being depleted for future periods.
Interest expense increased to $272,815 for the three months ended
September 30, 1996 from $202,765 for the three months ended September 30, 1995.
This increase was associated with the Company's additional borrowings on its
reducing revolving credit facility.
For the three months ended September 30, 1996 loss from operations
decreased $341,232 compared to the three months ended September 30, 1995 due
primarily to the increase in oil and gas production revenues coupled with lower
depreciation, depletion, amortization and other.
INFLATION AND CHANGES IN PRICES
While the costs of operations have been and will continue to be
effected by inflation, oil and gas prices have fluctuated during recent years
and generally have not followed the same pattern as inflation. With today's
global economy, especially in the area of oil and natural gas, Management
believes that other forces of the economy and world events, such as OPEC, the
weather, economic factors, and the effects of the supply of natural gas in the
United States and regionally have a more immediate effect on current pricing
than inflation. The Company received an average price of $19.85 and $16.99 per
barrel in the six months ended September 30, 1996 and 1995, respectively, and
$2.41 and $2.07 per Mcf for natural gas in the six months ended September 30,
1996 and 1995, respectively. The general market for natural gas in the
Appalachian Basin has rebounded somewhat reflecting the colder Appalachian area
weather which caused a draw-down in storage supplies of natural gas during the
1995/1996 winter. The reasons for the previously weak natural gas prices and
recent increases in the gas prices can be attributed to supply and demand
fluctuations caused by the weather sensitive nature of the industry. Although
there has been a decline in gas prices during the summer months compared to the
winter of 1995/1996, the demand for gas by storage facilities has continued to
keep gas prices above last year. Other variables potentially effecting gas
prices are increased competition from Canadian gas, effects of gas storage and
possibly Federal Energy Regulatory Commission ("FERC") Order 636. The FERC Order
may have contributed to the lower spot market prices by mandating an unbundling
of pipeline service and allowing open access to a variety of geographical
markets. Management cannot predict what long-term effects FERC Order 636 will
have on either spot market prices or longer term gas contracts.
Currently, the Company sells natural gas under both fixed price
contracts and on the spot market. The spot market price the Company receives for
gas production is related to several variables, including the weather and the
effects of gas storage. The Company anticipates that spot market prices will
continue to fluctuate in response to various factors, primarily weather and
market conditions.
In an effort to position itself to take advantage of future increases
in demand for natural gas, the Company continues to construct new gas gathering
systems in the Appalachian Basin and to contract with other pipeline systems in
the region to transport natural gas production from Company wells.
14
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was approximately negative $99,000 at
September 30, 1996 compared to approximately negative $360,000 at March 31,
1996. The increase of $261,000 in working capital from March 31, 1996 reflects
additional borrowings during the six months ended September 30, 1996. An
amendment to the Credit Facility increased the Company's borrowing base from
$9,500,000 at March 31, 1996 to $10,000,000 at August 30, 1996. As of September
30, 1996, the Company had $9,220,000 outstanding under its Credit Facility.
North Coast's current ratio was .97 to 1.0 at September 30, 1996 and .90 to 1.0
at March 31, 1996.
The following table summarizes the Company's financial position at
March 31, 1996 and September 30, 1996:
<TABLE>
<CAPTION>
(Amounts in Thousands) March 31, 1996 September 30, 1996
-------------- ------------------
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Working capital $ (360) (2%) $ (99) (1%)
Property and equipment (net) 16,737 100% 18,352 100%
Other 253 2% 180 1%
-------- ----- -------- ---
Total $ 16,630 100% $ 18,433 100%
======== ===== ======== ===
Long-term debt $ 8,954 54% $ 11,181 61%
Deferred income taxes 357 2% 333 2%
Stockholders' equity 7,319 44% 6,919 37%
-------- ----- -------- ---
Total $ 16,630 100% $ 18,433 100%
======== ===== ======== ===
</TABLE>
CAPITAL RESOURCES AND REQUIREMENTS
The oil and gas exploration and development activities of North Coast
historically have been financed through the Drilling Programs, through
internally generated funds, and from bank financing.
The following table summarizes the Company's Statements of Cash
Flows for the six months ended September 30, 1995 and 1996:
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------
(Amounts in Thousands) 1995 1996
---- ----
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Net cash used by operating activities $ (1,444) (51%) $ (518) (21%)
Net cash used for investing activities (1,217) (43%) (1,477) (58%)
Net cash provided by financing activities 1,099 39% 1,232 49%
-------- --- -------- --
Decrease in cash and equivalents $ (1,562) (55%) $ (763) (30%)
======== === ======== ==
</TABLE>
Note: All items in the previous table are calculated as a percentage of
total cash sources. Total cash sources include the following items if
positive: cash flow from operations before working capital changes,
changes in working capital, net cash provided by investing activities and
net cash provided by financing activities, plus any decrease in cash and
cash equivalents.
As the above table indicates, the Company's cash flow used by operating
activities decreased approximately $926,000 for the six months ended September
30, 1996 compared to the period ended September 30, 1995. This decrease reflects
the increased number of wells recognized in drilling revenues and the increase
cash flow from operations.
15
<PAGE> 17
Net cash used for investing activities increased to approximately
$1,477,000 (58% of cash sources) for the six months ended September 30, 1996
from approximately $1,217,000 (43% of cash sources) for the six months ended
September 30, 1995. This increase is primarily due to the Company's acquisition
of a new building to house its corporate headquarters coupled with the timing of
the Company's cash expenditures related to its obligation to fund the tangible
equipment for the Drilling Programs.
Net cash provided by financing activities increased approximately
$133,000 for the six months ended September 30, 1996 compared to the prior
period. This increase reflects the increase in borrowings on the Company's
credit facilities for the six months ended September 30, 1996 compared to
September 30, 1995.
On September 20, 1993 the Company entered into an agreement with an
affiliate of its lender to provide a reducing revolving line of credit of up to
$10,000,000, effective August 30, 1996 this amount was increased to
$20,000,000(the "Credit Facility"). The Credit Facility (as amended for
borrowing base adjustments) provided the Company with available borrowings of
$10,000,000 at September 30, 1996 based upon the Company's financial position
and level of oil and natural gas and pipeline-based reserves, with available
borrowings reducing $110,000 at the first of each month. Available borrowings
are also subject to a reduction based upon the amount of outstanding letters of
credit used to support certain bonding requirements ($140,000 as of September
30, 1996). The Credit Facility provides that availability is subject to
adjustment based upon the Company's semi-annual reserve study and is subject to
certain covenants (see Note 4 to the Company's March 31, 1996 financial
statements). As of September 30, 1996, the Company had $9,220,000 outstanding
under the Credit Facility. At September 30, 1996 the Company was in compliance
with its loan covenants. Amounts borrowed under the Credit Facility bear
interest at the lending bank's prime rate plus 1 1/2%. Also, at September 30,
1996, the Company had approximately $63,827 outstanding under a mortgage note
payable. The mortgage note bears interest at the rate of 8% and requires the
Company to make monthly payments of approximately $1,019 through July 2003. The
Company purchased a building for its headquarters and entered into a mortgage
note on May 13, 1996 for $540,000 over 15 year term with an interest rate of
8.58% to be renegotiated every five years. The amount outstanding under the
mortgage note at September 30, 1996 was $532,561.
The amounts borrowed under its reducing revolving line of credit are
secured by the Company's receivable, inventory, equipment and a first mortgage
on certain of the Company's interests in oil and gas wells and reserves. The
mortgage notes are secured by certain land and buildings.
In addition to bank financing, in 1994 the Company secured $335,000 in
financing from NAGIT, a principal stockholder of the Company, relating to the
purchase of certain producing wells, gas gathering lines and drilling locations.
The amounts outstanding under the terms of the Company's financing arrangements
with NAGIT are subordinated to the prior payment and amounts outstanding under
the Company's Credit Facility, and bear an interest rate at the prime rate
designated by the Chemical Bank, N.A., plus 1% (9.25% at September 30, 1996).
This agreement grants NAGIT an overriding royalty interest in the acquired
properties. Repayment of the loan is in cash, based upon a percentage of the net
monthly revenues from the acquired properties.
Also, effective June 13, 1995, the Company entered into a Loan
Agreement with NAGIT with respect to a loan of $1,000,000. The unsecured loan
may be repaid in cash plus accrued interest (with approval of the Company's
senior lender) with the proceeds of a sale of equity or may be converted into
shares of Common Stock at the rate of $1.00 per share. The loan is subordinate
to the Company's Credit Facility with its senior lender and bears interest at
the rate of 8% per annum. As of September 30, 1996, the balance of the loan and
accrued interest was $1,105,812. In connection with entering into the Loan
Agreement, the Company issued a warrant to purchase 200,000 shares of Common
Stock at $1.20 per share and a warrant to purchase 300,000 shares of Common
Stock at $1.00 per share. The warrants may be redeemed by the Company for $.10
per share at its option upon 30 days written notice. All of the Company's
indebtedness to NAGIT, as well as the related Warrants, were acquired by Lomak
in connection with the stock purchase described below.
As the financial results for the six months ended September 30, 1996
indicate North Coast Energy, Inc. made significant strides to regain
profitability. Recent developments, however, have caused concern for the
Company's ability to meet its current obligations. The Company has focused on
its core business of forming Drilling
16
<PAGE> 18
Programs which enables the Company to generate drilling revenues, well operating
fees, administrative fees and transportation fees. Management anticipated a
profitable year based upon improved drilling margins, higher product prices, the
results of the first six months of fiscal 1997 and a generally positive
reception from its broker/dealer network for Drilling Program sales. On or about
September 4, 1996 Lomak Petroleum, Inc.(Lomak), a publicly traded oil and gas
company, purchased approximately 47% of the outstanding common stock of the
Company from two of the Company's largest shareholders, NAGIT, USA (NAGIT) and
Bruce E. Brocker.
At the Company's annual meeting of stockholders, Lomak presented
proxies representing the shares acquired from these shareholders and indicated
its intention to nominate and elect two directors in the class whose terms were
scheduled to expire at that meeting. Due to concerns about the validity of such
proxies, the annual meeting was adjourned to a later date. On September 11,
1996, the meeting was reconvened. At the reconvened meeting, the Company
recognized the validity of the proxy executed by NAGIT (PLC), but reserved its
rights with respect to the proxy executed by Mr. Brocker. As described under the
caption "Legal Proceedings," litigation among the Company, Lomak and Mr. Brocker
then ensued. Also as described under "Legal Proceedings," the parties have
recently reached a settlement with respect to that litigation.
Revenues derived from the Company's Drilling Programs provide an
important source of the Company's cash flow. Due to uncertainties among
potential Drilling Program investors arising out of Lomak's acquisition of a
substantial ownership interest in the Company and the other matters described
above, the Company's ability to market its Drilling Programs has been adversely
affected. Consequently, demands on the Company's capital resources have
increased due to reduced cash flow associated with lower levels of investor
interest in its Drilling Programs and increased costs associated with litigation
and evaluating the Company's strategic alternatives. This has necessitated
actions by the Company to alter its growth oriented business plan in order to
conserve cash. On October 21, 1996, the Company initiated layoffs of 21% of its
staff coupled with a temporary reduction or deferment in wages to many of its
remaining employees. Additional cost cutting measures may become necessary in
the future if investor interest in the Company's Drilling Programs does not
increase.
With the reduction of the Drilling Program activity and the need to
conserve cash, the Company's ability to monetize equipment it owns on productive
wells and increase profitably through the Drilling Programs will be adversely
affected. It will be necessary for the Company to secure additional sources of
capital or financing for its future projects and to fund its current
obligations. In the event that available borrowings under the Credit Facility
are not sufficient or additional financing cannot be obtained, the Company would
be required to continue its current efforts to conserve cash resources. In order
to accomplish this objective, the Company believes that it would be necessary to
take various actions, including reducing the amount of capital raised in future
Drilling Programs, the introduction of additional cost cutting measures and the
possible sale of certain assets. Management of the Company believes that
measures of this type would have a material adverse effect on the Company.
The Company currently has 303,265 shares of Series A, 6% Non-Cumulative
Convertible Preferred Stock ("Stock A Stock") and 625,000 shares of Series B,
Cumulative Convertible Preferred Stock ("Series B Stock") outstanding. Holders
of Series A Stock are entitled to receive Semi-annual cash dividends at an
annual rate of $.60 per share and holders of Series B Stock are entitled to
receive quarterly cash dividends at an annual rate of $1.00 per share. The next
Semi-annual dividend payment on the Series A Stock is scheduled to be made on
December 1, 1996, and the next quarterly dividend payment on the Series B Stock
is scheduled to be made on December 31, 1996. As a result of the increased
demands on the Company's cash flow resulting from the lower level of investor
interest in its Drilling Programs, the Company anticipates that it may be unable
to make these dividend payments when due.
17
<PAGE> 19
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On June 18, 1996, the Company initiated an action in the Court of
Common Pleas of Mahoning County, Ohio styled NORTH COAST ENERGY, INC. VS. LOMAK
PETROLEUM, INC., ET AL., Case No. 96 CV 01555, against both Lomak and its
wholly-owned subsidiary, Border Resources, Inc. The complaint seeks damages in
excess of $517,000 for, among other things, the value of natural gas sold by the
Company to the defendants between December 1995 and March 1996, but for which
payment was never made by the defendants. Border Resources counterclaimed for
damages in excess of $950,000 based upon the allegation that the Company had
breached an existing contract by stopping further deliveries of gas which
allegedly necessitated the purchase of replacement gas by Border at a higher
price. Lomak's motion to dismiss was denied by the Court on September 3, 1996.
On September 4, 1996 representatives of Lomak attended the Company's
Annual Meeting of Stockholders at the Company's headquarters in Twinsburg, Ohio,
and presented proxies which purported to represent approximately 46.49% of the
shares of the Company's common stock which had been purchased by Lomak from
NAGIT (USA), North American Gas Investment Trust, PLC, and Bruce E. Brocker,
formerly the Company's Chairman of the Board. The meeting was adjourned until
the following Wednesday, September 11, 1996, to allow the inspectors of election
and legal counsel to verify the validity of the proxies and also to review the
Separation Agreement of January 6, 1995 between the Company and Brocker to
determine if the purported sale represented a breach of that agreement.
At the reconvened meeting of September 11, the Company recognized the
NAGIT (PLC) proxy, but reserved its rights with respect to the proxy executed by
Mr. Brocker based upon a review of Mr. Brocker's Agreement pursuant tot which he
sold his stock to Lomak. When the Chairman, Garry Regan, attempted to adjourn
the meeting once again based upon this issue, representatives of Lomak acted to
continue the meeting and elect their representatives as Directors, being C. Rand
Michaels and Steven L. Gorse, in opposition to the Company's nominees. Lomak
then filed an action in the Court of Chancery for the State of Delaware in a
case styled Lomak Petroleum, Inc., C. Rand Michaels and Steven L. Grose vs.
North Coast Energy, Inc., Charles M. Lombardy, Jr., and Charles K. Ebinger,
Civil Action No. 15211. The Company raised as an affirmative defense the
invalidity of the alleged proxy from Bruce E. Brocker and the fact that the
Shareholders' Meeting of the 11th had been adjourned without any valid action
having been taken.
The Company also amended its complaint in the Mahoning County, Ohio
action relating to the natural gas sales dispute to add a claim for tortious
interference against Lomak and a breach of contract claim against Mr. Brocker
with respect to his separation agreement with the Company.
Following discussions and negotiations between representatives of the
Company and Lomak, effective November 12, 1996, the Company entered in a
Settlement Agreement with Lomak in which all parties stipulated to the dismissal
of the Delaware litigation and to the litigation relating to Lomak's acquisition
of Mr. Brocker's shares in Ohio. The Settlement Agreement provides that the
Company will acknowledge the election of Messrs. Michaels and Grose as Directors
of the Company and, in addition, the Company and its Board of Directors have
agreed to increase the size of the Board from six to nine directors. The Board
will fill these vacancies by electing Charles M. Lombardy, Jr., Dr. Charles
Ebinger, the Board's original nominees for the September 1996 Annual Meeting,
and John H. Pinkerton of Lomak to fill these vacancies.
18
<PAGE> 20
The Company also agreed to withdraw its motion for leave to amend its
complaint in the Mahoning County, Ohio action and entered into a separate
settlement agreement and mutual release with Bruce E. Brocker whereby both
parties acknowledged the continuing validity of the Separation Agreement of
January 6, 1995. Accordingly, the only remaining legal proceeding is to the
existing gas contract dispute with Lomak and its subsidiary, Border Resources.
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibits
10.32 Fifth Amendment to Credit Agreement by and between Bank One,
Texas, N.A. and the Company dated August 30, 1996.
10.33 Open End Mortgage and Promissory Note by and between Bank One,
Akron, N.A. and the Company dated April 30, 1996.
11.1 Computation of Earnings per Common Share.
27.1* Financial Data Schedule
b). No reports on Form 8-K have been filed during the quarter for which
this report was filed.
- --------
* Exhibit 27.1 furnished for Securities & Exchange Commission only
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH COAST ENERGY, INC.
November 13, 1996 /s/ Charles M. Lombardy, Jr.
--------------------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer and Director
November 13, 1996 /s/ Tim Wagers
--------------------------------------------
Tim Wagers
Principal Accounting and Financial Officer
20
<PAGE> 1
Exhibit 10.32
FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and
entered into effective as of the 30th day of August, 1996, by and between NORTH
COAST ENERGY, INC., a Delaware corporation (the "BORROWER") and BANK ONE, TEXAS,
NATIONAL ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto have entered into the Credit Agreement dated
September 20, 1993, as amended by that certain First Amendment to Credit
Agreement effective as of March 16, 1994, that certain Second Amendment to
Credit Agreement effective as of January 13, 1995, that certain Third Amendment
to Credit Agreement effective as of August 8, 1995, and that certain Fourth
Amendment to Credit Agreement effective as of March 31, 1996 (as amended, the
"AGREEMENT"), pursuant to which the Lender has extended credit to the Borrower;
and
WHEREAS, the parties to the Agreement are desirous of amending the
Agreement in the particulars hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in the Agreement and this Amendment, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGREEMENT,"
"AMENDMENT," "BORROWER," and "LENDER" shall have the meaning assigned to such
term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the
Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.
1.3 REFERENCES. References in this Amendment to Article or Section numbers
shall be to Articles and Sections of this Amendment, unless expressly stated to
the contrary. References in this Amendment to "hereby," "herein," "hereinafter,"
"hereinabove," "hereinbelow," "hereof," and "hereunder" shall be to this
Amendment in its entirety and not only to the particular Article or Section in
which such reference appears.
<PAGE> 2
1.4 ARTICLES AND SECTIONS. This Amendment, for convenience only, has been
divided into Articles and Sections and it is understood that the rights, powers,
privileges, duties, and other legal relations of the parties hereto shall be
determined from this Amendment as an entirety and without regard to such
division into Articles and Sections and without regard to headings prefixed to
such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural and likewise the
plural shall be understood to include the singular. Words denoting sex shall be
construed to include the masculine, feminine, and neuter, when such construction
is appropriate, and specific enumeration shall not exclude the general, but
shall be construed as cumulative. Definitions of terms defined in the singular
and plural shall be equally applicable to the plural or singular, as the case
may be.
ARTICLE II
AMENDMENTS TO AGREEMENT
-----------------------
The Borrower and the Lender hereby amend the Agreement in the
following particulars, effective as of and after the effective date of this
Amendment:
2.1 AMENDMENT OF SECTION 1.2. The following definitions in Section 1.2 of
the Agreement are hereby amended to read as follows:
"COMMITMENT AMOUNT" shall mean the amount of $10,000,000, as such
amount is reduced pursuant to Section 2.1.
"NOTE" shall mean the promissory note of the Borrower, in the form
attached as Exhibit I to the Fifth Amendment to Credit Agreement dated effective
August 30, 1996, together with all renewals, extensions for any period,
increases and rearrangements thereof.
2.2 AMENDMENT OF SECTION 2.1. The last sentence of Section 2.1 of the
Agreement is hereby amended to read as follows:
"Commencing on October 1, 1996 and continuing thereafter on the first
day of each calendar month through the date of the next Borrowing Base
determination, the Commitment Amount shall be reduced by $110,000, and
thereafter reduced on the first day of each calendar month in the amount
determined by the Lender in connection with any redetermination of the Borrowing
Base made in accordance with Section 2.8."
2
<PAGE> 3
2.3 AMENDMENT OF SECTION 2.8(A). Section 2.8(a) of the Agreement is hereby
amended to read as follows:
"(a) The Borrowing Base as of the date of the Fifth Amendment to this
Agreement is acknowledged by the Borrower and the Lender to be $10,000,000. "
2.4 AMENDMENT OF SECTION 2.8(B). The first sentence of Section 2.8(b) of
the Agreement is hereby amended to read as follows:
"(b) The Borrowing Base shall be redetermined semi-annually as of each
March 1st and September 1st on the basis of financial and engineering
information supplied by the Borrower in compliance with the provisions of this
Agreement, including, without limitation, Reserve Reports, and all other
information available to the Lender."
2.5 AMENDMENT OF SECTION 5.2. Section 5.2 of the Agreement is hereby
amended to read as follows:
"QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES. Deliver to
the Lender, on or before the 60th day after the close of each of the first three
quarterly periods of each fiscal year of the Borrower, (a) a copy of the
unaudited consolidated Financial Statements or the Securities and Exchange
Commission Report on 10Q of the Borrower and its Subsidiaries as at the close of
such quarterly period and from the beginning of such fiscal year to the end of
such period, such Financial Statements or 10Q to be certified by a Responsible
Officer of the Borrower as having been prepared in accordance with GAAP and as a
fair presentation of the condition of the Borrower and its Subsidiaries, subject
to changes resulting from normal year-end audit adjustments, and (b) a
Compliance Certificate."
2.6 AMENDMENT OF SECTION 5.3. Section 5.3 of the Agreement is hereby
amended to read as follows:
"ANNUAL FINANCIAL STATEMENTS. Deliver to the Lender, on or before the
120th day after the close of each fiscal year of the Borrower, (a) a copy of the
annual audited consolidated Financial Statements or the Securities and Exchange
Commission Report on 10K of the Borrower and its Subsidiaries, and (b) a
Compliance Certificate."
2.7 AMENDMENT OF SECTION 6.1. Section 6.1 of the Agreement is hereby
amended to read as follows:
"INDEBTEDNESS. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; PROVIDED, HOWEVER, the
3
<PAGE> 4
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 60 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made, (c)
Indebtedness of the Borrower existing as of the Closing Date in favor of The
Metropolitan Savings Bank of Youngstown on the facility of the Borrower located
at 3896 Oakwood Avenue, Youngstown, Ohio 44515, (d) other Indebtedness, together
with Contingent Obligations outstanding under Section 6.2(d), not exceeding
$500,000 in the aggregate at any time, and (e) Indebtedness of the Borrower
existing as of the date of the Fifth Amendment to this Agreement in favor of the
Lender and Bank One, Akron, N.A. in the original principal amount of $540,000 on
the corporate headquarters of the Borrower located at 1993 Case Parkway,
Twinsburg, Ohio 44087 "
2.8 AMENDMENT OF SECTION 6.3. Section 6.3 of the Credit Agreement is hereby
amended to read as follows:
"LIENS. Create, incur, assume, or suffer to exist any Lien on any of
its Oil and Gas Properties or any other of its Property, whether now owned or
hereafter acquired; PROVIDED, HOWEVER, the foregoing restriction shall not apply
to (a) Permitted Liens, (b) Liens to secure the Indebtedness permitted under
Section 6.1(c), (c) purchase money Liens to secure Indebtedness permitted under
Section 6.1(d)," or (d) liens to secure Indebtedness permitted under Section
6.1(e). /s/ CML /s/CMM
2.9 AMENDMENT OF SECTION 6.14. Section 6.14 of the Agreement is hereby
amended to read as follows:
"SHAREHOLDER'S EQUITY. Permit Shareholder's Equity as of the close of
any fiscal quarter to be less than $7,000,000, plus a cumulative 80% of positive
Net Income for all fiscal years of the Borrower ending subsequent to March 31,
1996, less the amount of Preferred Stock dividends made for such period, plus a
cumulative 100% of all net proceeds from equity offerings commencing from August
31, 1996."
ARTICLE III
CONDITIONS
----------
The obligation of the Lender to amend the Agreement as provided herein is
subject to the fulfillment of the following conditions precedent:
3.1 RECEIPT OF DOCUMENTS AND OTHER ITEMS. The Lender shall have received,
reviewed, and approved the following documents and other items,
4
<PAGE> 5
appropriately executed when necessary and in form and substance satisfactory to
the Lender:
(a) multiple counterparts of this Amendment executed by the Borrower,
as requested by the Lender;
(b) Notice of Final Agreement; and
(c) a Facility Fee in the amount of $5,000.
3.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV of the Agreement and in any other Loan
Document shall be true and correct, except as affected by the transactions
contemplated in the Agreement and this Amendment.
3.3 MATTERS SATISFACTORY TO LENDER. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby expressly re-makes, in favor of the Lender, all of the
representations and warranties set forth in Article IV of the Agreement and set
forth in any other Loan Document to which it is a party, and represents and
warrants that all such representations and warranties remain true and
unbreached, except as affected by the transactions contemplated in the Agreement
and this Amendment.
ARTICLE V
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents to which it is a party, in all things in
accordance with the terms and provisions thereof, as amended by this Amendment.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this Amendment is expressly limited to
the matters addressed herein and this Amendment shall not operate as a waiver of
any past, present, or future breach, Default, or Event of
5
<PAGE> 6
Default under the Agreement, except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this Amendment.
6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document
heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this Amendment.
6.3 PARTIES IN INTEREST. All provisions of this Amendment shall be binding
upon and shall inure to the benefit of the Borrower, the Lender, and their
respective successors and assigns.
6.4 RIGHTS OF THIRD PARTIES. Subject to the provisions of Section 6.3, all
provisions herein are imposed solely and exclusively for the benefit of the
Lender and the Borrower and no other Person shall have standing to require
satisfaction of such provisions in accordance with their terms and any or all of
such provisions may be freely waived in whole or in part by the Lender at any
time if in its sole discretion it deems it advisable to do so.
6.5 ENTIRE AGREEMENT. THIS AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE BORROWER AND THE LENDER WITH RESPECT TO THE SUBJECT HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES
REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS AMENDMENT, THE
AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND SHE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
SUCH PARTIES.
6.6 GOVERNING LAW. THIS AMENDMENT SHALL CONSTITUTE A CONTRACT ENTERED INTO
UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT
THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS
AND HEREBY WAIVES ANY
6
<PAGE> 7
RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY
LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND THE LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR
OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS AMENDMENT, THE AGREEMENT,
OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AMENDMENT, THE AGREEMENT,
OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AMENDMENT.
IN WITNESS WHEREOF, this Fifth /s/CMM /s/CML Amendment to Credit Agreement
is executed effective as of the date first hereinabove written.
NORTH COAST ENERGY, INC.
By: /s/Charles M. Lombardy, Jr.
----------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer
BANK ONE, TEXAS,
NATIONAL ASSOCIATION
By: /s/ Christine M. Macan
----------------------------------
Name: Christine M. Macan
--------------------------------
Title: Vice President
-------------------------------
7
<PAGE> 8
EXHIBIT I
---------
[FORM OF NOTE]
PROMISSORY NOTE
---------------
$20,000,000 Houston, Texas August 30, 1996
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker")
promises to pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION ("Payee"),
at its banking quarters in Houston, Harris County, Texas, the sum of TWENTY
MILLION DOLLARS ($20,000,000), or so much thereof as may be advanced against
this Note pursuant to the Credit Agreement dated of even date herewith by and
between Maker and Payee (as amended, supplemented, or restated from time to
time, the "CREDIT AGREEMENT"), together with interest at the rates and
calculated as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
This Note is issued, in whole or in part, in renewal and extension, but
not innovation or discharge, of the remaining principal balance of the
Promissory Note dated September 20, 1993, in the face amount of $10,000,000,
executed by Maker and payable to the order of Payee.
Without being limited thereto or thereby, this Note is secured by the
Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL STATUTES, ARTICLE 5069, CHAPTER 15
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
8
<PAGE> 9
NORTH COAST ENERGY, INC.
By: /s/ Charles M. Lombardy, Jr.
-----------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer
9
<PAGE> 10
NOTICE OF FINAL AGREEMENT
-------------------------
TO: North Coast Energy, Inc. ("Borrower")
5311 Northfield Road, Suite 320
Bedford Heights, Ohio 44146
As of the effective date of this Notice, Borrower and BANK ONE, TEXAS,
NATIONAL ASSOCIATION ("Bank") have consummated a transaction pursuant to which
Bank has agreed to make a loan or loans to Borrower, to renew and extend an
existing loan or loans to Borrower, and/or to otherwise extend credit or make
financial accommodations to or for the benefit of Borrower, in an aggregate
amount up to $10,000,000 (collectively, whether one or more, the "Loan") .
In connection with the Loan, Borrower and Bank have executed and
delivered and may hereafter execute and deliver certain agreements, instruments,
and documents (collectively hereinafter referred to as the "WRITTEN LOAN
AGREEMENT").
It is the intention of Borrower and Bank that this Notice be
incorporated by reference into each of the written agreements, instruments, and
documents comprising the Written Loan Agreement. Borrower and Bank each warrants
and represents that the entire agreement made and existing by or among Borrower
and Bank with respect to the Loan is and shall be contained within the Written
Loan Agreement, as amended and supplemented hereby, and that no agreements or
promises exist or shall exist by or among Borrower and Bank that are not
reflected in the Written Loan Agreement.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Effective Date: August 30, 1996.
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By: /s/Christine Macan
--------------------------
Name: Christine Macan
------------------------
Title: Vice President
-----------------------
(Signatures Continued on Next Page)
10
<PAGE> 11
ACKNOWLEDGED AND AGREED:
NORTH COAST ENERGY, INC.
By: /s/Charles M. Lombardy, Jr.
------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer
11
<PAGE> 1
Exhibit 10.33
BANK ONE
OHIO OPEN END MORTGAGE
AMOUNT $540,000.00
----------
The undersigned, North Coast Energy, Inc. ("Mortgagor"), for the following
purposes and in consideration of FIVE HUNDRED FORTY THOUSAND AND
NO/100------------------DOLLARS ($ 540,000.00 ) paid by BANK ONE, AKRON, NA
having an office at 50 S. MAIN ST., AKRON, OHIO 44308 ("Mortgagee") does grant
and convey unto Mortgagee, its successors and assigns, all right, title and
interest Mortgagor now has or hereafter may have in and to all the premises
located in City of Twinsburg, Summit County, Ohio more specifically described in
Exhibit A attached hereto and made a part hereof, including such real property,
all buildings now or hereafter attached to or used in connection therewith, all
hereditaments, privileges and appurtenances thereunto belonging, all fixtures
and articles annexed thereto as permanent accessions now or hereafter used in
connection therewith, and all leases, rents, issues and profits which may arise
therefrom, be the same more or less, but subject to all legal highways
("Mortgaged Property").
1. USE AND PURPOSE. To have and to hold the Mortgaged Property to Mortgagee,
its successors and assigns, for the use and purpose of securing the
following (collectively "Indebtedness" or "Obligations"):
(a) DEBT SECURED. Payment of the Indebtedness evidenced by the following
instruments, including any amendments, extensions or renewals thereof
in the aggregate sum of the consideration expressed above with
interest, and the performance and observance of each term thereof by
the parties obligated thereon and any guarantor thereof (singularly
and collectively "Obligor"):
<TABLE>
<CAPTION>
<S> <C>
Promissory Note $540,000 April 30, 1996 North Coast Energy, Inc.
(i)
------------------- ------------------- --------------------- --------------------------------------
Instrument Amount Date Obligor
------------------------------- -------------------------------- --------------------------------------
Obligor Obligor Oblgor
(ii) $
------------------- ------------------- --------------------- --------------------------------------
Instrument Amount Date Obligor
------------------------------- -------------------------------- --------------------------------------
Obligor Obligor Oblgor
(iii) $
------------------- ------------------- --------------------- --------------------------------------
Instrument Amount Date Obligor
------------------------------- -------------------------------- --------------------------------------
Obligor Obligor Oblgor
</TABLE>
(b) ADVANCES FOR TAXES, INSURANCE, ETC. Upon request of Mortgagee,
Mortgagor also hereby agrees to pay to Mortgagee monthly a sum equal
to 1/l2 of the annual taxes, assessments and reassessments levied
against the Mortgaged Property and 1/12 of the annual premium of
insurance insuring the Mortgaged Property as estimated or computed in
each instance by Mortgagee, which payments Mortgagee is hereby
authorized to accumulate and commingle with other funds of Mortgagee
without any obligation to pay interest thereon and use for the payment
of taxes, assessments, reassessments and insurance premiums as they
become due and payable, provided the amount deposited with Mortgagee
for such purposes including any amount of additional deposit requested
by Mortgagee is sufficient with which to pay the same. In addition to
the right herein granted and in addition to the Indebtedness and
Obligations secured hereby, This Mortgage will also secure unpaid
balances of advances made by Mortgagee with respect to the Mortgaged
Property for the payment of taxes, assessments, insurance premiums or
costs incurred for the protection of the Mortgaged Property;
(c) OTHER ADVANCES. Payment by Mortgagor to Mortgagee of all sums expended
or advanced by Mortgagee pursuant to any term or provision of this
Mortgage;
(d) PERFORMANCE. Performance and observance of each covenant and agreement
herein, in the Indebtedness and Obligations secured and in any other
agreement relating to such, as construction loan agreements and
contracts;
(e) FUTURE ADVANCES. Unpaid balances of loan advances made after this
Mortgage will be delivered to the recorder for recording to the extent
that the total unpaid Indebtedness, exclusive of interest thereon,
does not exceed the consideration set forth above which will be the
maximum amount of Indebtedness that may be outstanding at any time;
and
(f) OTHER DEBTS. Payment by Mortgagor to Mortgagee of all other
liabilities and Indebtedness, direct or contingent, now or hereafter
owing by Mortgagor to Mortgagee.
2) COVENANTS OF MORTGAGOR. Mortgagor covenants and agrees with Mortgagee as
follows:
(a) TITLE AND USE. At the time hereof Mortgagor is well seized of the
Mortgaged Property, has title with a good and indefeasible estate in
fee simple and has good right to bargain, sell, convey, and encumber
as set forth herein; that Mortgagor will warrant and defend title to
the Mortgaged Property forever against the claims and demands of all
persons whomsoever; that the Mortgaged Property is free and clear of
all easements, reservations, conditions, restrictions and encumbrances
whatsoever, except liens for taxes and assessments not yet due and
payable, building and use restrictions of record, zoning ordinances,
if any, and the exceptions which may be set forth on Exhibit B
attached hereto and made a part hereof; that to the best of
Mortgagor's knowledge the Mortgaged Property while held by Mortgagor
or any previous owner has not been used contrary to law to use,
generate, store or dispose of materials such as toxic waste or
hazardous substances commonly identified by governmental regulations
as hazardous including but not limited to flammable, explosive,
corrosive, reactive, radioactive or otherwise hazardous to human use
of the Mortgaged Property ("Hazardous Materials") and there has been
no seepage, spills, release or discharge of Hazardous Materials on the
Mortgaged Property at any time.
(b) INSURANCE. Mortgagor will keep all buildings and other insurable
property now or hereafter erected or placed in or on the Mortgaged
Properly insured against loss or damage by fire, flood, builder's
risk, the several hazards comprehended from time to time within all
risk, extended coverage terms, including boiler and pressure vessel
hazards, if applicable, war damage, when available, and such other
hazards, casualties and contingencies, in such amounts at replacement
costs, and for such periods as may be required by Mortgagee and at no
time will the amount of fire and extended coverage be less than the
full insurable value of the Mortgaged Property. Further Mortgagor will
maintain comprehensive public liability insurance for injuries to
persons, including death, and property damage or loss of use in
amounts acceptable to Mortgagee. All such insurance will be carried in
companies approved by Mortgagee and will include a provision
satisfactory to it making loss payable to Mortgagee or naming
Mortgagee as an insured as its interest may appear. Mortgagor will
promptly pay when due all insurance premiums and upon request of
Mortgagee will promptly deliver the policies, certificates of
insurance or any renewal thereof to Mortgagee. Should any loss occur
to the Mortgaged Property Mortgagor will promptly give written notice
to Mortgagee of such loss or damage and will not adjust or settle such
loss without the written consent of Mortgagee, and Mortgagee is hereby
appointed attorney-in-fact for Mortgagor to make proof of loss or
damage if Mortgagor fails to do so promptly, to receive any sums
collected under said policies, which sums or any part thereof at the
option of Mortgagee may be applied as payment for the Indebtedness or
to the restoration or repair of the Mortgaged Property so destroyed or
damaged, and, in the event any insurance losses are paid by check,
draft or other instrument payable to Mortgagor, Mortgagee may endorse
Mortgagor's name thereon and take such further steps in behalf of
Mortgagor as are necessary to realize on such instrument. Application
of insurance proceeds to payment of Indebtedness will not extend,
postpone, or waive installments otherwise due, or change the amount of
payments to be made, and proceeds may be applied in such order and in
such amounts as Mortgagee may elect. In the event of foreclosure of
this Mortgage, all right, title and interest of Mortgagor in and to
any insurance policies then in force will pass to Mortgagee who is
hereby appointed attorney-in-fact for Mortgagor to assign and transfer
such policies.
(c) MAINTENANCE. Mortgagor will at all times maintain the
Mortgaged Property in good and substantial repair, free from waste or
nuisance of any kind; will make all repairs, replacements,
improvements and additions which may be necessary to preserve and
maintain the Mortgaged Properly; will permit the Mortgagee, its agents
or representatives, to inspect the same at any reasonable time; will
comply with any reasonable requirements made by Mortgagee with respect
to maintaining and preserving the Mortgaged Property; has and will
comply with all laws, ordinances and regulations affecting the
Mortgaged Property or its use and will not use, generate, store or
dispose of Hazardous Materials in, on, under or around the Mortgaged
Property or permit anyone to use the Mortgaged Property for such
purposes and will not permit to occur any seepage, spill, release or
discharge of Hazardous Materials on or onto the Mortgaged Property at
any time, and will indemnify Mortgagee for any loss arising out of the
presence of Hazardous Materials in any way on the Mortgaged Property
and any violation of federal, state or local environmental laws or
regulations, such as clean up costs, personal injury or death,
restoration, and remedial actions; will not alter, destroy or remove
any of the Mortgaged Property or permit the Mortgaged Property to be
altered, destroyed or removed or used for any purpose other than
<PAGE> 2
Exhibit 10.33
that for which it is now used or permit any easement thereon without
first obtaining Mortgagee's written permission; will complete in good
workmanlike manner any building or improvement which is being or may
be constructed; repaired thereon; will pay when due all claims for
work performed and material furnished and will not permit any lien of
mechanics or materialmen nor any judgment lien to attach to the
Mortgaged Property. Mortgagor hereby authorizes and empowers Mortgagee
at its option to do all things authorized or required to be done by
Mortgagee under any present or future law of the State of Ohio
relating to improvement of or payment of encumbrances on the Mortgaged
Property or to the granting of liens for work, labor, material or
machinery in connection with the construction of any building or other
improvement on the Mortgaged Property in protection of Mortgagee's
interest therein and Mortgagee will be subrogated to the claims of any
party paid with the proceeds.
(d) CONSTRUCTION. If any building or other Improvements of the Mortgaged
Property are to be constructed or are under construction and are not
completed, Mortgagee will have the right, upon the happening of any
event of default, to enter into possession of the Mortgaged Property
and perform any and all work and labor necessary to complete
improvements substantially in accordance with the plans and
specifications therefor and employ watchmen to protect the Mortgaged
Property; all sums expended by Mortgagee for such purposes will be
deemed to have been paid to Mortgagor and secured by this Mortgage.
For this purpose, Mortgagor hereby constitutes and appoints Mortgagee
its true and lawful attorney-in-fact with full power of substitution
to complete the construction in the name of Mortgagor, and hereby
empowers said attorney or attorneys to use any funds of Mortgagor
including any balance which may be held in escrow and any funds which
may remain unadvanced hereunder for the purpose of completing
construction in the manner called for by the plans and specifications;
to make such additions and changes and corrections in the plans and
specifications which will be necessary or desirable to complete
construction as Mortgagee deems necessary in its sole judgment and in
substantially the manner contemplated by the plans and specifications;
to employ such contractors, subcontractors, agents, architects and
inspectors as will be required for said purposes; to enforce or
otherwise without limitation deal with any bonding or insurance
company under any policy required hereunder as Mortgagor might do in
its own behalf; to pay, settle or compromise all existing bills and
claims which are or may be liens against the Mortgaged Property, or
which may be necessary or desirable for the timely completion of
construction or the removal of liens and encumbrances; to execute all
applications and certificates in the name of Mortgagor which may be
required by any construction contract; to do any and every act with
respect to construction which Mortgagor may do in its own behalf; and
to prosecute and defend all actions or proceedings in connection with
improvements on the Mortgaged Property and to take such action and
require such performance as Mortgagee deems necessary. This power of
attorney will be deemed to be a power coupled with an interest which
cannot be revoked. Said attorney-in-fact will also have power to
prosecute and defend all actions or proceedings in connection with the
construction of improvements on the Properly and to take such action
and require such performance as is deemed necessary.
Mortgagee will not be liable for any loss sustained by Mortgagor
resulting from Mortgagee's failure to enforce the power of attorney
granted herein or from any other act or omission of Mortgagee in
managing the Mortgaged Property. Nor will Mortgagee be obligated to
perform or discharge nor does Mortgagee hereby undertake to perform or
discharge any obligation, duty or liability with respect to
improvements and Mortgagor will indemnify Mortgagee for, and hold
Mortgagee harmless from, any and all liability, loss or damage which
may or might be incurred in the exercise or failure to exercise any of
the rights granted to Mortgagee under this section or by reason of any
assignment to Mortgagee of the construction contract, architectural
agreements, plans and specifications and other contract rights with
respect to the Mortgaged Property. Should Mortgagee incur any such
liability or in defense of any claims or demands relating thereto, the
amount thereof, including costs, expenses and reasonable attorney's
fees, will be secured hereby and Mortgagor will reimburse Mortgagee
therefore immediately upon demand. It is further understood that this
section will not operate to place responsibility upon Mortgagee for
the control, care, management or repair of the Mortgaged Property or
for the carrying out construction, nor will it operate to make
Mortgagee responsible or liable for any waste committed on the
Mortgaged Property by the contractor or any other parties, or for any
dangerous or defective condition of the Mortgaged Property, or for any
negligence in the management, upkeep, repair or control of the
Mortgaged Property resulting in loss, injury, or death to any
contractor, subcontractor, licensee, invited employee, agent or
stranger.
(e) TAXES. Mortgagor will pay before they become delinquent, all taxes
(both general and special), assessments, water rates, sewer service or
other governmental or municipal charges, fines or impositions lawfully
levied or assessed against the Mortgaged Property, or any part
thereof, or upon the rents, income and profits thereof, so that the
lien and priority of this Mortgage will be fully preserved; will
promptly at the request of Mortgagee deliver to Mortgagee the receipt
showing such payment; and will allow no payment of any taxes,
assessments or governmental charges by a third party with subrogation
attaching; nor permit the Mortgaged Property or any part thereof to be
sold or forfeited for any tax, assessment or governmental charge
whatsoever.
(f) FURTHER ASSURANCES, CONDEMNATION. Mortgagor will execute, acknowledge
and deliver all and every further assurance in law for the better
assuring, conveying, assigning and transferring to Mortgagee the
Mortgaged Property hereby conveyed in such manner as Mortgagee will
require. All awards of damages in connection with any condemnation or
exercise of the power of eminent domain for public use of or injury to
any of the Mortgaged Property are hereby assigned and will be paid to
Mortgagee, who may apply the same to payment of the indebtedness,
including a foreclosure deficiency and Mortgagee is hereby authorized,
in the name of Mortgagor, to execute and deliver valid acquittances
thereof and to appeal to any such award. Application of proceeds to
payment of Indebtedness will not extend, postpone, or waive
installments otherwise due, or change the amount of payments to be
made, and proceeds may be applied in such order and in such amounts as
Mortgagee may elect.
3. EVENTS OF DEFAULT. Mortgagee will have the Remedies and powers set forth
herein upon occurrence of any of the following "Events of Default": (a)
failure of Mortgagor or Obligor to make payment when due of the principal
or interest of the secured Indebtedness or failure to perform any terms of
the Obligations; (b) failure of Obligor to furnish satisfactory additional
collateral; (c) failure of Mortgagor to comply With any of the terms and
conditions of this Mortgage (d) death of Mortgagor or Obligor, dissolution,
termination of existence, insolvency, business failure, appointment of a
receiver for Mortgagor or Obligor or any property of Mortgagor or Obligor,
assignment for the benefit of creditors or commencement of any proceeding
under any bankruptcy, reorganization, arrangement or liquidation law for
Mortgagor or Obligator, or if such proceedings are commenced by a creditor
and remain undismissed for thirty (30) days; (e) failure of Mortgagor or
Obligor to pay when due any premium on any policy of life or other
insurance pledged hereunder, or held in connection with the Mortgaged
Property; (f) Mortgagee deeming itself insecure and in good faith believing
that the prospect of payment or performance by Mortgagor or Obligor is
impaired; (g) the filing of a Judgment or statutory lien or the institution
of any proceedings by foreclosure attachment levy or otherwise against
Mortgagor, Obligor, the Mortgaged Property or any other collateral securing
the Indebtedness; (h) failure of Mortgagor or Obligor to furnish Mortgagee
within thirty (30) days after written request by Mortgagee, current
financial statements in form satisfactory to Mortgagee or to permit
Inspection of any Mortgagor's or Obligor's books or records; (i) any
representation, warranty, statement, report, or application made, or
furnished, by Obligor or Mortgagor proving to have been false, or
erroneous, in any material respect at the time of the making thereof; (j)
the issuance of any tax levy or lien against Mortgagor or Obligor or the
failure to pay, withhold, collect or remit any tax when assessed or due;
(k) abandonment, sale, or transfer of the Mortgaged Property by contract to
sell or lease, by conveyance, assignment of lease, rents or rights thereto,
encumbering or granting other rights therein, by Mortgagor; (I) a bulk sale
of Obligor's assets; or (m) the suspension of liquidation of Obligor's
business.
4. REMEDIES. Upon an Event of Default Mortgagee may at its option without
notice and without affecting the validity or priority of the lien hereby
created or any right of Mortgagee hereunder:
(a) Perform any such defaulted covenant or agreement to such extent as
Mortgagee will determine and enter upon the Mortgaged Property,
inspect, repair and maintain the same and perform such other acts
thereon as Mortgagee we deem necessary or advisable for any of the
above purposes and all funds so advanced by Mortgagee with interest
thereon at the highest rate applicable to the Indebtedness as set
forth in any instrument evidencing the Indebtedness, from the date
advanced until paid will be secured hereby and will be repaid promptly
without demand. Nothing herein will be construed as requiring
Mortgagee to advance funds for any of the aforesaid purposes.
Mortgagee will have the right to take possession of the Mortgaged
Property, manage it and collect the rents, issues and profits
therefrom and apply the same less reasonable costs of collection upon
the Indebtedness. Any and all of the rights and remedies granted by
this paragraph will accrue and become available to Mortgagee upon such
default whether or not a receiver has been appointed or a foreclosure
action has been commenced;
(b) Declare without notice all sums secured hereby immediately due and
payable whether or not such default be remedied by Mortgagor, to
enforce any of the rights which accrue to Mortgagee hereunder and to
enforce any right or remedy of Mortgagee under the laws of the State
of Ohio. Upon commencement of any Judicial proceedings to enforce any
right under this Mortgage, the court in which such proceedings are
brought, at any time thereafter (without notice to Mortgagor or any
party claiming under Mortgagor, such notice being hereby expressly
waived, and without reference to the then value of the Mortgaged
Property, to the use of the Mortgaged Property as a homestead or to
the solvency or insolvency of any Obligor or other grounds for
extraordinary relief) may appoint a receiver for the benefit of
Mortgagee with power to take immediate possession of the Mortgaged
Property, manage, rent and collect the rents, issues and profits
thereof and such rents, issues and profits when collected may be
applied toward the payment of the indebtedness and the costs. taxes,
insurance or other items necessary for the protection and preservation
of the Mortgaged Property, including the expenses of such
receivership. In the event of a sale, Judicial or otherwise, of the
Mortgaged Property, the Mortgaged Property may be sold in one or more
parcels as the Mortgagee may determine.
<PAGE> 3
Exhibit 10.33
5. WAIVER. To the extent permitted by law Mortgagor will not claim the benefit
of any stay, extension, valuation, appraisement or redemption law now or at
any time hereafter in force.
6. AVAILABILITY OF REMEDIES. Every right and remedy provided in this Mortgage
will be cumulative of every other right or remedy of Mortgagee whether
herein or by law conferred and may be enforced concurrently therewith and
no acceptance of the performance of any obligation as to which Mortgagor
will be in default, or waiver of particular or single performance of any
obligation or observance of any covenant, will be construed as a waiver of
the obligation or covenant or as a waiver of any other default then,
theretofore or thereafter existing. Mortgagee's acceptance of less than the
entire payment of principal due or receipt of interest computed at a rate
less than the maximum permitted to be charged under the terms of any
Obligation or Indebtedness will not constitute a waiver of Mortgagee's
rights hereunder to thereafter require payment of the full amount of
principal and interest computed at such maximum rate and receipt of
payments after maturity, by acceleration, declaration or otherwise of any
instrument of Indebtedness in an amount less than that due will not
constitute a waiver of Mortgagee s rights to full payment unless so agreed
in writing
7. INDULGENCE. Mortgagee may, at any time and without notice, deal with
Mortgagor or grant to Mortgagor or any Obligor any indulgence or
forbearance or any extension of time of payment of the Indebtedness, or a
release of liability for payment of the secured Indebtedness, or may, with
or without consideration, release portions of the Mortgaged Property from
the lien hereof. No such act or acts of Mortgagee will affect the personal
liability of any other Obligor for payment of the Indebtedness or the lien
of this Mortgage upon the remainder of the Mortgaged Property for the full
amount of the Indebtedness. Assumption of liability for the payment of the
Indebtedness by any other party will not release Mortgagor from liability
for the of secured Indebtedness, and the consent. Mortgagee to any such
assumption or to any sale, lease, conveyance or transfer of the Mortgaged
Property will not be so construed as a release of any Obligor. No delay or
omission of Mortgagee to exercise any right, power or remedy accuring upon
any default will exhaust or impair any such right, power or remedy or will
be construed to be a waiver of any such default, or acquiescence therein;
and every right power and remedy given by this Mortgage may be exercised
from time to time and as often as may be deemed expedient by Mortgagee
8. JOINT AND SEVERAL LIABILITY. The term "Mortgagor" wherever used in this
Mortgage will include the joint and several liability of not only the
persons signing this Mortgage, but also any person or persons who hereafter
may assume payment of any or all of the Indebtedness, together with the
respective heirs, representatives, successors and assigns of such persons,
and the term "Mortgagee" wherever used in this Mortgage will include any
lawful owner, holder or pledgee of any indebtedness.
9. FINANCIAL STATEMENTS. As long as the Indebtedness remains unpaid in whole
or in part, Mortgagor agrees to furnish Mortgagee upon request by
Mortgagee, at such times reasonably required by Mortgagee, financial
statements certified by Mortgagor, including balance sheets and statements
of income and expense for such period requested by Mortgagee including such
information with respect to the Mortgaged Property as Mortgagee will
request.
10. DOWER. The undersigned, spouse of Mortgagor, if any, does hereby remise,
release and forever quit-claim unto Mortgagee, its successors and assigns,
all right, title and expectancy of dower in the Mortgaged Property.
11. FEES AND EXPENSES. If Mortgagee incurs any costs and expenses (including
reasonable attorneys' fees) in connection with any action or proceeding to
sustain the lien of this Mortgage or its priority or to enforce any of
Mortgagee's rights hereunder or to recover any Indebtedness, or for any
title examination or title insurance policy relating to title to the
Mortgaged Property required by Mortgagee, or in curing any default of
Mortgagor under any lease, or other agreement, all such sums will be paid
by Mortgagor on demand, together with interest thereon at the default rate
from date of payment by Mortgagee. To the maximum extent permitted by law,
such sums will be secured by this Mortgage and will be a lien on the
Mortgaged Property prior to any right, title or interest claimed upon the
Mortgaged Property subordinate to the lien of this Mortgage.
12. TIME IS OF THE ESSENCE. Time is of the essence in the perfommance of the
terms of this Mortgage, the Indebtedness and the Obligations.
13. INDEMNIFICATION. Mortgagor will protect save harmless and indemnify
Mortgagee from and against any and all claims, Iiabilities, costs and
ex-penses, of whatever nature, (including court costs and attomeys' fees),
which may arise or result, directly or indirectly, by reason of the use,
occupation or operation of the Mortgaged Property or any part thereof, or
of any violation of any covenants of this Mortgage.
14. ASSIGNMENT OF RENTS AND LEASES. Mortgagor hereby absolutely and
unconditionally assigns, transfers and sets over unto Mortgagee, its
successors and assigns, all present and future leases covering all or any
part of the Mortgaged Property and all of the rents, income, receipts,
revenues issues and profits now due or which may hereafter become due under
the leases or any extensions or renewals thereof, together with any and all
rights and remedies which Mortgagor may have against any tenant under any
of the leases or others in possession of the Mortgaged Property.
Mortgagee shall not be obligated to perform or discharge any
obligation or duty to be performed or discharged by Mortgagor under any of
the leases; and Mortgagor hereby agrees to indemnify Mortgagee for, and to
save Mortgagee harmless from, any and all liability, damage or expense
arising from any of the leases or from this assignment, including
attorneys' fees. This assignment shall not place responsibility for the
control, care, management or repair of the Mortgaged Property upon
Mortgagee. Upon any default in the payment of the Indebtedness, or upon any
default in performance or observance of any of the terms, covenants or
agreements of this Mortgage or any one or more of the other Instruments
securing the Indebtedness and Obligations all rents assigned hereunder
shall be paid directly to Mortgagee, and Mortgagee may notify the tenants
under the leases (or any other parties in possession of the Mortgaged
Property) to pay all of the rents directly to Mortgagee. Rents collected by
Mortgagee may be applied toward the payment of taxes, assets, insurance
premiums, repairs, protection of the Mortgaged Property, and other charges
against the Mortgaged Property, or in the reduction of the Indebtedness and
the payment of interest as Mortgagee may elect.
Mortgagor shall not lease the Mortgaged Property without
Mortgagee's consent, however if Mortgagee consents to a lease Mortgagor
will comply with and observe the duties of lessor thereunder and Mortgagor
will furnish Mortgagee with a copy upon request. Mortgagor agrees to
provide Mortgagee a separate Assignment of Lease upon request to clarify
the rights of Mortgagor and Mortgagee therein. The absence of a separate
assignment will not affect the rights of Mortgagee granted hereby.
15. NOTICES. Any provision in this Mortgage requiring or permitting notice or
demand or request will be deemed satisfied by written notice personally
served on Mortgagor or Mortgagee, as the case may be, or as of the fifth
(5th) day after being mailed by United States Postal Service, registered or
certified mail, return receipt requested, postage prepaid, addressed to
Mortgagor as follows:
North Coast Energy, Inc.
5311 Northfield Road, Suite 200
Bedford Heights, OH 44146
and addressed to Mortgagee as follows:
BANK ONE, Akron, NA
P.O. Box 3547
50 S. Main Street
Akron, OH 44309-3547
Attn: Commercial Real Estate Dept.
Either party may, by written notice to the other in the above manner, specify a
different address for notice purposes.
16. CONFLICTS. The terms of this Mortgage will prevail over conflicting terms
set forth in any of the Obligations secured.
17. SEVERABILITY. In the event that any provision of this Mortgage, the
Indebtedness or Obligations or any other agreement conflicts with
applicable law, such conflict will not affect other provisions of this
Mortgage, which can be given effect without the conflicting provision, and
to this end the provisions of this Mortgage, the Indebtedness and
Obligations, and other agreements are declared to be severable.
18. FURTHER ASSURANCES. Mortgagor will, at its own expense, within fifteen (15)
days after request by Mortgagee, do, execute, acknowledge and deliver all
further acts, deeds, conveyances, transfers, security interests, security
agreements, financing statements, renewals, certificates, affidavits,
continuation statements and other documents and assurances necessary or
proper to effectuate, complete, or perfect, or to continue and preserve,
the Obligations of Mortgagor and the lien provided for by this Mortgage in
the Mortgaged Property or any part thereof.
<PAGE> 4
Exhibit 10.33
Upon any failure by Mortgagor to do so, Mortgagee may make, execute,
record, file, re-record and/or re-file any and all such mortgages,
instruments, certificates and documents for and in the name of Mortgagor,
and Mortgagor hereby irrevocably appoints Mortgagee the agent and
attorney-in-fact of Mortgagor to do so.
19. GOVERNING LAW. This Mortgage will be construed, interpreted, enforced and
governed by and in accordance with laws of the State of Ohio.
20. CAPTIONS & HEADINGS, GENDER & NUMBER. The captions or headings of the
provisions hereof are for convenience of reference only and will not define
or limit the terms hereof. Whenever the singular or plural number,
masculine or feminine or neuter gender is used herein, it will equally
include the other.
21. PROVIDING ALWAYS, that if Mortgagor will pay to Mortgagee the secured
Indebtedness with interest and perform the secured Obligations at the time
and in the manner provided therein or under this Mortgage, then these
presents will be void and this Mortgage will be released and cancelled at
the cost of Mortgagor.
IN WITNESS WHEREOF, this Open End Mortgage has been executed at RAVENNA, OHIO,
this 30th day of APRIL , 1996.
NORTH COAST ENERGY, INC.
Signed, acknowledged and
delivered in the presence of: By: /s/ Tim Wagers,CFO/Treasurer
---------------------------------------------
/s/ Ronald S. Formanik /s/ Thomas A. Hill, Secretary/General Counsel
- ------------------------ ---------------------------------------------
/s/ Kelly A. Prest
- ------------------
<PAGE> 5
Exhibit 10.33
EXHIBIT A
OPEN END MORTGAGE BETWEEN
NORTH COAST ENERGY, INC.
------------------------
BANK ONE AKRON, NA
------------------
Mortgagee
LEGAL DESCRIPTION OF MORTGAGED PROPERTY
Situated in the City of Twinsburg, County of Summit and State of Ohio and known
as being part of Original Twinsburg Township Lot No. 5, Tract 3 and is bounded
and described as follows:
Beginning at the intersection of the center line of Darrow Road (S.R. 91) and
the center line of Case Parkway (60 feet wide) as shown by the dedication plat
recorded in Plat Cabinet D, Slide 466 - 468 of Summit County Map Records;
thence North 88 deg. 43' 24" West 1512.00 feet along said center line of Case
Parkway;
thence North 01 deg. 16' 36" East 30.00 feet to a point on the northerly line of
Case Parkway, said point being the PRINCIPAL PLACE OF BEGINNING of the premises
herein described;
thence North 88 deg. 43' 24" West 290.00 feet along said northerly line of Case
Parkway;
thence North 01 deg. 16' 36" East 231.92 feet to a point on the northerly line
of said Original Lot;
thence North 89 deg. 57' 40" East 290.08 feet along said northerly Original Lot
line:
thence South 01 deg. 16' 36" West 238.58 feet to the principal place of
beginning and containing 68,221 square feet or 1.566 acres of land according to
the survey of Dempsey & Associates, Inc., Professional Surveyors.
Property Located: 1993 Case Parkway, Twinsburg, Ohio
<PAGE> 6
Exhibit 10.33
PERSONAL ACKNOWLEDGMENT
STATE OF_____________________________________________)
) SS.
COUNTY OF____________________________________________)
Before me, a Notary Public in and for said county and state, personally
appeared the above-named ____________________________ and
________________________________________ who acknowledged signing the foregoing
instrument and that the same is his/her/their free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at this
_____ day of __________, 19____.
---------------------------------------
Notaly Pubic
CORPORATE ACKNOWLEDGMENT
STATE OF Ohio )
-----------
) SS.
COUNTY OF Mahoning )
-----------
BEFORE ME, a Notary Public and for said county and state, personally
appeared the above-named North Coast Energy, Inc. , by Tim Wagers its CFO /
Treasurer , and Thomas A. Hill its Secretary and General Counsel , who
acknowledged that he/she/they did sign the foregoing instrument for and on
behalf of the corporation by authority of its Board of Directors and that the
same is his/her/their free act and deed and the free act and deed of the
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Youngstown, Ohio , this 30th day of April , 1996 .
/s/ Kelly A. Prest
------------------------------
Notaly Pubic
KELLY ANNE PREST, Notary Public
State of Ohio
My Commission Expires November 7, 2000
PARTNERSHIP ACKNOWLEDGMENT
STATE OF_____________________________________________)
) SS.
COUNTY OF____________________________________________)
BEFORE ME, a Notary Public in and for said county and state, personally
appeared the above-named __________________________________ ,
by ___________________________ and ________________________________ its
partners, who acknowledged that he/she/they did sign the foregoing instrument
for and on behalf of the partnership and that the same is his/her/their free act
and deed and the free act and deed of the partnership. IN TESTIMONY WHEREOF, I
have hereunto set my hand and official seal at this day of , 19
-------------------------------
Notaly Pubic
This instrument prepared by BANK ONE, Akron, NA ,
------------------------------------------
Address of BANK ONE: P.O. BOX 3547 50 S. Main St., Akron, OH 44309-3547
------------------------------------------------------------
- -
<PAGE> 7
Exhibit 10.33
Schedule "A"
Note Date: April 30, 1996
----------------
Loan Amount: $540,000.00
Term: 5 years
Rate: Fixed for 60 months at 8.58 %. Rate will be adjusted every five
years at 300 basis points over the then current five year U.S.
Treasury Constant Maturity Index.
Repayment: 60 level monthly principal and interest payments of $5248.19 based
on a 180 month amortization. Payment to adjusted every five years
based upon any change in rate.
Acknowledged:
North Coast Energy, Inc.
By: /s/ Tim Wagers, Cfo/Treasurer and
----------------------------------
/s/ Thomas A. Hill, Secretary and General Counsel
-------------------------------------------------
Date: April 30, 1996
--------------------------------------
<PAGE> 8
Exhibit 10.33
BANK 1 ONE BUSINESS PURPOSE PROMISSORY NOTE
Date April 30, 1996 Executed at Ravenna, Ohio Amount $ 540,000.00
--------------- ------- ---- --------------
(City) (State)
For value received, receipt of which is hereby acknowledged, the undersigned
jointly and severally promises to pay to the order of BANK ONE, Akron, NA ("BANK
ONE") at its principal office located at 50 S. Main St., Akron, Ohio 44308 or at
such other place as BANK ONE may designate from time to time, in lawful money of
the United States of America, the principal sum of Five Hundred Forty Thousand
and no/100---------------------------------------------------------------------
DOLLARS or such lesser portion thereof as may have from time to time been
disbursed to, or for the benefit of the undersigned, and remaining unpaid
pursuant to the books or records of BANK ONE, together with interest on the
unpaid balance of principal advanced from the date(s) of disbursement until paid
in full as set forth below. Principal sum(s) disbursed and repaid will not be
available for redisbursement.
(If checked, the following is applicable:)
[ ] After ________________, 19 ___ ("FINAL DRAW DATE"), disbursements hereunder
will not be allowed.
RATE OF INTEREST AND ITS CALCULATION
[x]Fixed: Eight and Fifty-Eight One-Hundredths percent ( 8.58 %) per annum *See
attached Schedule "A"
[ ] Variable: Prime Rate plus _________________________ percent (___%) per annum
which will be adjusted to reflect the change in the Prime Rate:
[ ] on the first day of each month following the month in which the Prime
Rate changes
[ ] on the same day as the Prince Rate changes
"Prime Rate" means the rate announced from time to time by BANK ONE as its prime
rate.
Interest shall be calculated on a 360 day year basis and shall be calculated by
dividing the actual number of days which elapsed during the period interest
accrued by a year of 360 days times the interest rate in effect.
After this Note becomes due and payable, whether at maturity, by acceleration
or otherwise, the interest rate on the outstanding principal sum and accrued
interest will be the rate stated above plus ______ ____ percent (______%) per
annum.
BANK ONE shall have the right to assess a late payment processing fee in the
amount of the greater of $_________ or _____% of the scheduled payment in the
event of a default in payment that remains uncured for a period of at least
_________________ days.
TIME AND METHOD OF PAYMENT
[x] PRINCIPAL AND INTEREST DUE AND PAYABLE PERIODICALLY UNTIL THE MATURITY
DATE. On the MATURITY DATE all outstanding amounts of principal and
interest are immediately due and payable.
MATURITY DATE:
[ ] FOR FIXED AND VARIABLE RATE LOANS:
PRINCIPAL: Principal payment frequency:
[ ] Date of first principal payment:
_______________________________________, and continuing
[ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually thereafter
until the MATURITY DATE. Principal payment amount until the
MATURITY DATE:
[ ] $--------------------------
[ ] one-__________________ (1/_______ ) of the outstanding
principal sum as of the FINAL DRAW DATE
INTEREST: Interest payment frequency:
Date of first interest payment:
[ ] Monthly [ ] Quarterly thereafter until the MATURITY
DATE.
[x] FOR FIXED RATE LOANS ONLY:
PRINCIPAL AND INTEREST: Principal and interest payment frequency:
Date of first principal and interest payment: May 30, 1996,
and continuing -------------
[ ] Monthly [ ]Quarterty until the MATURITY DATE.
Amount of payment: $ 5,248.19 .
------------
[ ]PRINCIPAL DUE AND PAYABLE ON THE MATURITY DATE, INTEREST DUE AND PAYABLE ON
THE MATURITY DATE OR PERIODICALLY:
[ ]MATURITY DATE:______________________________
PRINCIPAL: The principal balance is immediately due and payable on the
MATURITY DATE
INTEREST: Interest is due and payable:
[ ]on the MATURITY DATE
[ ]beginning _______________________ and continuing
[ ]Monthly [ ] Quarterly thereafter, until the MATURITY DATE
on which date all outstanding accrued and
unpaid interest shall be immediately due and
payable.
PRINCIPAL AND INTEREST DUE AND PAYABLE ON DEMAND. Principal and interest are
immediately due and payable on demand but until such time as demand for
payment is made, principal and accrued interest thereon is due and payable
as hereinafter provided:
PRINCIPAL: Principal payment frequency:
[ ] on demand [ ]Installments as follows:
Date of first principal payment: ____________, and continuing
[ ] Monthly [ ] Quarterly [ ]Semiannually [ ] Annually
thereafter until demand is made.
Principal payment amount until demand is made:
[ ] $
----------------------------
[ ] one- ___________________ (1/___________) of the
outstanding principal sum as of the FINAL DRAW DATE
INTEREST: Interest payment frequency:
Date of first interest payment: ______________, and continuing
[ ] Monthly [ ] Quarterly thereafter, until demand is made.
This Note [X] is [ ] is not issued in conjunction with an agreement or
letter dated February 9, 1996 , to which referenceis made
--- --
and [X] is [ ] is not supported by other security documents.
- -------------------------------------------------------------------------------
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO C0MPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
North Coast Energy, Inc.
By: /s/ Tim Wagers, CFO/Treasurer
- ------------------------------------------------ ------------------------------------------ ------------------------------------
and /s/ Thomas A. Hill, Secreatary and General
Counsel
- ------------------------------------------------ ------------------------------------------ ------------------------------------
- ------------------------------------------------ ------------------------------------------ ------------------------------------
</TABLE>
Additional terms and conditions of this Promissory Note are contained on the
reverse side of this document.
- --------------------------------------------------------------------------------
CAT NO. OOB94 (11
<PAGE> 9
Exhibit 10.33
ADDITIONAL TERMS AND CONDITIONS OF PROMISSORY NOTE
1. All credits, deposits, accounts, securities or moneys of any signer,
endorser or guarantor hereof (Obligor", meaning each jointly and severally and
all other property or rights belonging to or in which Obligor has any interest,
now or hereafter pledged or hypothecated to BANK ONE or in the possession or
control of BANK ONE ("Collateral") shall be held by BANK ONE as security for the
payment of this Note, and of every other liability now or hereafter existing of
Obligor, absolute or contingent, due or to become due, and in whatsoever manner
acquired by or accruing to BANK ONE ("Obligations"). BANK ONE shall have the
right to setoff any such Collateral at any time without prior notice to Obligor.
2. If this Note is due and payable on demand it is subject to being called
at any time upon actual demand by BANK ONE. The inclusion of a payment schedule
is merely to provide terms for payment in the absence of actual demand and does
not affect or impair BANK ONE's absolute right to demand payment of this Note at
any time. Obligor agrees that BANK ONE may delay demand until, or make demand at
anytime before, any payment date specified in the demand payment section of this
Note.
3. At the option of BANK ONE, and without in any way limiting its right to
demand payment in full of this Note if it is due and payable on demand, all
Obligations shall become immediately due and payable without prior notice or
demand upon the occurrence of any of the following events of default: (a)
failure of Obligor to make payment when due of the principal or interest of this
Note and/or any of the Obligations; (b) failure of Obligor to furnish
satisfactory collateral or additional collateral, as the case may be, as
hereinafter agreed; (c) failure of Obligor to comply with any of the terms and
conditions of this Note and/or any of the Obligations or contained in any
security agreement or instrument securing this Note and/or any of the
Obligations; (d) death of Obligor; (e) dissolution of, termination of existence
of, insolvency of, business failure of, appointment of a receiver for, or
assignment for the benefit of creditors or a commencement of any proceeding
under any bankruptcy, reorganization, arrangement or liquidation law by or
against Obligor or any property of Obligor; (f) failure of Obligor to pay when
due any premium on any policy of life or other insurance pledged hereunder, or
held in connection with any Collateral; (g) BANK ONE deeming itself insecure and
in good faith believing that the prospect of payment or performance is impaired;
(h) the institution of any garnishment proceedings by attachment, levy or
otherwise against any deposit balance or Collateral maintained or deposited with
BANK ONE by Obligor; (i) failure of Obligor to either furnish BANK ONE within
thirty (30) days after written request by BANK ONE, current financial
statements, including income tax returns, in form satisfactory to BANK ONE or to
permit inspection of any of Obligor's books or records; (j) any representation,
warranty, statement, report, or application made, or furnished, by Obligor
proving to have been false, erroneous or misleading, in any material respect at
the time of the making thereof; (k) the issuance of any tax levy or lien against
Obligor or Obligor's failure to pay, withhold, collect or remit any tax when
assessed or due; (I) sale or transfer of Collateral out of Obligor's ordinary
course of business; (m) a bulk sale of Obligor's assets; or (n) suspension or
liquidation of Obligor's business.
4. No delay or omission on the part of BANK ONE in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right and/or remedy on any future occasion.
5. Obligor waives presentment, demand, notice, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note; and assents to any extension or postponement of the
time of payment, modification or waiver of any payment amount or any other
indulgence, and/or to the addition or release of any other party or person
liable hereon or of any Collateral herefore.
6. This Note shall be governed by and construed in accordance with the laws
of the State of Ohio in all respects.
7. Obligor will pay on demand all costs of collection and attorneys fees
incurred or paid by BANK ONE in enforcing this Note when the same have become
due, whether by acceleration or otherwise, if allowable by law.
8. BANK ONE shall have the right to charge interest on the amount of any
interest payment not paid as provided in this Note at the same rate as
applicable to the principal sum.
9. Payments shall be allocated between principal, interest and fees, if any,
in the discretion of BANK ONE, and, when applicable, any prepayments WILL BE
APPLIED TO PRINCIPAL in the inverse order of scheduled maturity.
10. All rights, powers, privileges and immunities herein granted to BANK ONE
shall extend to its successors and assigns and any other legal holder of this
Note. All rights, powers, privileges and immunities of Obligor hereunder may not
in any way be assigned, transferred or sold. BANK ONE at any time is authorized
to correct patent errors and fill in any blanks herein.
11. Obligor acknowledges that this Note evidences a loan made primarily for
business, commercial or agricultural purposes and not primarily for personal,
family or household purposes.
12. When any Obligation becomes due, whether by acceleration or otherwise,
and at any time thereafter, BANK ONE shall have all of the remedies provided in
the security documents including the remedies of a secured party under the
Uniform Commercial Code. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, BANK ONE will give Obligor reasonable notice of the time and place of
any public sale thereof or of the time after which any private sale or other
intended disposition is to be made. The requirement of reasonable notice shall
be met if such notice is mailed, postage prepaid, to the last known address of
the Obligor at least ten (10) days before the time of the sale or disposition.
13. When any Obligation becomes due, whether by acceleration or otherwise,
and at any time thereafter, BANK ONE is empowered to collect, sell, assign,
transfer, set over and deliver the whole or any part of any Collateral through
any stock exchange, broker or agent or at any public or private sale, either for
cash or credit or for future delivery, without assumption of credit risk, and at
any such sale BANK ONE may become the purchaser of any part of the Collateral
discharged from right of redemption. Upon any such sale, after deducting all
costs and expenses of every kind related to retaking, storing and selling the
Collateral, the residue of the proceeds thereof may be applied as BANK ONE may
determine toward the payment of any or all of the Obligations, whether due or
not, returning the overage, if any, to Obligor and Obligor shall be and remain
liable to BANK ONE for every and any deficiency after application of such
proceeds.
14. Right is expressly granted to BANK ONE at its option to transfer at any
time to itself or to its nominee any securities pledged hereunder, to receive
and retain the income thereon, all splits, substitutions and divisions, and hold
the same as security herefore, or apply it on the principal or interest which
has become due on any Obligation, whether by acceleration or otherwise, and, in
the case of voting shares or interests pledged, to vote the same when BANK ONE
deems the exercise of such power necessary to maintain or protect such
Collateral.
15. When any Obligation becomes due, whether by acceleration or otherwise,
and at any time thereafter, BANK ONE may, at its option, demand, sue for,
collect, or make any compromise or settlement it deems desirable with reference
to the Collateral. BANK ONE shall not be bound to take any steps necessary to
preserve any rights in the Collateral against prior parties, inasmuch as Obligor
agrees to assume such responsibility. BANK ONE shall have no duty with respect
to collection or protection of the Collateral or of any income on the Collateral
as to the preservation of any rights pertaining to the Collateral beyond safe
custody.
16. Obligor will deliver to BANK ONE satisfactory collateral or additional
collateral, as the case may be, should BANK ONE so require.
17. Obligor agrees that BANK ONE may take possession of any Collateral
without prior judicial hearing or process, hereby expressly waives any right to
such judicial hearing process, and hereby assents to any substitution, exchange
or release of Collateral.
18. When any Obligation becomes due, by acceleration or otherwise, BANK ONE
shall have the right, without notice to Obligor, any party claiming under
Obligor, or any other party, such notice being hereby expressly waived, and
without regard to the adequacy of value of the Collateral or the solvency or
insolvency of Obligor, to the appointment of a receiver by a court of competent
jurisdiction chosen solely by BANK ONE, upon application at any time, whether
prior to or aver a judgment has been obtained against Obligor, to take
possession of the assets and/or business of Obligor together with its books and
records, to maintain or to liquidate said assets and/or business, to collect the
proceeds of the Collateral and apply the net proceeds to any Obligation. Obligor
consents to jurisdiction and venue for the appointment of such receiver by such
court and agrees that any receiver so appointed may take possession of the
assets and/or business of the Obligor, together with the Collateral in any other
jurisdiction in which the Collateral may be located.
19. Obligor authorizes BANK ONE to exchange BANK ONE deposit, credit and
borrowing information about Obligor with third parties.
20. Obligor jointly and severally hereby authorizes any attorney at law to
appear in an ACTION ON THIS NOTE AT ANY TIME AFTER THE SAME BECOMES due, whether
by acceleration or otherwise, in any court of record in or of the State of Ohio,
or of elsewhere, and to waive the issuing and service of process against any or
all of said parties, enter an appearance and to confess judgment in favor of
BANK ONE against any or all of said parties for the amount that may be due,
together with costs of suit, and to release all errors and waive all rights of
appeal and stay of execution from the judgment rendered. After the judgment is
entered against one or more of said parties, the powers herein conferred may be
exercised as to one or more of the others. The death of Obligor shall not impair
the authority herein granted as to the survivor or survivors of Obligor.
<PAGE> 1
Exhibit 11.1
Computation of Primary and Fully Diluted Earnings Per Common Share
EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
9/30/95 9/30/96 9/30/95 9/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Loss $ (343,100) $ (228,106) $ (516,791) $ (75,955)
Series A Preferred Stock Dividends 0 0 (92,838) (91,542)
Series B Preferred Stock Dividends (116,167) (116,167) (232,333) (232,333)
----------- ----------- ----------- -----------
Pro Forma Loss Applicable to Common Stock $ (459,267) $ (344,273) $ (841,962) $ (399,830)
- ------------------------------------------------------------------------------------------------------------------
SHARES
Weighted Average Common Shares for the
period ended 8,032,509 8,041,213 8,031,649 8,040,743
Additional Shares Assuming Conversion of:
Employee Options Exercised
0 0 0 0
----------- ----------- ----------- -----------
Pro Forma Shares for Primary Earnings
Per Common Share 8,032,509 8,041,213 8,031,649 8,040,743
----------- ----------- ----------- -----------
Additional Shares Assuming Conversion of:
Preferred Stock
0 0 0 0
----------- ----------- ----------- -----------
Pro Forma Shares for Fully Diluted Earnings
Per Common Share 8,032,509 8,041,213 8,031,649 8,040,743
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
Primary Earnings Per Common Share $ (.06) $ (.04) $ (.10) $ (.05)
Fully Diluted Earnings Per Share *$ (.06) *$ (.04) *$ (.10) *$ (.05)
- ------------------------------------------------------------------------------------------------------------------
<FN>
* Common Stock Equivalents Have an Anti-Dilutive Effect on Earnings Per Share
and are Excluded From This Exhibit.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000839950
<NAME> NORTH COAST ENERGY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 788,251
<SECURITIES> 0
<RECEIVABLES> 1,719,759
<ALLOWANCES> 0
<INVENTORY> 107,241
<CURRENT-ASSETS> 2,831,251
<PP&E> 30,545,348
<DEPRECIATION> 12,192,941
<TOTAL-ASSETS> 21,363,322
<CURRENT-LIABILITIES> 2,930,729
<BONDS> 0
<COMMON> 80,446
0
7,680
<OTHER-SE> 12,082,944
<TOTAL-LIABILITY-AND-EQUITY> 6,918,7754
<SALES> 4,498,579
<TOTAL-REVENUES> 4,498,579
<CGS> 4,127,615
<TOTAL-COSTS> 4,127,615
<OTHER-EXPENSES> (41,185)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 512,104
<INCOME-PRETAX> (99,955)
<INCOME-TAX> (24,000)
<INCOME-CONTINUING> (75,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,955)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
