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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
OCTOBER 30, 1995
CODA ENERGY, INC.
(Exact Name of Registrant as Specified in its Charter)
State of Delaware 0-10955 75-1842480
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
5735 Pineland Drive
Suite 300
Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 692-1800
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Item 5. Other Events
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ANNOUNCEMENT OF EXECUTION OF DEFINITIVE MERGER AGREEMENT
On October 31, 1995, Coda Energy, Inc. ("Coda") announced that it had
entered into a definitive merger agreement dated as of October 30, 1995 (the
"Merger Agreement") by and among Coda, Joint Energy Development Investments
Limited Partnership ("JEDI"), an affiliate of Enron Capital & Trade Resources
Corp. ("ECT"), and Coda Acquisition, Inc. ("Purchaser"), a newly formed
corporation and a subsidiary of JEDI, whereby JEDI will acquire in the merger
(the "Merger") shares of common stock, par value $.02 per share, of Coda (the
"Coda Common Stock") at a price of $8.00 per share in cash. The Merger Agreement
has been approved by Coda's Board of Directors and its Special Committee of
outside directors. Concurrently with the execution of the Merger Agreement, JEDI
and Purchaser have entered into certain agreements with members of management of
Coda providing for a continuing role of management in Coda after the
acquisition. Coda expects to hold a special meeting of the stockholders, for the
purpose of voting on the Merger, as soon as practical after the Securities and
Exchange Commission has cleared the related proxy statement material for
mailing. Coda anticipates that this special meeting will occur in late 1995 or
early 1996.
PARTIES TO THE MERGER
Coda. Coda is an independent energy company which, together with its
subsidiaries, is principally engaged in the acquisition and exploitation of (i)
producing oil and natural gas properties, (ii) natural gas processing and
liquids extraction facilities and (iii) natural gas gathering systems. Coda's
producing oil and natural gas properties are concentrated in the mid-continent
region of the United States. Coda's exploitation efforts include, where
appropriate, the drilling of low-risk development wells, the initiation of
secondary recovery projects, the renegotiation of product marketing agreements
and the reduction of drilling, completion and lifting costs.
JEDI and Purchaser. JEDI is a Delaware limited partnership whose general
partner is a subsidiary of ECT, which is a wholly-owned subsidiary of Enron
Corp. The limited partner of JEDI is the California Public Employees'
Retirement System. JEDI was created primarily to invest in a portfolio of
diversified natural gas related assets. Purchaser is a Delaware corporation
formed solely for the purpose of effecting the Merger and has not carried on any
activities other than in connection with the Merger. Purchaser is a subsidiary
of JEDI.
CERTAIN TERMS OF THE MERGER
Principal Effects of the Merger. Purchaser will be merged with and into
Coda, with Coda surviving the Merger (the "Surviving Corporation"). Pursuant to
and subject to the terms and
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conditions of the Merger Agreement, at the Effective Time (as defined below),
(i) all then-outstanding shares of Coda Common Stock (other than (A) shares of
Coda Common Stock held by Purchaser, Coda or any Coda subsidiary, all of which
will be canceled without payment of any consideration, and (B) shares of Coda
Common Stock held by stockholders who perfect their appraisal rights under
Section 262 of the Delaware General Corporation Law ("DGCL")) will be converted
into the right to receive, in cash, $8.00 per share of Coda Common Stock,
without interest, and (ii) all shares of Coda Common Stock underlying then-
outstanding but unexercised options and warrants to purchase Coda Common Stock
(other than the "Specified Options" and "Specified Warrants" held by certain
members of the Management Group (as defined below)) will, at the election of the
holder, be converted into the right to receive, in cash, either (A) the
difference between (x) $8.00 per share of Coda Common Stock and (y) the exercise
or strike price of the option or warrant, without interest or (B) $8.00 per
share of Coda Common Stock, without interest, upon such holder's exercise
(including payment of the applicable exercise or strike price) of his or her
options.
Effective Time. The effective time of the Merger will be the date and time
when a properly executed certificate of merger, in such form as is required by
and executed in accordance with the DGCL, is duly filed with the Secretary of
State of the State of Delaware, or at such later time as the parties to the
Merger Agreement designate in such filing as the effective time (the "Effective
Time"). It is anticipated that, subject to the satisfaction or waiver, if
permissible, of the conditions to consummation of the Merger set forth in the
Merger Agreement, such filing will be made promptly after the Merger Agreement
has been approved by Coda's stockholders.
Conditions to the Merger. The respective obligations of Coda, JEDI and
Purchaser to effect the Merger are subject to the satisfaction, or waiver if
applicable, at or prior to the Effective Time, of various conditions, including,
among other things, (i) the approval and adoption of the Merger Agreement and
the Merger by the requisite vote of the holders of Coda Common Stock; (ii) the
expiration or termination of the waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"); (iii) the absence of any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) that is then in effect and has the effect
of making the Merger illegal or otherwise preventing or prohibiting consummation
of the Merger; (iv) the confirmation by Coda at the time of the special meeting
of Coda stockholders called for the purpose of approving and adopting the Merger
Agreement that the written opinion of Coda's financial advisor to the effect
that the Merger is fair, from a financial point of view, to the stockholders of
Coda (except that such advice will not be provided to the members of Coda's
management, consisting of Douglas H. Miller, Chairman of the Board and Chief
Executive Officer of Coda, Jarl P. Johnson, Vice Chairman of the Board and
President of Diamond Energy Operating Company, a subsidiary of Coda ("Diamond"),
Grant W. Henderson, Executive Vice President, Chief Financial Officer and a
director of Coda, and twelve other officers and employees of Coda and Diamond
(collectively, the "Management Group"), who have agreed to participate in the
equity ownership of the Surviving Corporation), has not been withdrawn; and (v)
the absence of any pending action, proceeding or investigation brought by any
person or entity before any governmental entity challenging, affecting or
seeking material
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damages in connection with, the transactions contemplated by the Merger
Agreement. Furthermore, each of Coda, on the one hand, and JEDI and Purchaser,
on the other hand, have additional conditions to their respective obligations to
consummate the Merger. Among the conditions to JEDI and Purchaser consummating
the Merger are that (i) the sale of Taurus Energy Corp., a wholly owned
subsidiary of Coda ("Taurus") shall have been completed upon terms satisfactory
to JEDI; (ii) certain members of Coda's management shall have not breached or
anticipatorily breached certain employment and other agreements with Purchaser
that are to become effective in conjunction with the consummation of the Merger
and certain specified senior executives of Coda shall not have died or become
disabled; and (iii) assuming the representations and warranties of Coda in the
Merger Agreement were made without regard to any "materiality qualifications,"
the amount that would be required to be contributed to the Surviving Corporation
at the Effective Time, so that the owners of the Surviving Corporation would be
in the same economic position as they would have been if the representations and
warranties, without regard to any materiality qualifications, had been true and
correct in all respects, in the aggregate does not exceed $7.5 million.
Regulatory Clearances. The Merger is subject to review by the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") pursuant to the Hart-Scott-Rodino Act.
Termination; Expenses and Termination Fees. Under certain conditions, the
Merger Agreement may be terminated at any time prior to the Effective Time,
whether prior to or after approval of the Merger Agreement by the stockholders
of Coda. In the event of the termination of the Merger Agreement, there will be
no obligation or liability on the part of any party thereto, except for the
payment of certain expenses and/or the Break-up Fee (as defined below) or as
otherwise expressly provided for in the Merger Agreement; provided, however,
that no termination pursuant to the termination provisions will relieve any
party from liability for any breach of the Merger Agreement. Pursuant to the
Merger Agreement, if the Merger Agreement is terminated by Purchaser for certain
reasons, then Coda would be obligated to reimburse Purchaser for certain out-of-
pocket expenses not to exceed $750,000. Additionally, if the Merger Agreement
is terminated for certain reasons and if Coda were to consummate another
acquisition transaction prior to October 30, 1996, that provides better value to
Coda's stockholders than the Merger would have provided, then Coda would be
obligated to pay Purchaser a fee (the "Break-up Fee") of $3.5 million. If the
Merger Agreement is terminated by Coda due to a breach on the part of JEDI or
Purchaser, JEDI is obligated to reimburse Coda for certain expenses not to
exceed $750,000.
Business of Coda. Coda has agreed that, during the period from the date of
the Merger Agreement to the Effective Time, except as otherwise contemplated by
the Merger Agreement or unless Purchaser otherwise consents in writing, Coda
will conduct its operations in the ordinary course of business, consistent with
past practices. In addition, unless Purchaser consents in writing or except as
otherwise permitted pursuant to the Merger Agreement, prior to the Effective
Time Coda is not permitted to engage in certain actions specified in the Merger
Agreement.
Obligations of JEDI and Purchaser. Each of JEDI and Purchaser has agreed
to use its
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reasonable best efforts to refrain from taking any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth in the Merger Agreement being or becoming untrue in any
material respect as of the Effective Time, or in any of the conditions to the
Merger not being satisfied, or (unless such action is required by applicable
law) that would adversely affect the ability of JEDI or Purchaser to obtain any
of the regulatory approvals required to consummate the Merger.
OPINION OF FINANCIAL ADVISOR
The Special Committee engaged Bear, Stearns & Co. Inc. ("Bear Stearns") to
act as its financial advisor in connection with the Merger and related matters.
On September 27, 1995, Bear Stearns orally advised the Special Committee that
the Merger is fair, from a financial point of view, to Coda's stockholders
(except that no advice was given as to the Management Group).
NO SOLICITATION OF OTHER BIDS
Prior to the Effective Time, Coda has agreed not to, nor to permit any of
its subsidiaries to, nor to authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to, directly
or indirectly, initiate, solicit, negotiate or encourage (including by way of
furnishing information), or take any other action to facilitate or entertain,
any inquiries or the making of any proposal that constitutes, or may be
reasonably expected to lead to, any proposal or offer to acquire all or
substantially all of the business of Coda and its subsidiaries, or all or
substantially all of the capital stock of Coda; provided, however, that Coda may
negotiate with a potential acquiror if (i) the potential acquiror has made a
tender or exchange offer, or a proposal to Coda's Board of Directors to acquire
Coda, (ii) Coda's Board of Directors believes, based in part upon advice of its
financial advisor and after having an opportunity to discuss any such proposal
with a potential acquiror, that such potential acquiror has the financial
wherewithal to consummate such offer or transaction and such offer or
transaction would yield a better value to Coda's stockholders than would the
Merger and (iii) based upon the advice of counsel to Coda given to the Board of
Directors, the Board of Directors determines in good faith that there is a
significant risk that the failure to negotiate with the potential acquiror could
constitute a breach of the Board's fiduciary duty to Coda's stockholders.
TAURUS DISPOSITION
On August 23, 1995, Coda announced that it had received an offer to
purchase substantially all of the assets of Taurus. On the same date Coda's
Board of Directors authorized the Special Committee to reach a determination or
recommendation, if any, with respect to the possible sale or restructuring of
Coda's ownership of Taurus. The sale of Taurus on terms acceptable to JEDI
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is also a condition to the consummation of the Merger. Mr. Lohman is an officer
and director of Taurus. The Company understands that Mr. Lohman has been active
in trying to find a buyer for Taurus in a transaction that would provide a
continuing role for Taurus' management.
During the period after execution of the Merger Agreement and prior to the
Effective Time, Coda has agreed in the Merger Agreement to use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to promptly negotiate a
definitive agreement (the "Taurus Disposition Agreement") providing for the sale
of Taurus, whether by merger, sale of all or substantially all of the assets of
Taurus, sale of all of the capital stock of Taurus or otherwise (the "Taurus
Disposition") as soon as reasonably practicable. Coda has agreed to deliver the
final version of the Taurus Disposition Agreement to JEDI for review at least
five business days prior to its execution. Coda has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
Taurus Disposition if a Taurus Disposition Agreement that has been approved by
JEDI is executed.
SOURCES AND AMOUNT OF FUNDS
The total amount of funds required by JEDI and Purchaser to acquire all of
the then-outstanding (except for shares of Coda Common Stock held by Purchaser)
capital stock of Coda (including options and warrants to purchase Coda Common
Stock, but excluding the Specified Options and the Specified Warrants), is
estimated to be approximately $182.2 million. Coda will also need cash to pay
the fees and expenses incurred or to be incurred by Coda associated with
effecting the Merger, the financing thereof and with providing loans to certain
members of management to purchase shares of capital stock of Purchaser,
including an estimated $3.8 million in transaction fees expected to be paid to
ECT Securities Corp., an affiliate of the general partner of JEDI. JEDI expects
Purchaser to have available to it at the Effective Time approximately $190
million from (i) a $90 million equity investment to be made in Purchaser by JEDI
prior to the Effective Time and (ii) proceeds of a $100 million loan to be made
to Purchaser by JEDI prior to the Effective Time. The obligation of JEDI and
Purchaser to consummate the Merger under the Merger Agreement is not subject to
a condition that any financing be available to JEDI or Purchaser.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Four of Coda's ten directors, Douglas H. Miller, Chairman of the Board and
Chief Executive Officer, Jarl P. Johnson, Vice Chairman and President of
Diamond, Grant W. Henderson, Executive Vice President and Chief Financial
Officer, and Tommie E. Lohman, President of Taurus, abstained from voting on
the Merger Agreement and related resolutions because of their interests in the
transactions. Messrs. Miller, Johnson and Henderson have entered into written
agreements with Purchaser pursuant to which, effective at the Effective Time,
they will be employed by the Surviving Corporation and will acquire equity
interests in the Surviving
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Corporation. Certain members of Coda's management have also entered into written
agreements with Purchaser concerning their employment with and/or equity
participation in the Surviving Corporation. Immediately following closing of the
Merger, management will hold an aggregate of approximately 1.5% of the Surviving
Corporation's common stock (approximately 5% on a fully diluted basis, including
options granted to such persons).
These agreements will terminate automatically if the Merger Agreement is
terminated. The agreements are summarized below:
Subscription Agreement. The Purchaser has entered into a Subscription
Agreement dated as of October 30, 1995, with each member of the Management Group
(the "Subscription Agreement") which provides for the acquisition by such
persons of Purchaser common stock and the grant to them of nonqualified stock
options to purchase shares of Surviving Corporation common stock (the
"Replacement Options"). Under the Subscription Agreement, each member of the
Management Group who is acquiring Purchaser common stock is paying $100 per
share for shares of Purchaser common stock, which is the same price per share
being paid by JEDI for the remaining shares of Purchaser. Under the
Subscription Agreement, the Management Group will acquire Purchaser common stock
immediately prior to the Effective Time in exchange for varying combinations of
(i) proceeds from limited recourse promissory notes payable to the Purchaser
(the "Notes"), (ii) Coda Common Stock, which is valued for this purpose at $8.00
per share and (iii) cash. The Purchaser common stock so acquired will not have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws and will not have the benefit of any
registration rights, but will be subject to the Stockholders Agreement described
below. By virtue of the Merger, each share of Purchaser common stock will be
converted into one share of Surviving Corporation common stock.
The Subscription Agreement provides that the Specified Options
(representing certain Coda stock options held by certain members of the
Management Group) and Specified Warrants (representing warrants to purchase Coda
Common Stock held by certain members of the Management Group) will not be
exercised prior to the Effective Time and shall, as of the Effective Time, be
canceled without exercise and without payment of consideration. Concurrently,
the Management Group will enter into Nonstatutory Stock Option Agreements
governing the Replacement Options providing for the right for a period of 10
years from and after the Effective Time to purchase shares of Surviving
Corporation common stock for $.01 per share. However, the Replacement Options
may only be exercised while the holder remains an employee of the Surviving
Corporation and for a limited period of time thereafter. The number of shares of
Surviving Corporation common stock underlying the Replacement Options each
member of the Management Group receives is based on the amount of cash the
holder would have received if his Specified Options or Specified Warrants had
been converted into cash in the Merger on the same basis as other outstanding
options and warrants to purchase Coda Common Stock were converted, divided by
the $100 per share purchase price paid by JEDI and the other Management Group
members for their common stock of Purchaser. Thus, if the Replacement Options
are exercised, the holders will have effectively paid the same purchase price
per share
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as JEDI and the Management Group paid for their shares of common stock of the
Surviving Corporation.
The Notes will be due on the fifth anniversary of the Effective Time, will
bear interest at the mid-term applicable federal rate (annual compounding) for
the month in which the Effective Time occurs (6.11% for November 1995), will be
secured by the Surviving Corporation common stock purchased with the proceeds
thereof and certain rights of the maker under the Stockholders Agreement
described below, and will provide that in no event will an individual maker's
liability thereunder for any deficiency on his respective Note (after the sale
and disposition of all collateral securing same) exceed 35% of the original
principal balance of the Note.
The members of the Management Group, their current positions with Coda
and/or Diamond and the number of shares of fully diluted Purchaser Common Stock
to be acquired by them are set forth in the following table:
<TABLE>
<CAPTION>
Name of Member of Surviving Fully Diluted
Management Group Corporation Ownership
and Current Position with Common Stock Replacement --------------------
Coda and/or Diamond Direct Ownership Options Shares %
- --------------------------------------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Randell A. Bodenhamer,
Vice President - Land;
Executive Vice President,
Diamond Energy
Operating Company.................... 2,322 178 2,500 .26
Joe I. Callaway,
Vice President - General Counsel....... 500 500 1,000 .11
J. David Choisser,
Vice President - Controller............ 1,105 395 1,500 .17
J. William Freeman,
Vice President - Engineering........... 1,250 1,250 2,500 .26
Roy Harney,
Manager - Engineering,
Diamond Energy
Operating Company.................... 500 0 500 .05
Grant W. Henderson,
Executive Vice President,
Chief Financial Officer
and Director........................... 2,500 2,500 5,000 .53
Jarvis A. Hensley,
Vice President - Operations,
Diamond Energy Operating
Company.............................. 500 0 500 .05
Chris A. Jackson,
Manager - Production................... 500 500 1,000 .11
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Jarl P. Johnson,
Vice Chairman of the Board, Director;
President, Diamond Energy
Operating Company.................... 2,543 1,457 4,000 .42
Douglas H. Miller,
Chairman of the Board,
Chief Executive Officer
and Director........................... 0 25,000 25,000 2.64
Gary M. Nelson,
Manager - Data Processing.............. 250 250 500 .05
Gary R. Scoggins,
Vice President -
Human Resources...................... 250 250 500 .05
Claude A. Seaman,
Manager - Financial
Reporting............................ 250 250 500 .05
J. W. Spencer, III,
Vice President - Operations............ 1,372 1,128 2,500 .26
Scott E. Studdard,
Manager - Tax Department............... 250 250 500 .05
------ ------ ------ ----
Total............................. 14,092 33,908 48,000 5.06
====== ====== ====== ====
</TABLE>
Stockholders Agreement. The Purchaser, JEDI and the Management Group have
entered into a Stockholders Agreement dated as of October 30, 1995 (the
"Stockholders Agreement"), which provides generally that all parties, including
JEDI and the Management Group, (i) have rights of first refusal to acquire
additional shares of Surviving Corporation Common Stock that may be issued by
the Surviving Corporation and (ii) are restricted from transferring their
Surviving Corporation common stock. The Surviving Corporation has a right to
match any third party offer to purchase shares of Surviving Corporation common
stock from any stockholder, and, in the event that the Surviving Corporation
does not purchase those shares, the other stockholders may have a right to
include a pro rata portion of their Surviving Corporation common stock in the
transaction. The Stockholders Agreement provides that, if the employment of a
member of the Management Group terminates for any reason (including death or
disability) other than his voluntary termination (except upon retirement at age
65 or older or the expiration of the term of any employment agreement he has
with the Surviving Corporation) or his termination by the Surviving Corporation
for cause, then the Surviving Corporation shall have a right to purchase such
member's shares of Surviving Corporation common stock at a purchase price to be
determined from time to time by the Surviving Corporation pursuant to a formula
that values the shares on the basis of a comparison of the discretionary cash
flow and EBITDA (as defined therein) of the Surviving Corporation and a group of
peer companies. The Stockholders Agreement also provides that, if the
employment of a member of the Management Group terminates for any reason other
than voluntary termination or termination of such member for
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cause, then such member shall have the right to require the Surviving
Corporation to purchase such member's shares of Surviving Corporation common
stock based on the previously described formula. The purchase price under the
formula will vary depending on the financial performance of the Surviving
Corporation and the group of peer companies. The Stockholders Agreement
provides that each member of the Management Group shall have the right (the
"Special Management Rights") to receive from JEDI, upon the occurrence of
certain events (generally an initial public offering, a business combination
with another person or the liquidation of the Surviving Corporation) (each, a
"Trigger Event"), an amount, which is payable in cash or additional shares of
Surviving Corporation Common Stock depending upon the cause of the Trigger
Event, designed to result in the Management Group receiving in connection with
the Trigger Event one-third of the proceeds, attributable to the shares of
Surviving Corporation common stock purchased by JEDI, above the amount of
proceeds necessary for JEDI to achieve an internal annual rate of return on that
investment of 15%. The individual member's interest in such Special Management
Rights is proportional to such member's ownership of the fully diluted common
stock of the Surviving Corporation, as reflected in the table above. The
Stockholders Agreement also provides that if the employment of a member of the
Management Group terminates, then his Special Management Rights shall terminate
and, if the termination is other than a voluntary termination or a termination
for cause, he may be entitled to receive an amount based on the discretionary
cash flow and EBITDA formula discussed above. The Stockholders Agreement
further provides that, after the Effective Time, the Surviving Corporation will
establish an employee benefit plan for the benefit of its employees who are not
members of the Management Group and will contribute to the plan 2,000 shares of
Surviving Corporation common stock, and pursuant to the Stockholders Agreement
4% of the Special Management Rights will be allocated thereto.
The Stockholders Agreement will terminate and no party thereto will have
any further obligations or rights thereunder upon the earliest to occur of (i)
the termination of the Merger Agreement in accordance with its terms, (ii)
October 30, 2005, (iii) the date on which an initial public offering of
Surviving Corporation common stock is consummated or of any business transaction
involving the Surviving Corporation whereby Surviving Corporation common stock
becomes a publicly traded security, (iv) the date of the dissolution,
liquidation or winding-up of the Surviving Corporation and (v) the date of the
delivery to the Surviving Corporation of a written termination notice executed
by certain parties to the Stockholders Agreement.
Business Opportunity Agreement. ECT, the Purchaser, JEDI and the
Management Group have also entered into a Business Opportunity Agreement (the
"Business Opportunity Agreement") that is intended to make it clear that Enron
and its affiliates have no duty to make business opportunities available to the
Surviving Corporation in most circumstances. The Business Opportunity Agreement
also provides that ECT and its affiliates may pursue certain business
opportunities to the exclusion of the Surviving Corporation. The Business
Opportunity Agreement may limit the business opportunities available to the
Surviving Corporation and the opportunity of the Management Group to earn
incentive compensation under the Stockholders Agreement or otherwise. In
addition, there may be circumstances in which the Surviving Corporation will
offer business opportunities to certain affiliates of Enron. If an Enron
affiliate
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is offered such an opportunity and decides to pursue it, the Surviving
Corporation may be unable to pursue it.
Employment Agreements. Messrs. Miller, Johnson, Henderson, Randell A.
Bodenhamer, J. William Freeman and J.W. Spencer, III, have entered into
employment agreements (the "Employment Agreements") with the Purchaser to become
effective at the Effective Time. The Employment Agreements are for a period of
five years from the Effective Time (three years in the case of Messrs. Johnson
and Spencer) and provide for the payment of base salaries, together with other
benefits generally available to employees of the Surviving Corporation, and
positions with the Surviving Corporation as set forth below:
<TABLE>
<CAPTION>
Name Position with Surviving Corporation Annual Base Salary
- ----------------------- ---------------------------------------------- ------------------
<S> <C> <C>
Randell A. Bodenhamer.. Vice President - Land $145,000
J. William Freeman..... Vice President - Engineering $170,000
Grant W. Henderson..... President and Chief Financial Officer $225,000
Jarl P. Johnson........ Vice Chairman of the Board and Chief $250,000
Operating
Officer
Douglas H. Miller...... Chairman of the Board and Chief Executive $350,000
Officer
J.W. Spencer, III...... Vice President - Operations $170,000
</TABLE>
Each of these persons would receive his salary for the remaining term of
his Employment Agreement if the Surviving Corporation were to terminate his
Employment Agreement other than for cause. The Employment Agreements provide
that the employees agree not to compete with the Surviving Corporation for a
period of six months after their voluntary termination or termination for cause;
in the case of Mr. Miller, the covenant not to compete is for a period of two
years, except that the noncompetition period is one year in the event of
incapacity, involuntary termination other than for cause or his resignation due
to a breach by Surviving Corporation of Mr. Miller's Employment Agreement.
OPERATION AND MANAGEMENT OF SURVIVING CORPORATION AFTER THE MERGER
Following the Merger, JEDI and the Management Group will own approximately
98.5% and 1.5%, respectively, of the outstanding shares of Surviving Corporation
Common Stock (approximately 95% and 5%, respectively, on a fully diluted basis,
including options granted to the Management Group). Coda is expected to
continue to manage and operate its business and properties substantially as
before the Merger and is expected to maintain its current offices.
The Bylaws of the Surviving Corporation will provide that the Chairman of
the Board and the Vice Chairman of the Board of the Surviving Corporation will
be directors. As such, Douglas H. Miller, as Chairman of the Board of the
Surviving Corporation, and Jarl P. Johnson,
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as Vice Chairman of the Board of the Surviving Corporation, will be directors of
the Surviving Corporation. The other five members of the Board of Directors
will be elected by the stockholders of the Surviving Corporation. JEDI
anticipates that Grant W. Henderson will also be elected to one of the other
five positions on the Board of Directors of the Surviving Corporation. In
addition, the respective executive officers of Coda, with the exception of T.W.
Eubank, Coda's President and Chief Operating Officer, will continue as executive
officers of Surviving Corporation. Grant W. Henderson will assume the
additional title of President and Jarl P. Johnson will assume the additional
title of Chief Operating Officer.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for shares of Coda Common Stock pursuant to the Merger
or pursuant to the exercise of appraisal rights will be a taxable transaction
for federal income tax purposes and may also be a taxable transaction under
applicable state, local, foreign or other tax laws. For United States federal
income tax purposes, in general, a stockholder who receives cash for shares of
Coda Common Stock pursuant to the Merger will recognize a gain or loss equal to
the difference between the stockholder's tax basis for the shares of Coda Common
Stock converted into the right to receive cash in such transaction and the
amount of cash received in exchange therefor. Assuming that the shares of Coda
Common Stock constitute capital assets in the hands of the stockholder, such
gain or loss will be long-term capital gain or loss if, as of the date of
disposition, such shares of Coda Common Stock have been held for more than one
year.
Page - 12
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
The following documents are attached hereto as exhibits:
2.1 Agreement and Plan of Merger by and among Coda Energy, Inc., Joint Energy
Development Investments Limited Partnership and Coda Acquisition, Inc.
dated as of October 30, 1995.
99.1 Coda Energy, Inc. Press Release dated October 31, 1995.
99.2 Stockholders Agreement dated October 30, 1995, including exhibits but
omitting schedules.
99.3 Subscription Agreement among Coda Acquisition, Inc. and The Management
Investors dated October 30, 1995, including exhibits but omitting
schedules.
99.4 Business Opportunity Agreement dated as of October 30, 1995.
99.5 Executive Employment Agreement between Coda Acquisition, Inc. and Randell
A. Bodenhamer.
99.6 Executive Employment Agreement between Coda Acquisition, Inc. and J.
William Freeman.
99.7 Executive Employment Agreement between Coda Acquisition, Inc. and Grant
W. Henderson.
99.8 Executive Employment Agreement between Coda Acquisition, Inc. and Jarl P.
Johnson.
99.9 Executive Employment Agreement between Coda Acquisition, Inc. and Douglas
H. Miller.
99.10 Executive Employment Agreement between Coda Acquisition, Inc. and J.W.
Spencer, III.
99.11 Agreement of Coda to provide schedules to Stockholders Agreement (Exhibit
99.3) and Subscription Agreement (Exhibit 99.4).
Page - 13
<PAGE>
- --------------------------------------------------------------------------------
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 hereunto duly authorized.
Date: November 9, 1995 CODA ENERGY, INC.
By: \s\ Joe Callaway
-------------------------------------
Joe Callaway, Vice President
and General Counsel
Page - 14
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- ----------
2.1 Agreement and Plan of Merger by and among
Coda Energy, Inc., Joint Energy Development
Investments Limited Partnership and Coda Ac-
quisition, Inc. dated as of October 30, 1995.
99.1 Coda Energy, Inc. Press Release dated October
31, 1995.
99.2 Stockholders Agreement dated October 30,
1995.
99.3 Subscription Agreement among Coda Acquisi-
tion, Inc. and The Management Investors dated
October 30, 1995.
99.4 Business Opportunity Agreement dated as of
October 30, 1995.
99.5 Executive Employment Agreement between
Coda Acquisition, Inc. and Randell A.
Bodenhamer.
99.6 Executive Employment Agreement between
Coda Acquisition, Inc. and J. William Freeman.
99.7 Executive Employment Agreement between
Coda Acquisition, Inc. and Grant W.
Henderson.
99.8 Executive Employment Agreement between
Coda Acquisition, Inc. and Jarl P. Johnson.
99.9 Executive Employment Agreement between
Coda Acquisition, Inc. and Douglas H. Miller.
99.10 Executive Employment Agreement between
Coda Acquisition, Inc. and J.W. Spencer, III.
99.11 Agreement of Coda to provide schedules to
Stockholders Agreement (Exhibit 99.3) and
Subscription Agreement (Exhibit 99.4).
Page - 15
<PAGE>
EXHIBIT 2.1
AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
CODA ACQUISITION, INC.,
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
AND
CODA ENERGY, INC.
DATED AS OF OCTOBER 30, 1995
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 30, 1995, by and among Coda Acquisition, Inc., a Delaware corporation
("Sub"), Coda Energy, Inc., a Delaware corporation (the "Company") and Joint
Energy Development Investments Limited Partnership, a Delaware limited
partnership ("JEDI"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, JEDI and the Company desire to effect a merger of Sub with
and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has appointed a special
committee of independent directors (the "Special Committee") to consider the
Merger;
WHEREAS, the Special Committee, with the advice and assistance of
Bear, Stearns & Co. Inc. and independent legal counsel, has unanimously
recommended (subject to the satisfaction of the conditions precedent set forth
herein) that the Board of Directors of the Company approve this Agreement and
the transactions contemplated hereby;
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interests of the Company's stockholders to consummate
the Merger, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of Sub has determined it advisable and
in the best interests of Sub's stockholders to consummate the Merger, upon the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), at the Effective Time (as hereinafter
defined), Sub shall be merged with and into the Company and the separate
corporate existence of Sub shall thereupon cease, and the Company, as the
surviving corporation in the Merger (the "Surviving Corporation"), shall by
virtue of the Merger continue its corporate existence in accordance with the
DGCL.
Section 1.2 Effective Time of the Merger. The Merger shall become
----------------------------
effective at the date and time (the "Effective Time") when a properly executed
certificate of merger, in such form as is required by and executed in accordance
with the DGCL, is duly filed with the Secretary of State of the State of
Delaware or at such later time as the parties hereto shall have provided in such
certificate.
<PAGE>
The parties hereto shall cause such filing to occur as soon as practicable on or
after the Closing Date (as hereinafter defined).
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. At the Effective Time, the
----------------------------
Restated Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended to read in its entirety as set
forth in Exhibit 2.1 hereto, and such Restated Certificate of Incorporation, as
so amended, shall be the Restated Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law.
Section 2.2 By-Laws. The By-laws of the Company as in effect at the
-------
Effective Time shall be the By-laws of the Surviving Corporation and shall be
amended and restated to conform to the By-laws of Sub as in effect immediately
prior to the Effective Time, until thereafter further amended as provided by
law.
Section 2.3 Board of Directors and Officers of the Surviving
------------------------------------------------
Corporation. The directors of Sub and the officers designated by Sub prior to
- ------------
the Effective Time of the Company immediately prior to the Effective Time,
subject to the applicable provisions of the Certificate of Incorporation and By-
laws of the Surviving Corporation, shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors
shall be duly elected or appointed and qualified.
Section 2.4 Effects of Merger. The Merger shall have the effects set
-----------------
forth in Section 259 of the DGCL. The corporate existence of the Company, with
all its purposes, powers and objects, shall continue unaffected and unimpaired
by the Merger and, as the Surviving Corporation, it shall be governed by the
laws of the State of Delaware and shall succeed to all rights, assets,
liabilities, properties, privileges, powers, franchises and obligations of Sub
in accordance with the DGCL.
ARTICLE III
CONVERSION OF SECURITIES
Section 3.1 Merger Consideration. At the Effective Time, by virtue
--------------------
of the Merger and without any action on the part of Sub, the Company or their
respective stockholders (other than the filing of the certificate of merger
referred to in Section 1.2 hereof) (a) each share (a "Share") of common stock,
par value $0.02 per share, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than (i) Shares held
by Sub, (ii) Shares held in the treasury of the Company or owned by any
subsidiary of the Company and (iii) Dissenting Shares (as hereinafter defined)
in respect of which appraisal rights are properly exercised and perfected) shall
be canceled and extinguished and be converted automatically into the right to
receive, pursuant to Section 3.2 hereof, $8.00 per Share in cash, without
interest thereon (the "Merger Consideration"), less any required withholding of
taxes, which Merger Consideration shall be payable upon surrender of the
certificate formerly representing such Share (a "Certificate") in the
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<PAGE>
manner provided in Section 3.2(b), (b) each Share then held in the treasury of
the Company and each Share owned by any subsidiary of the Company shall be
canceled and retired without conversion thereof and without payment of any
consideration and shall cease to exist, and (c) each Share owned beneficially or
of record by Sub immediately prior to the Effective Time shall be canceled and
retired without conversion thereof and without payment of any consideration and
shall cease to exist.
Section 3.2 Paying Agent and Surrender of Certificates. (a) Prior to
------------------------------------------
the Effective Time, the Company and Sub shall appoint a bank reasonably
acceptable to the Company, and having a place of business in New York City, as
paying agent (the "Paying Agent") for the holders of Shares in connection with
the Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 3.1. At Closing, JEDI shall cause to be deposited in trust
with the Paying Agent, cash in the aggregate amount equal to the sum of (i) the
cash consideration required pursuant to Section 3.6 to make payments with
respect to Outstanding Options and Outstanding Warrants and (ii) the product of
(A) the number of Shares outstanding immediately prior to the Effective Time
(other than Shares held by Sub and Shares held in the treasury of the Company)
and (B) the Merger Consideration. Such funds shall be invested by the Paying
Agent as directed by JEDI, provided that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $100 million (based on the most recent financial statements of such
bank which are then publicly available at the Commission (as hereinafter
defined) or otherwise); provided, however, that no loss on any investment made
pursuant to this Section 3.2(a) shall relieve JEDI or the Surviving Corporation
of its obligation to pay the Merger Consideration for each Share outstanding
immediately prior to the Effective Time. JEDI shall promptly replace, or cause
to be replaced, any monies lost through any investment made pursuant to this
Section 3.2(a).
(b) As soon as practicable after the Effective Time, JEDI shall cause
the Surviving Corporation to mail to each person who was a record holder of
Shares immediately prior to the Effective Time (other than holders of Dissenting
Shares, Sub, the Company and the Company's subsidiaries), a form of letter of
transmittal and instructions for use in effecting the surrender for payment of
Certificates that immediately prior to the Effective Time represented Shares.
Upon surrender of a Certificate to the Paying Agent, together with a duly
executed and completed letter of transmittal and any other required documents,
the holder of the Certificate shall receive in exchange , and the Paying Agent
will pay (via U.S. mail. postage prepaid) as soon as practicable to such holder,
cash in an amount equal to the product of the number of Shares represented by
the Certificate or Certificates surrendered and the Merger Consideration,
without any interest thereon and less any required withholding of taxes, and
such Certificate(s) shall forthwith be canceled. If the payment is to be made to
a person other than the person in whose name a surrendered Certificate is
registered, it shall be a condition of payment that (x) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that (y) the person requesting such payment shall either pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax has
been paid or is not applicable. The
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<PAGE>
Surviving Corporation shall pay all charges and expenses (except those taxes
described in the immediately preceding sentence and expenses incurred by the
holders of Certificates in tendering their Certificates), including those of the
Paying Agent, in connection with the distribution of the Merger Consideration.
After the Effective Time, until surrendered in accordance with the provisions of
this Section 3.2(b), a Certificate shall represent only the right to receive the
Merger Consideration in cash multiplied by the number of Shares evidenced by
such Certificate, without any interest thereon. On or after the one-hundred
eightieth day following the Effective Time, the Surviving Corporation may by
written request require the Paying Agent to pay to the Surviving Corporation
that portion of the funds deposited with the Paying Agent pursuant to this
Section 3.2(b) (and any income earned thereon) that have not been disbursed
pursuant to this Section 3.2(b), and holders of Certificates shall thereafter
look only to the Surviving Corporation for any payment to be made pursuant to
this Section 3.2(b). Notwithstanding anything to the contrary, none of the
Paying Agent, the Surviving Corporation or any party hereto shall be liable to a
holder of a Certificate for any amount delivered to a public official pursuant
to applicable abandoned property, escheat or similar law.
Section 3.3 Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who have properly
exercised appraisal rights with respect thereto under Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration as provided in Sections 3.1 and 3.2, but the
holders of Dissenting Shares shall be entitled to receive such payment of the
appraised value of such Shares held by them from the Surviving Corporation (or
the Paying Agent, if applicable) as shall be determined pursuant to Section 262
of the DGCL; provided, however, that if any such holder shall have failed to
perfect or shall withdraw or lose the right to appraisal and payment under the
DGCL, each such holder's Shares shall thereupon be deemed to have been converted
as of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon and less any required withholding of taxes as
provided in Section 3.1, and upon surrender of the Certificate(s) representing
such Shares, in the manner provided in Section 3.2, such Shares shall no longer
be Dissenting Shares.
Section 3.4 Conversion of Sub Securities. At the Effective Time,
----------------------------
each share of common stock, par value $0.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time shall be converted, by
virtue of the Merger and without any action on the part of the holder thereof,
into one fully paid and nonassessable share of the common stock of the Surviving
Corporation.
Section 3.5 Stockholders to Have No Further Rights. At and after the
--------------------------------------
Effective Time, the holder of a Certificate shall cease to have any rights as a
stockholder of the Company, except for (i) the right to surrender such
Certificate in exchange for the amount of Merger Consideration to which such
holder is entitled under this Agreement, or (ii) the rights available under the
DGCL for Dissenting Shares.
-4-
<PAGE>
Section 3.6 Stock Options and Warrants.
--------------------------
(a) Following the execution of this Agreement, the Company shall use
its reasonable best efforts to cause all holders of options to purchase Company
Common Stock granted under the Company's 1989 Incentive Stock Option Plan and
the 1993 Incentive Stock Option Plan, each as amended (collectively, the "Stock
Option Plans"), except for the options referred to in Schedule 3.6(a)(1) of the
Company Disclosure Schedule (the "Specified Options"), to execute prior to the
Effective Time an Option Relinquishment and Release Agreement (herein so called)
in the form attached hereto as Exhibit 3.6(a)(2). As soon as practicable after
the Effective Time, JEDI and the Surviving Corporation shall cause the Paying
Agent to pay (via U.S. mail, postage prepaid) to such holders who have
previously delivered an Option Relinquishment and Release Agreement the cash
amount equal to the product of (i) the number of shares of Company Common Stock
subject to such option (irrespective of whether such option is then exercisable)
and (ii) the amount by which $8.00 exceeds the exercise or strike price per
share of Company Common Stock subject to such option immediately prior to the
Effective Time, less any required withholding taxes. In the event that an option
holder fails to deliver an Option Relinquishment and Release Agreement prior to
the Effective Time, such holder's options (the "Outstanding Options") shall, in
accordance with the terms and conditions of the governing Stock Option Plan and
the holder's stock option agreement(s), be converted without any action on the
part of the holder thereof into the right to receive an amount equal to the
Merger Consideration, upon the exercise of such holder's options in accordance
with, and within the time period prescribed by, the applicable Stock Option Plan
and the holder's stock option agreement(s). The Surviving Corporation shall pay,
or cause the Paying Agent to pay (via U.S. mail, postage prepaid), to each
holder of Outstanding Options the Merger Consideration, less any required
withholding taxes, as promptly as practicable after receiving a valid exercise
of such options by the holder thereof. To the extent that options to purchase
Company Common Stock are exercised by holders prior to the Effective Time, such
holders shall receive Certificates evidencing the Shares underlying such options
and may surrender such Certificates to the Paying Agent after the Effective Time
for payment in cash, as provided in Article III hereof. As of the Effective
Time, the Specified Options shall be canceled without exercise and without
payment of consideration and shall cease to exist, in accordance with the
provisions of the subscription agreement executed by the holders of such options
relating to their equity ownership of the Surviving Corporation.
(b) Following the execution of this Agreement, the Company shall send
to all holders of warrants to purchase Company Common Stock granted under the
Company's Compensation Plan for Directors (the "Warrant Plan") and the warrant
to purchase Company Common Stock issued to Douglas H. Miller as of October 26,
1989 (together, the "Outstanding Warrants"), except for the warrants referred to
in Schedule 3.6(a)(1) of the Company Disclosure Schedule (the "Specified
Warrants"), written notice (i) of the Merger contemplated hereby, (ii) that all
unvested warrants are deemed fully vested pursuant to Section 6 of the Warrant
Plan or otherwise, and (iii) that all unexercised Warrants held by such persons
shall be cancelled as of the Effective Time pursuant to Section 6 of the Warrant
Plan or otherwise. In lieu of having to exercise their warrants, the Company
also shall send to all such persons a Warrant Relinquishment and Release
Agreement (herein so called) in the form attached hereto as Exhibit 3.6(b)(2)
for execution and delivery by the warrant holder prior to the Effective Time
permitting the holder to receive the cash amount equal to the product of (i) the
number of shares of Company Common Stock subject to such warrant (irrespective
of whether such warrant is then exercisable) and (ii) the amount by which $8.00
-5-
<PAGE>
exceeds the exercise or strike price per share of Company Common Stock subject
to such warrant immediately prior to the Effective Time (the "Warrant Merger
Consideration"), less any required withholding taxes. As soon as practicable
after the Effective Time, JEDI and the Surviving Corporation shall cause the
Paying Agent to pay (via U.S. mail, postage prepaid) to such holders who have
previously executed a Warrant Relinquishment and Release Agreement the Warrant
Merger Consideration, less any required withholding taxes. To the extent that
warrants to purchase Company Common Stock are exercised by holders prior to the
Effective Time, such holders shall receive Certificates evidencing the Shares
underlying such warrants and may surrender such Certificates to the Paying Agent
after the Effective Time for payment in cash, as provided in Article III hereof.
As of the Effective Time, the Specified Warrants shall be canceled without
exercise and without payment of consideration and shall cease to exist, in
accordance with the provisions of the subscription agreement executed by the
holders of such options relating to the equity ownership of the Surviving
Corporation.
Section 3.7 Stockholders' Meeting. The Company, acting through its
---------------------
Board of Directors, shall take all action necessary, in accordance with
applicable law and its Certificate of Incorporation and By-laws, to convene a
special meeting of the holders of Company Common Stock (the "Company Meeting")
as promptly as practicable for the purpose of considering and taking action to
authorize this Agreement and the Merger pursuant to the DGCL. Subject to its
fiduciary duties under applicable law as advised by outside counsel, the Board
of Directors of the Company will recommend that holders of Company Common Stock
vote in favor of and approve the Merger and the adoption of this Agreement at
the Company Meeting. At the Company Meeting, all of the shares of Company Common
Stock then owned by Sub, or with respect to which Sub holds the power to direct
the voting, will be voted in favor of approval of the Merger and adoption of
this Agreement.
Section 3.8 Closing of the Company's Transfer Books. At the
---------------------------------------
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of Shares shall be made thereafter. In the event that, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration as provided in
Sections 3.1 and 3.2.
Section 3.9 Closing. Unless this Agreement is terminated and the
-------
transactions contemplated herein abandoned pursuant to Section 11.1 and subject
to the satisfaction or, if permissible, waiver of the conditions set forth in
Article X, the consummation of the Merger and the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place (i) at the
offices of Vinson & Elkins L.L.P., Houston, Texas, at 11:00 A.M. local time on a
date to be specified by JEDI and the Company, but as soon as practicable (and in
any event within two business days) after the day on which the last of the
conditions set forth in Article X is fulfilled (other than deliveries of
instruments to be made at Closing) or, if permissible, waived by the relevant
party or (ii) at such other time and place as JEDI and the Company shall agree
upon in writing. The date on which the Closing occurs is referred to herein as
the "Closing Date."
-6-
<PAGE>
ARTICLE IV
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Agreement"shall have the meaning set forth in the opening paragraph.
"Antitrust Division" shall have the meaning set forth in Section 9.4.
"Approved Taurus Disposition Agreement" shall have the meaning set
forth in Section 9.7.
"CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
"Certificate" shall have the meaning set forth in Section 3.1.
"Closing" shall have the meaning set forth in Section 3.9.
"Closing Date" shall have the meaning set forth in Section 3.9.
"Code" shall have the meaning set forth in Section 7.9(b).
"Commission" shall have the meaning set forth in Section 7.5.
"Commonly Controlled Entity" shall have the meaning set forth in
Section 7.9(b).
"Company" shall have the meaning set forth in the opening paragraph.
"Company Common Stock" shall have the meaning set forth in Section
3.1.
"Company Disclosure Schedule" shall have the meaning set forth in
Section 7.1.
"Company Estimated Proved Reserves" shall have the meaning set forth
in Section 7.19(a).
"Company Material Adverse Effect" shall have the meaning set forth in
Section 7.1.
"Company Meeting" shall have the meaning set forth in Section 3.7.
"Company Reserve Report" shall have the meaning set forth in Section
7.19(a).
"Company SEC Reports" shall have the meaning set forth in Section 7.5.
"Company Voting Debt" shall have the meaning set forth in Section 7.2.
"Confidentiality Agreement" shall have the meaning set forth in
Section 9.1.
-7-
<PAGE>
"Defensible Title" shall mean, subject to and except for the Permitted
Encumbrances, (i) the title of the Company and its Subsidiaries to such assets
is free and clear of all liens, encumbrances and defects of any kind whatsoever,
and (ii) as to those wells for which a "Working Interest" and a "Net Revenue
Interest" are set forth in the Company Engineering Report, the Company or its
Subsidiaries are entitled to receive the percentage of all Hydrocarbons
produced, saved and marketed from such wells in an amount not less than the Net
Revenue Interest set forth in the such engineering report, without reduction,
suspension or termination throughout the duration of the productive life of such
wells (except as set forth in such report), and such party is obligated to bear
the percentage of costs and expenses related to the maintenance, development and
operation of such wells in an amount not greater than the Working Interest set
forth in such engineering report, without increase throughout the productive
life of such wells, except increases that also result in a proportionate
increase in Net Revenue Interest and as set forth in such report.
"Dissenting Shares" shall have the meaning set forth in Section 3.3.
"DGCL" shall have the meaning set forth in Section 1.1.
"ECT" shall have the meaning set forth in Section 9.1.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Entity pertaining
to health or the environment currently in effect in any or all jurisdictions in
which the Company and its Subsidiaries own property or conduct business,
including without limitation, the Clean Air Act, as amended, CERCLA, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, RCRA, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing federal
laws, any state laws pertaining to the handling of oil and gas exploration and
production wastes or the use, maintenance, and closure of pits and impoundments,
and all other environmental conservation or protection laws.
"ERISA" shall have the meaning set forth in Section 7.9(a).
"Exchange Act" shall have the meaning set forth in Section 5.2.
"Fixed Price Contracts" means any contracts, commitments or agreements
for the purchase or sale of Hydrocarbons (i) having, as of the date hereof, a
remaining term of two months or more, wherein the purchase or sales price
thereunder throughout all or part of the life of such contract, commitment or
agreement is a fixed amount or an amount that is otherwise reasonably
determinable as of the date hereof pursuant to the terms of such contract,
commitment or agreement, or (ii) which the Company or any Subsidiary thereof has
hedged with futures contracts or otherwise; provided, that the term Fixed Price
Contracts will not include any contract, commitment or agreement wherein
-8-
<PAGE>
the purchase or sales price thereunder throughout all of the life of the
contract, commitment or agreement is based on a market responsive reference
price for a Hydrocarbon.
"FTC" shall have the meaning set forth in Section 9.4.
"GAAP" shall have the meaning set forth in Section 6.3.
"Governmental Entity" shall have the meaning set forth in Section
7.16.
"HSR Act" shall have the meaning set forth in Section 5.2.
"Hydrocarbons" means oil, gas, condensate, casinghead gas, helium,
carbon dioxide, mineral and other liquid or gaseous hydrocarbons.
"Indebtedness" means any liability in respect of (A) borrowed money,
(B) capitalized lease obligations, (C) the deferred purchase price of property
or services (other than trade payables in the ordinary course of business) and
(D) guarantees of any of the foregoing.
"JEDI" shall have the meaning set forth in the opening paragraph.
"JEDI Material Adverse Effect" shall have the meaning set forth in
Section 6.2.
"Leases" shall have the meaning set forth in Section 7.20(e).
"Loss" shall have the meaning set forth in Section 10.3.
"Material Company Assets" shall have the meaning set forth in Section
7.21.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall have the meaning set forth in Section
3.1.
"Oil and Gas Interests" means, when used with respect to the Company
or its Subsidiaries, direct and indirect interests in and rights with respect to
Hydrocarbons and related properties and assets of any kind and nature, direct or
indirect, including working, royalty, and overriding royalty interests,
production payments, operating rights, net profits interests, other nonworking
interests, and nonoperating interests; and all revenues therefrom and all
contracts in connection therewith and claims and rights thereto (including all
oil and gas leases, operating agreements, unitization and pooling agreements and
orders, divisions orders, transfer orders, mineral deeds, royalty deeds, oil and
gas sales, exchange and processing contracts and agreements, and in each case,
interests thereunder), surface interests, fee interests, reversionary interests,
reservations and concessions; all easements, rights of way, licenses, permits,
leases and other interests associated with, appurtenant to, or necessary for the
operation of any of the foregoing; and all interests in equipment and machinery
(including tanks, batteries, pipelines, and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries and
other tangible personal property and fixtures associated with, appurtenant to,
or necessary for the operation of any of the foregoing.
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<PAGE>
"Option Relinquishment and Release Agreement" shall have the meaning
set forth in Section 3.6(a).
"Other Acquisition Transaction" shall have the meaning set forth in
Section 9.6.
"Outstanding Options" shall have the meaning set forth in Section
3.6(a).
"Outstanding Warrants" shall have the meaning set forth in Section
3.6(b).
"Paying Agent" shall have the meaning set forth in Section 3.2.
"PBGC" shall have the meaning set forth in Section 7.9(b).
"Permitted Encumbrances" shall mean any of the following: (i) any
liens for taxes and assessments not yet delinquent or, if delinquent, that are
being contested in good faith in the ordinary course of business; (ii) any
obligations or duties to any municipality or public authority with respect to
any franchise, grant, certificate, license or permit, and all applicable laws;
(iii) any easements, rights-of-way, servitudes, permits and other rights in
respect of surface operations, pipelines or the like, and easements for
pipelines, power lines and other similar rights-of-way, and encroachments, on,
over or in respect of any property or lands of the Company and its Subsidiaries
or over which such party owns rights-of-way, easements, permits or licenses,
that do not unreasonably or materially interfere with the operation of any
property or lands for exploration and production of hydrocarbon or related
operations; (iv) all royalties, overriding royalties, net profits interests,
production payments, carried interests, reversionary interests, calls on
production and other burdens on or deductions from the proceeds of production
that do not operate to (A) reduce the Net Revenue Interest below that set forth
in the Company Engineering Report, or (B) increase the Working Interest of the
Company and its Subsidiaries above that set forth in the engineering report
without a proportionate increase in the Net Revenue Interest of such party; (v)
the terms and conditions of all leases, servitudes, production sales contracts,
division orders, contracts for sale, purchase, exchange, refining or processing
of hydrocarbons, unitization and pooling designations, declarations, orders and
agreements, operating agreements, agreements of development, area of mutual
interest agreements, farmout agreements, gas balancing or deferred production
agreements, processing agreements, plant agreements, pipeline, gathering and
transportation agreements, injection, repressuring and recycling agreements,
carbon dioxide purchase or sale agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements,
to the extent that such contracts and agreements do not (A) reduce the Net
Revenue Interest below that set forth in the Company Engineering Report, or (B)
increase the Working Interest above that set forth in the Company Engineering
Report, as applicable, without a proportionate increase in the Net Revenue
Interest of the applicable party; (vi) conventional rights of reassignment prior
to abandonment; (vii) materialmen's, mechanics', repairmen's, employees',
contractors', operators', tax and other similar liens or charges arising in the
ordinary course of business incidental to construction, maintenance or operation
of any of the assets (A) if they have not been filed pursuant to law, (B) if
filed, they have not yet become due and payable or payment is being withheld as
provided by law or (C) if their validity is being contested in good faith in the
ordinary course of business by appropriate action; and (viii) any other
encumbrances that (A) do not secure an
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obligation in respect of borrowed money (B) do not interfere materially with the
operation, value or use of assets of the Company or its Subsidiaries.
"Plan" shall have the meaning set forth in Section 7.9(a).
"Potential Acquirer" shall have the meaning set forth in Section 9.6.
"Proxy Statement" shall have the meaning set forth in Section 5.3.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended.
"Securities Act" shall have the meaning set forth in Section 7.5.
"Share" shall have the meaning set forth in Section 3.1.
"Special Committee" shall have the meaning set forth in the recitals.
"Specified Options" shall have the meaning set forth in Section
3.6(a).
"Specified Parties" shall mean Douglas H. Miller, Grant W. Henderson,
J. William Freeman, J. W. Spencer III, Randy Bodenhamer and Jarl P. Johnson.
"Specified Warrants" shall have the meaning set forth in Section
3.6(b).
"Stock Option Plans" shall have the meaning set forth in Section
3.6(a).
"Sub Material Adverse Effect" shall have the meaning set forth in
Section 5.1.
"Subsidiaries" shall have the meaning set forth in Section 7.3.
"Superior Proposal" shall have the meaning set forth in Section 9.6.
"Surviving Corporation" shall have the meaning set forth in Section
1.1.
"Taurus" shall have the meaning set forth in Section 7.24.
"Taurus Disposition" shall have the meaning set forth in Section 9.7.
"Taurus Disposition Agreement" shall have the meaning set forth in
Section 9.7.
"Taurus Disposition Notice" shall have the meaning set forth in
Section 9.7.
"Tax" shall mean all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties and
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assessments of any nature whatsoever together with all interest, penalties and
additions imposed with respect to such amounts.
"Tax Return" shall mean any return, declaration, report, estimate,
claim for refund, information return, statement, request for extension, or other
similar document relating to any tax, including any schedule or attachment
thereto, and including any amendment thereof.
"Terminating Other Acquisition Transaction" shall have the meaning set
forth in Section 11.1(e).
"Warrant Merger Consideration" shall have the meaning set forth in
Section 3.6(b).
"Warrant Plan" shall have the meaning set forth in Section 3.6(b).
"Warrant Relinquishment and Release Agreement" shall have the meaning
set forth in Section 3.6(b).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB
Sub hereby represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Sub is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as it is
now being conducted. Sub is duly qualified as a foreign corporation and is in
good standing in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in good standing would
not, individually or in the aggregate, have a direct or indirect material
adverse effect on the business, assets, condition (financial or otherwise),
liabilities or operations of Sub or Sub's ability to consummate the Merger (a
"Sub Material Adverse Effect"). Complete and correct copies as of the date
hereof of the Certificate of Incorporation and By-laws of Sub have been
delivered to the Company.
Section 5.2 Authority Relative to this Agreement. Sub has the
------------------------------------
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Sub and the consummation of the transactions contemplated hereby by
Sub have been duly authorized by all necessary corporate action on the part of
Sub. This Agreement has been duly executed and delivered by Sub and, assuming
the due authorization, execution and delivery of this Agreement by the Company
and JEDI, this Agreement constitutes a legal, valid and binding obligation of
Sub enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought.
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<PAGE>
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of Sub or (ii) result in
any breach or constitute a default (with or without notice or lapse of time, or
both) or give rise in others of any rights of termination, cancellation or
acceleration under any indenture, contract, license, franchise, permit, order,
decree, concession, lease, instrument, judgment, statute, law, ordinance, rule
or regulation applicable to Sub or its assets, other than, in the case of clause
(ii) only, breaches, defaults, violations and losses of rights that would not
have a Sub Material Adverse Effect. Except as referred to herein, or in
connection or in compliance with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the filing and
recordation of the certificate of merger pursuant to the DGCL, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
Sub of the Merger or the other transactions contemplated by this Agreement,
except where the failure to make any such filing or registration or to obtain
such authorization, consent or approval would not prevent consummation of the
Merger or have a Sub Material Adverse Effect.
Section 5.3 Information in Proxy Statement. None of the information
------------------------------
supplied by Sub for inclusion in the preliminary and definitive proxy statement
of the Company and any amendments or supplements thereto (collectively the
"Proxy Statement") to be mailed to the stockholders of the Company in connection
with the Merger will, at the time of the mailing thereof or at the time of the
Company Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
Section 5.4 Capitalization of Sub. The authorized capital stock of
---------------------
Sub consists of 1,000,000 shares of common stock, par value $0.01 per share,
1,000 of which shares, as of the date of this Agreement, are validly issued and
outstanding, fully paid and nonassessable and are owned by JEDI free and clear
of all liens, claims and encumbrances.
Section 5.5 Financing. Sub has or will have available to it at the
---------
time the Surviving Corporation is required to pay for the Shares pursuant to
Article III hereof sufficient funds to permit it to (i) pay for all of the
outstanding shares of Company Common Stock, (ii) pay for the cancellation of the
Outstanding Options and the Outstanding Warrants in accordance with Article III,
and (iii) pay amounts due to stockholders of the Company who have perfected
dissenters' rights in accordance with the DGCL.
Section 5.6 Operations of the Company Following the Merger. Based
----------------------------------------------
upon, among other things, Sub's review of the Company's financial condition and
operations, the Company's business plan and the representations made by the
Company in this Agreement, the financial condition of Sub and Sub's present
plans with respect to the Company and its subsidiaries following the Merger, Sub
has no reason to believe that, following the consummation of the Merger, the
Surviving Corporation will not be able to meet its obligations as they come due.
-13-
<PAGE>
Section 5.7 Finder's Fees. Sub has not made any arrangements with
-------------
any broker, finder or investment banker that would require the Company to pay
any fee or commission if the Merger or the other transactions contemplated by
this Agreement are not consummated.
Section 5.8 Review of Company. Without in any way affecting the
-----------------
importance of, or impacting its reliance on, any other provision of this
Agreement, Sub acknowledges that it has had a full opportunity to request from
the Company and its representatives, and has received and reviewed, all oral and
written information concerning the Company and its Subsidiaries that Sub deems
relevant to its decision to enter into this Agreement and to consummate the
transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JEDI
JEDI hereby represents and warrants to the Company as follows:
Section 6.1 Organization. JEDI is a limited partnership duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the partnership power to carry on its business as it is now
being conducted. Schedule 6.1 sets forth the names of the general partner and
the limited partners and their respective percentages of ownership.
Section 6.2 Authority and Capacity. JEDI has the requisite
----------------------
partnership power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by JEDI
and the consummation of the transactions contemplated hereby by JEDI have been
duly authorized by all necessary partnership action on the part of JEDI. This
Agreement has been duly executed and delivered by JEDI and, assuming the due
authorization, execution and delivery of this Agreement by the Company and Sub,
this Agreement constitutes a legal, valid and binding obligation of JEDI
enforceable in accordance with its terms except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the partnership agreement of JEDI, or (ii) result in any breach or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise in others to any rights of termination, cancellation or
acceleration under, any indenture, contract, instrument, or loan agreement
pursuant to which JEDI is a borrower, or any license, franchise, permit, order,
decree, concession, lease, judgment, statute, law, ordinance, rule or regulation
applicable to JEDI or its assets, other than, in the case of clause (ii) only,
such breaches, defaults, violations and losses of rights that would not have a
Sub Material Adverse Effect or a JEDI Material Adverse Effect (as defined
below). Except as referred to herein, or in connection or in compliance with
the provisions of the HSR Act, the Exchange Act and the filing and recordation
of the certificate of merger pursuant to the DGCL, no filing or registration
with, or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the
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<PAGE>
consummation by JEDI of the Merger or the other transactions contemplated
hereby, except where failure to make such filing or registration or obtain such
authorization, consent or approval would not prevent consummation of the Merger
or have a Sub Material Adverse Effect or, individually or in the aggregate, a
direct or indirect material adverse effect on the business, assets, conditions
(financial or otherwise), liabilities or operations of JEDI or JEDI's ability to
consummate the Merger (a "JEDI Material Adverse Effect").
Section 6.3 Financial Information.
---------------------
(a) JEDI has furnished the Company with true and complete copies of
JEDI's audited consolidated financial statements as of December 31, 1994 and
unaudited interim financial statements as of June 30, 1995. As of their
respective dates, the audited financial statements and unaudited interim
financial statements of JEDI were (i) prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") during the
periods presented (except as may be indicated therein or in the notes thereto,
or in the case of the unaudited statements, subject to normal year-end audit
adjustments), (ii) present fairly, in all material respects, the financial
position of JEDI as of the dates thereof and the results of their operations and
cash flow for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein and (iii) are, in all material respects, in
accordance with the books of account and records of JEDI.
(b) JEDI has or will have sufficient funds
available to perform its obligations under Section 9.8 of this Agreement.
Section 6.4 Operations of the Company Following the Merger. Based
----------------------------------------------
upon, among other things, JEDI's review of the Company's financial condition and
operations, the Company's business plan and the representations made by the
Company in this Agreement, the financial condition of Sub and Sub's present
plans with respect to the Company and its subsidiaries following the Merger,
JEDI has no reason to believe that, following the consummation of the Merger,
the Surviving Corporation will not be able to meet its obligations as they come
due.
Section 6.5 Information in Proxy Statement. None of the information
------------------------------
supplied by JEDI for inclusion in the Proxy Statement will, at the time of the
mailing thereof or at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 6.6 Finder's Fees. JEDI has not made any arrangements with
-------------
any broker, finder or investment banker that would require the Company to pay
any fee or commission if the Merger or the other transactions contemplated by
this Agreement are not consummated.
Section 6.7 Review of Company. Without in any way affecting the
-----------------
importance of, or impacting its reliance on, any other provision of this
Agreement, JEDI acknowledges that it has had a full opportunity to request from
the Company and its representatives, and has received and reviewed, all oral and
written information concerning the Company and its Subsidiaries that JEDI
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<PAGE>
deems relevant to its decision to enter into this Agreement and to consummate
the transactions contemplated hereby.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to JEDI and Sub as follows:
Section 7.1 Organization and Qualification. The Company is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on its business as
it is now being conducted. The Company is duly qualified as a foreign
corporation and is in good standing in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not, individually or in the aggregate, have a direct or
indirect material adverse effect on the business, assets, condition (financial
or otherwise), liabilities or operations of the Company and its Subsidiaries (as
hereinafter defined) taken as a whole or its ability to consummate the Merger (a
"Company Material Adverse Effect"). Complete and correct copies of the charter
and by-laws or comparable organizational documents of the Company and each of
its Subsidiaries as of the date hereof have been previously provided to Sub, and
a list of each jurisdiction in which the Company is duly qualified as a foreign
corporation has been delivered to Sub as Schedule 7.1 of a disclosure schedule
delivered by the Company to Sub on the date of this Agreement (the "Company
Disclosure Schedule").
Section 7.2 Capitalization. The authorized capital stock of the
--------------
Company consists of 40,000,000 shares of Company Common Stock and 7,500,000
shares of preferred stock, par value $0.001 per share. As of the date of this
Agreement, 22,088,903 shares of Company Common Stock were outstanding, no shares
of Company Common Stock were held in the treasury of the Company, no shares were
held by Subsidiaries of the Company and no shares of preferred stock were
outstanding. All the outstanding shares of Company Common Stock are validly
issued, fully paid and non-assessable and were issued free of preemptive rights.
As of the date hereof, there are no bonds, debentures, notes or other evidences
of indebtedness having the right to vote on any matters on which the Company's
stockholders may vote ("Company Voting Debt") issued or outstanding. Except for
(i) options to acquire 1,116,632 shares of Company Common Stock pursuant to the
Stock Option Plans, and (ii) warrants to purchase 1,300,000 shares of Company
Common Stock pursuant to the warrant agreements referred to in Section 3.6(b)
hereof, there are no options, warrants, calls or other rights, agreements or
commitments outstanding obligating the Company to issue, deliver or sell shares
of its capital stock or debt securities, or obligating the Company to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment.
Section 7.3 Subsidiaries. Schedule 7.3 of the Company Disclosure
------------
Schedule lists all subsidiaries of the Company (the "Subsidiaries"). Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to carry on its business as it is now
being conducted. Each Subsidiary is duly qualified as a foreign corporation,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes
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<PAGE>
such qualification necessary, except where the failure to be so qualified or in
good standing would not, individually or in the aggregate, have a Company
Material Adverse Effect. All the outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable and are owned by the
Company free and clear of any liens, claims or encumbrances. There are no
existing options, warrants, calls or other rights, agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of any of the Subsidiaries. Other than the Subsidiaries and except
as set forth in Schedule 7.3, the Company does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity, excluding joint interest operations of oil and
gas wells and drilling ventures arising in the ordinary course of business.
Section 7.4 Authority Relative to this Agreement. The Company has
------------------------------------
the requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the holders of a majority of the
outstanding shares of the Company Common Stock, the corporate power and
authority to carry out its obligations hereunder. The execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company (except for the approval of the holders of a majority
of the outstanding shares of Company Common Stock). This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by Sub and JEDI, this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable in
accordance with its terms except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
Except as set forth in Schedule 7.4 of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of the Company or any of
its Subsidiaries, or (ii) result in any breach or constitute a default (with or
without notice or lapse of time, or both) under, or give rise in others to any
rights of termination, cancellation or acceleration under, any indenture,
contract, loan agreement, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or its or their respective
assets, other than, in the case of clause (ii) only, such breaches, defaults,
violations and losses of rights that would not, individually or in the
aggregate, have a Company Material Adverse Effect. Except as disclosed in
Schedule 7.4 of the Company Disclosure Schedule or, in connection or in
compliance with the provisions of the HSR Act, the Exchange Act and the filing
and recordation of the Certificate of Merger pursuant to the DGCL, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
the Company of the Merger or the other transactions contemplated hereby, except
where failure to make such filing or registration or obtain such authorization,
consent or approval would not, individually or in the aggregate, prevent
consummation of the Merger or have a Company Material Adverse Effect.
-17-
<PAGE>
Section 7.5 Reports and Financial Statements. The Company has
--------------------------------
furnished Sub with true and complete copies of the Company's (i) Annual Reports
on Form 10-K for the fiscal years ended December 31, 1993 and December 31, 1994,
as filed with the Securities and Exchange Commission (the "Commission"), (ii)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993, June 30,
1993, September 30, 1993, March 31, 1994, June 30, 1994, September 30, 1994,
March 31, 1995 and June 30, 1995, as filed with the Commission, (iii) proxy
statements related to all meetings of its stockholders (whether annual or
special) held since January 1, 1993 and (iv) all other reports on Form 8-K and
registration statements declared effective by the Commission since December 31,
1992, except registration statements on Form S-8 relating to employee benefit
plans and reports on Form 10-C relating to securities quoted on the NASDAQ
Interdealer Quotation system, which are all the documents (other than
preliminary material) that the Company was required to file with the Commission
since January 1, 1993 (all items in clauses (i) through (iv) being referred to
herein collectively as the "Company SEC Reports"). As of their respective
dates, the Company SEC Reports complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Company SEC Reports. As of their
respective dates, the Company SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates, the audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC Reports
complied in all material respects with applicable accounting requirements of the
Securities Act and the Exchange Act, and with the published rules and
regulations of the Commission with respect thereto. The financial statements
included in the Company SEC Reports (i) have been prepared in accordance with
GAAP during the periods presented (except as may be indicated therein or in the
notes thereto or, in the case of the unaudited statements, subject to normal
year-end audit adjustments and except for the fact that such unaudited
statements do not contain all notes required by GAAP), (ii) present fairly, in
all material respects, the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flow for the periods then ended (except as may be
indicated therein or in the notes thereto, or , in the case of the unaudited
interim financial statements, subject to normal year-end audit adjustments and
any other adjustments described therein and except for the fact that certain
information and notes have been condensed or omitted in accordance with the
Securities Act and the Exchange Act and the rules promulgated thereunder) and
(iii) are, in all material respects, in accordance with the books of account and
records of the Company. Neither the Company nor any of its Subsidiaries has any
liability or is subject to any loss contingency material to the Company and its
Subsidiaries, taken as a whole, other than as reflected or disclosed in the
financial statements or notes thereto included in the Company SEC Reports filed
prior to the date hereof or as otherwise disclosed on Schedule 7.6 of the
Company Disclosure Schedule. Any reports or other material filed by the
Company with the Commission after the date hereof and prior to the Effective
Time (other than preliminary material) shall be deemed to be included in the
defined term "Company SEC Reports" for purposes of this Agreement and the
Company shall be deemed to have made the representations set forth in this
Section 7.5 in respect of such reports or other material and any financial
statements set forth therein.
Section 7.6 Absence of Certain Changes or Events. Except as
------------------------------------
contemplated by this Agreement or as disclosed in Schedule 7.6 of the Company
Disclosure Schedule or in any of the
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<PAGE>
Company SEC Reports filed prior to the date hereof, there have not been (i)
since June 30, 1995 transactions, commitments, disputes, events, damage,
destruction or losses, whether or not covered by insurance, development or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) individually or in the aggregate having, or which
could reasonably be expected to have, a Company Material Adverse Effect or (ii)
since December 31, 1994 (A) any entry into any commitment or transaction
material to the Company and its Subsidiaries taken as a whole (including,
without limitation, any borrowing or sale of assets) except in the ordinary
course of business consistent with past practice or (B) any action taken by the
Company or its Board of Directors in connection with the adoption or
implementation of any plan or arrangement or the entry into any agreement (x)
principally intended to discourage an Other Acquisition Transaction, or (y)
pursuant to which the officers, directors or employees of the Company or its
Subsidiaries have been granted any benefits payable or distributable upon
severance or upon a change of control of the Company or pursuant to which any
rights held by such persons have been accelerated to occur or vest at or prior
to a change of control, including without limitation any amendments to,
modifications of, or elections of other rights under existing benefit plans
(including the Stock Option Plans and Warrants).
Section 7.7 Litigation. Except as disclosed in the Company's Annual
----------
Report on Form 10-K for the year ended December 31, 1994 or as disclosed in
Schedule 7.7 of the Company Disclosure Schedule, there is no claim, suit, action
or proceeding pending or, to the knowledge of the officers of the Company,
overtly threatened, against or affecting the Company or any of its Subsidiaries
which, either individually or in the aggregate, has or could reasonably be
expected to have a Company Material Adverse Effect, nor, as of the date of this
Agreement, is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or any of its Subsidiaries.
Section 7.8 Information in Disclosure Documents. None of the
-----------------------------------
information with respect to the Company or its Subsidiaries included or
incorporated by reference in the Proxy Statement will, at the time of the
mailing thereof and at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading; provided, however,
that this provision shall not apply to, and no representation or warranty is
made by the Company with respect to, statements or omissions in the Proxy
Statement based upon information furnished by or on behalf of JEDI or Sub for
use therein. The Proxy Statement will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. No
representation or warranty made by the Company contained in this Agreement and
no statement in the Company Disclosure Schedule, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
Section 7.9 Employee Benefits Plans; Labor Matters.
--------------------------------------
(a) Schedule 7.9 (a) of the Company Disclosure Schedule lists each
"employee benefit plan," as such term is defined in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including, but not
limited to, employee benefit plans, such as foreign
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<PAGE>
plans, which are not subject to the provisions of ERISA) ("Plan"), sponsored,
maintained or contributed to by the Company or any of its Subsidiaries for the
benefit of the employees of the Company or any of its Subsidiaries, or that has
been so sponsored, maintained or contributed to by Company or any of its
Subsidiaries within six years prior to the Closing.
(b) Except as otherwise set forth in Schedule 7.9(b) of the Company
Disclosure Schedule or as previously disclosed in writing to Sub by the Company:
(i) the Company and its Subsidiaries do not contribute to or
have an obligation to contribute to, and have not at any time within six years
prior to the Closing contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA;
(ii) all reports and disclosures relating to the Plans
required to be filed with or furnished to governmental agencies, Plan
participants or Plan beneficiaries the failure to file of which would,
individually or in the aggregate, have a Company Material Adverse Effect have
been filed or furnished in accordance with applicable law in a timely manner,
and each Plan has been administered in substantial compliance with its governing
documents and in accordance with ERISA, the Internal Revenue Code of 1986, as
amended (the "Code"), and other applicable laws, except for any failure of
compliance or violation of applicable law which would not, individually or in
the aggregate, have a Company Material Adverse Effect;
(iii) there are no actions, suits, claims, governmental (and,
to the knowledge of the Company's officers, non-governmental) investigations or
audits pending (other than routine claims for benefits) or, to the knowledge of
the Company's officers, threatened against, or with respect to, any of the Plans
or their assets which, individually or in the aggregate, have or could
reasonably be expected to have a Company Material Adverse Effect;
(iv) no act, omission or transaction has occurred which would
result in imposition on the Company of (A) a breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code, which (in the case of (A), (B)
or (C) above), individually or in the aggregate, could have a Company Material
Adverse Effect;
(v) each of the Plans intended to be qualified under Section
401 of the Code satisfies the requirements of such Section and has received a
favorable determination letter from the Internal Revenue Service regarding such
qualified status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of Company, operated in
a way which would adversely affect such qualified status;
(vi) no Plan is subject to Title IV of ERISA;
(vii) as to any Plan intended to be qualified under Section 401
of the Code, to the knowledge of the Company's officers there has been no
termination or partial termination of the Plan within the meaning of Section 411
(d) (3) of the Code which has had or could reasonably be expected to have a
Company Material Adverse Effect; and
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(viii) with respect to any Plan which is sponsored, maintained
or contributed to, or has been sponsored, maintained or contributed to within
six years prior to the Closing Date, by any corporation, trade, business or
entity under common control with the Company, within the meaning of Section 4104
(b), (c) or (m) of the Code or Section 4001 of ERISA ("Commonly Controlled
Entity"), (A) no withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred, which withdrawal liability has not been satisfied, (B)
no liability to the Pension Benefit Guaranty Corporation ("PBGC") has been
incurred by any Commonly Controlled Entity, which liability has not been
satisfied, (C) no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (D) all contributions (including installments) to such Plan
required by section 302 of ERISA and Section 412 of the Code have been timely
made.
(c) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contracts. There is no pending or
threatened labor dispute, strike or work stoppage against the Company or any of
its Subsidiaries which may materially interfere with the respective business
activities of the Company or any of its Subsidiaries.
(d) Except as set forth in Schedule 7.9(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to or is
bound by any severance agreements, programs or policies. Schedule 7.9(d) of the
Company Disclosure Schedule sets forth, and the Company has provided to Sub,
true and correct copies of (i) all agreements with employees or consultants of
the Company or its Subsidiaries, obligating the Company or any Subsidiary to
make annual cash payments in an amount exceeding an aggregate of $50,000, (ii)
all non-competition agreements with the Company or a Subsidiary executed by
officers of the Company or a Subsidiary, and (iii) all plans, programs,
agreements and other arrangements of the Company or its Subsidiaries with or
relating to the employment and to the remuneration and compensation of its
employees.
(e) Except as provided in Schedule 7.9(e) of the Company Disclosure
Schedule, (i) no Plan provides retiree medical or retiree life insurance
benefits to any person and (ii) neither the Company nor any of its Subsidiaries
is contractually or otherwise obligated (whether or not in writing) to provide
any person with life insurance or medical benefits upon retirement or
termination of employment, other than as required by the provisions of Section
601 through 608 of ERISA and Section 4980B of the Code.
(f) Except as provided in Schedule 7.9(f) of the Company Disclosure
Schedule, the Company has not amended, terminated or taken any other actions
with respect to any of the Plans or any of the plans, programs, agreements,
policies or other arrangements described in this Section 7.9 since December 31,
1994 which, individually or in the aggregate, have or could reasonably be
expected to have a Company Material Adverse Effect.
Section 7.10 Environmental Matters. Except for matters disclosed in
---------------------
Schedule 7.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries and the properties and operations of the Company and its
Subsidiaries are not subject to any existing, pending or, to the knowledge of
the Company, overtly threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Entity under any Environmental Law.
Except for matters disclosed in Schedule 7.10 of the Company Disclosure Schedule
and except for matters that would not result, individually or
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in the aggregate, in a Company Material Adverse Effect, (i) the properties,
operations and activities of the Company and its Subsidiaries are in compliance
with all applicable Environmental Laws; (ii) all notices, permits, licenses, or
similar authorizations, if any, required to be obtained or filed by the Company
or any of its Subsidiaries under any Environmental Law in connection with any
aspect of the business of the Company or its Subsidiaries, including without
limitation those relating to the treatment, storage, disposal or release of a
hazardous substance, have been duly obtained or filed and will remain valid and
in effect after the Merger, and the Company and its Subsidiaries are in
compliance with the terms and conditions of all such notices, permits, licenses
and similar authorizations; (iii) there are no physical or environmental
conditions existing on any property of the Company or its Subsidiaries or
resulting from the Company's or such Subsidiaries' operations or activities,
past or present, at any location, that would give rise to any on-site or off-
site remedial obligations imposed on the Company or any of its Subsidiaries
under any Environmental Laws; (iv) to the Company's knowledge, since the
effective date of the relevant requirements of applicable Environmental Laws and
to the extent required by such applicable Environmental Laws, all hazardous
substances generated by the Company and its Subsidiaries have been transported
only by carriers authorized under Environmental Laws to transport such
substances and wastes, and disposed of only at treatment, storage, and disposal
facilities authorized under Environmental Laws to treat, store or dispose of
such substances and wastes; (v) there has neither been any exposure of any
person or property to hazardous substances or any pollutant or contaminant
released by the Company or its Subsidiaries, nor has there been any release of
hazardous substances, or any pollutant or contaminant into the environment by
the Company or its Subsidiaries or in connection with their properties or
operations that could reasonably be expected to give rise to any claim against
the Company or any of its Subsidiaries for damages or compensation; and (vi) the
Company and its Subsidiaries have made available to Sub all internal and
external environmental audits and studies and all correspondence on substantial
environmental matters in the possession of the Company or its Subsidiaries
relating to any of the current or former properties or operations of the Company
and its Subsidiaries. For purposes of this Agreement, the terms "hazardous
substance" and "release" have the meanings specified in CERCLA, and the term
"disposal" has the meaning specified in RCRA; provided, however, that to the
extent the laws of the state in which the property is located establish a
meaning for "hazardous substance," "release," or "disposal" that is broader than
that specified in either CERCLA or RCRA, such broader meaning shall apply.
Section 7.11 Public Utility Holding Company Act. None of the Company
----------------------------------
or any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, and the rules and regulations
thereunder.
Section 7.12 Futures Trading and Fixed Price Exposure. Schedule
----------------------------------------
7.12 to the Company Disclosure Schedule sets forth a true and correct statement
of the position, as of the date hereof, of the Company and its Subsidiaries with
respect to obligations under Fixed Price Contracts (including, with respect to
each Fixed Price Contract, location of delivery and variations in the obligation
to take or deliver) and related Hydrocarbon price swaps, hedges, futures or
similar instruments to which the Company or any of its Subsidiaries is a party.
Section 7.13 Takeover Provisions Inapplicable. As of the date hereof
--------------------------------
and at all times on or prior to the Effective Time, Section 203 of the DGCL is,
and shall be, inapplicable to the Merger and the transactions contemplated
hereby or connected herewith.
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<PAGE>
Section 7.14 Fairness Opinion. The Special Committee has been orally
----------------
advised by Bear, Stearns & Co. Inc., financial advisor to the Company, that it
believes that the Merger is fair to the stockholders of the Company from a
financial point of view (except that such advice is not provided to management
stockholders who will participate in the equity ownership of the Surviving
Corporation).
Section 7.15 Finder's Fees. Except as set forth in Schedule 7.15 of
-------------
the Company Disclosure Schedule, since December 31, 1994, neither the Company
nor any of its Subsidiaries have made any arrangements with any broker, finder
or investment banker that would require the Company or any of its Subsidiaries
to pay any fee or commission in connection with any material transaction by the
Company or any of its Subsidiaries, and no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. A complete and correct copy
of all agreements referenced in Schedule 7.15 of the Company Disclosure Schedule
has been provided to Sub.
Section 7.16 Compliance with Applicable Laws. Except as disclosed in
-------------------------------
the Company SEC Reports filed prior to the date of this Agreement or in Schedule
7.16 of the Company Disclosure Schedule, the Company and the Subsidiaries are
not in violation of any law, ordinance, regulation, order or writ of any courts,
administrative agencies or commissions or other governmental authorities or
instrumentalities, domestic or foreign (each a "Governmental Entity") applicable
to the Company or any of the Subsidiaries or by which any of them or their
assets may be bound, except for violations that would not, individually or in
the aggregate, have a Company Material Adverse Effect. Except as disclosed in
Schedule 7.16 of the Company Disclosure Schedule, neither the Company nor any of
the Subsidiaries has received notice of violation of any law, ordinance,
regulation, order or writ, or is in default with respect to any order, writ,
judgment, award injunction or decree of any Governmental Entity, except for such
notices or defaults which would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 7.17 Taxes. Each of the Company and the Subsidiaries has
-----
timely filed when due (taking into account permitted extensions) all material
federal, state and local income and franchise Tax Returns and all other Tax
Returns required to be filed by any of them and has paid (or the Company has
paid on its behalf), or has set up an adequate reserve for the payment of, all
Taxes required to be paid in respect of the periods covered by such Tax Returns.
The information contained in such Tax Returns is true, complete and accurate in
all material respects. Except as disclosed in Schedule 7.17 of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is delinquent in the
payment of any Tax, assessment or governmental charge in an amount exceeding
$100,000. Except as disclosed in Schedule 7.17 of the Company Disclosure
Schedule, no deficiencies for any Taxes have been proposed, asserted or assessed
against the Company or any of the Subsidiaries, by delivery of a written
instrument to the Company or to the knowledge of the officers of the Company,
that have not been finally settled or paid in full, and no requests for waivers
of the time to assess any such Tax are pending. The federal income Tax Returns
of the Company and each of the Subsidiaries consolidated in such returns have
been examined by and settled with the Internal Revenue Service as set forth in
Schedule 7.17 of the Company Disclosure Schedule. Neither the Company nor any
of the Subsidiaries is a party to or obligated under any agreement,
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<PAGE>
commitment or arrangement that could require the payment of any "excess
parachute payment" within the meaning of Section 280G of the Code.
Section 7.18. Certain Agreements.
------------------
Except as listed as an exhibit to the Company SEC Reports filed prior
to the date of this Agreement or as disclosed in Schedule 7.18 of the Company
Disclosure Schedule, neither the Company nor any of the Subsidiaries is a party
to any oral or written (i) agreements, contracts, indentures or other
instruments relating to Indebtedness which, when aggregated with all such other
agreements, contracts, indentures or instruments, exceeds an amount of $500,000,
(ii) confidentiality or standstill agreements or other material contract or
agreement which, after giving effect to the transactions contemplated by this
Agreement, purports to restrict or bind Sub or any of its affiliates (other than
the Surviving Corporation and its subsidiaries), (iii) collective bargaining
agreement, (iv) contract, agreement or commitment not entered into in the
ordinary course of business consistent with past practice and for which the
Company could become liable for payments in excess of $500,000 (in respect of
all such contracts, agreements or commitments, collectively), (v) any contract
or agreement granting a preferential right of purchase or similar right to any
person or entity with respect to any Material Company Asset (as hereinafter
defined), or (vi) material contract or agreement that is not expected to be
fully performed within 30 days following the Effective Time excluding oil and
gas leases, farmout agreements, gas sales or purchase contracts, joint operating
agreements, unit operating agreements and unit agreements entered into in the
ordinary course of business.
Section 7.19. Engineering Reports.
-------------------
(a) The estimates of proved reserves of oil and natural gas (the
"Company Estimated Proved Reserves") prepared by the Company and set forth in
the report of Company Estimated Proved Reserves as of December 31, 1994 (the
"Company Reserve Report") were reviewed by independent petroleum engineers Lee
Keeling and Associates, Inc. as indicated in, and with the conclusion set forth
in, their reports dated February 1, 1995, effective as of January 1, 1995; and
(b) All information and production data provided to Lee Keeling and
Associates, Inc. for the preparation of the Company Reserve Report were true and
correct in all material respects as of the date provided.
Section 7.20 Oil and Gas Reserve Information. Except as otherwise
-------------------------------
set forth in Schedule 7.20 of the Company Disclosure Schedule and except for
exceptions that would not, and could not reasonably be expected to, individually
or in the aggregate, have a Company Material Adverse Effect:
(a) To the knowledge of the Company's officers, none of the wells
included in the Oil and Gas Interests of the Company and its Subsidiaries has
been overproduced such that it is subject or liable to being shut-in or to any
other overproduction penalty (including cash payments);
(b) There are no wells included in the Oil and Gas Interests of the
Company and its Subsidiaries that: (i) the Company or any of its Subsidiaries
are currently obligated by law or
-24-
<PAGE>
contract to plug and abandon; (ii) are subject to exceptions to a requirement to
plug and abandon issued by a regulatory authority having jurisdiction over such
Oil and Gas Interests; or (iii) to the knowledge of the Company, have been
plugged and abandoned but have not been plugged or reclaimed in accordance with
all applicable requirements of each regulatory authority having jurisdiction
over such Oil and Gas Interests;
(c) No person has any call on, option to purchase, or similar rights
with respect to the Oil and Gas Interests of the Company and its Subsidiaries
(including without limitation the production attributable thereto) and upon
consummation of the transactions contemplated by this Agreement, the Company and
its Subsidiaries will have the right to market production from the Oil and Gas
Interests of the Company and its Subsidiaries on terms no less favorable than
the terms upon which such company is currently marketing such production;
(d) To the knowledge of the Company's officers, all royalties,
overriding royalties, compensatory royalties and other payments due with respect
to the Oil and Gas Interests of the Company and its Subsidiaries (excluding
those held in suspense in accordance with past operating practices or in
connection with post-closing adjustments in respect of acquired properties) have
been properly and timely paid; and
(e) To the knowledge of the Company's officers, with respect to those
assets of the Company and its Subsidiaries that are oil and gas leases
("Leases"), there has not occurred any event, fact or circumstance which with
the lapse of time or the giving of notice, or both, would constitute a breach or
default on behalf of the Company and its Subsidiaries or, to the knowledge of
the Company and its Subsidiaries, with respect to any other parties under the
Leases.
Section 7.21 Title to Property. The Company or its Subsidiaries has
-----------------
Defensible Title to all of the material assets reflected on the consolidated
financial statements of the Company included in the Company SEC Reports as being
owned by it or its Subsidiaries (including Oil and Gas Interests of the Company
and its Subsidiaries) and all of the material assets thereafter acquired by it
or its Subsidiaries (except to the extent that such assets have thereafter been
disposed of in the ordinary course of business consistent with past practice)
(collectively, the "Material Company Assets"). All material payments of any
kind required to be made by the Company and its Subsidiaries to third parties
under any contract or agreement relating to the Material Company Assets have
been or will be properly and timely paid or provided for.
Section 7.22 Insurance. Schedule 7.22 to the Company Disclosure
---------
Schedule contains a summary of all material policies of insurance (including all
directors' and officers' liability insurance coverage) maintained by the Company
and its Subsidiaries during the past five years.
Section 7.23 Affiliate Transactions. Except for the transactions
----------------------
described in Schedule 7.23 of the Company Disclosure Schedule, all transactions
involving the Company or any of its Subsidiaries that are required to be
disclosed in the Company SEC Reports in accordance with Item 404 of Regulation
S-K have been so disclosed, and since December 31, 1994, neither the Company nor
any of its Subsidiaries has entered into any transactions that would be required
to be disclosed in future public filings under the Exchange Act pursuant to such
Item which have not already been disclosed in the Company SEC Reports filed
prior to the date hereof.
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<PAGE>
Section 7.24 Taurus Energy. Except as set forth in Schedule 7.24 of
-------------
the Company Disclosure Schedule, since December 31, 1994 neither the Company nor
any of its Subsidiaries (other than Taurus Energy Corp. ("Taurus")) have made
any capital contribution to Taurus, engaged in a transaction with Taurus not in
conformance with past practice or which added material value to Taurus or
otherwise transferred value to Taurus (including by way of assumption of
liabilities).
ARTICLE VIII
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 8.1 Conduct of Business by the Company. Following the date
----------------------------------
hereof and prior to the Effective Time, except as otherwise contemplated by this
Agreement or unless Sub shall otherwise consent in writing:
(a) subject to the limitations contained in or transactions
contemplated by (including, but not limited to, the Taurus Disposition) this
Agreement, the Company shall, and shall cause its Subsidiaries to, carry on
their respective operations in the usual and ordinary course consistent with
past practice, and shall use its reasonable best efforts, and shall cause each
of its Subsidiaries to use its reasonable best efforts, to preserve
substantially intact its present business organization, keep available the
services of its present officers and employees, maintain and keep its material
assets in as good repair and condition as of the date hereof, ordinary wear and
tear and damage due to casualty excepted, and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and on-going businesses shall be materially unimpaired at the
Effective Time;
(b) the Company shall not, nor shall it propose to, except as
required by this Agreement, (i) sell or pledge or agree to sell or pledge any
capital stock owned by it in any of its Subsidiaries, (ii) amend its Certificate
of Incorporation or By-laws, (iii) split, combine or reclassify its outstanding
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
capital stock, or declare, set aside or pay any dividend or other distribution
payable in cash, stock or property, or (iv) directly or indirectly redeem,
purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire
any shares of its capital stock;
(c) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) except as required or contemplated by this Agreement,
issue, deliver or sell or agree to issue, deliver or sell any additional shares
of, or stock appreciation rights or rights of any kind to acquire any shares of,
its capital stock of any class, any Company Voting Debt, or any option, rights
or warrants to acquire, or securities convertible into, shares of capital stock,
other than issuances of Company Common Stock pursuant to the exercise of options
granted pursuant to the Stock Option Plans or Outstanding Warrants, (ii) amend
in any respect existing agreements evidencing the options granted pursuant to
the Stock Option Plans or Outstanding Warrants (including, without limitation,
the exercise or strike prices thereof) or the Stock Option Plan pursuant to
which such options were granted, except to permit the acceleration of the
vesting or exercisability of the options granted pursuant to the Stock Option
Plans and Outstanding Warrants in connection with the settlement thereof in
accordance with Section 3.6, (iii) acquire or lease or agree to acquire or lease
any material capital asset or assets, or make any other capital expenditures,
which exceed the Company's capital expenditure budgets for
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<PAGE>
the fourth quarter of 1995 and the first quarter of 1996 set forth in Schedule
8.1(c) of the Company Disclosure Schedule, in the aggregate for all such assets
or other capital expenditures in both quarters, by $2.0 million or more
(including in such calculation the proceeds of any sale/leaseback transactions),
(iv) dispose or agree to dispose of capital assets or any other assets other
than in the ordinary course, with a value in the aggregate in excess of $2.0
million, (v) (A) create, incur, assume or permit additional material
indebtedness (including obligations in respect of capital leases), other than
periodic drawdowns under the Company's credit facilities existing as of the date
hereof, provided that such drawdowns are in the ordinary course of business
consistent with past practice, and provided further that the amount available
under such facilities as of the date hereof is not increased, (B) assume,
guarantee, endorse or otherwise become liable or responsible for the obligations
of any other person (other than a Subsidiary of the Company, or as to a
Subsidiary, another Subsidiary of the Company) in an amount in excess of
$10,000, (excluding suspense account obligations assumed in connection with
acquisitions by the Company whereby the Company also receives the funds held in
suspense or an adjustment to the purchase price is made in an equal amount), (C)
encumber or grant a security interest in any Material Company Asset other than
for the Company's credit facilities existing as of the date hereof, or (D) make
any loans or advances to any other person (excluding intercompany transactions),
enter into any agreement or instrument relating to the borrowing of money or the
extension of credit or enter into any other material transaction, other than in
each case in the ordinary course of business consistent with past practice, (vi)
acquire or agree to acquire oil or gas properties or other assets of a type not
covered by Schedule 8.1(c) of the Company Disclosure Schedule, or acquire or
agree to acquire by merging or consolidating with, or by purchasing the assets
of or a substantial equity interest in, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, for an aggregate purchase price in excess of $5.0 million,
(vii) enter into or renew any material agreements, contracts or other
commitments that are not expected to be fully performed within thirty days after
the Effective Time excluding oil and gas leases, farmout agreements, gas sales
or purchase contracts, joint operating agreements, unit operating agreements and
unit agreements entered into in the ordinary course of business, or (viii)
adopt, enter into, amend or terminate any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(d) the Company shall not, nor shall it permit any of its
Subsidiaries to, except as required to comply with applicable law and except as
provided in Section 9.3 hereof and other than acceleration of vesting permitted
by this Agreement, (i) adopt, enter into, terminate or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other Plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any current or former
director, officer or employee (other than the adoption of any special
compensation for the members of the Special Committee), (ii) increase in any
manner the compensation or fringe benefits of any director (other than the
adoption of any special compensation for the members of the Special Committee),
executive officer or employee (provided, however, that the Company shall be
permitted to award normal salary increases to employees (other than executive
officers) of the Company in the ordinary course of business that are consistent
with past practice (including, without limitation, in connection with any
promotion of such employee) and that, in the aggregate, do not result in a
material increase in compensation expense to the Company and its Subsidiaries
relative to the level in effect prior to such increase), unless consented to by
Sub, which consent shall not be unreasonably withheld, (iii) pay any benefit not
provided under any existing plan or arrangement, except for payments set forth
in Schedule 8.1(d) of the Company
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<PAGE>
Disclosure Schedule, (iv) grant any awards under the Stock Option Plan or any
other bonus, incentive, performance or other compensation plan or arrangement or
Plan (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Plans or
agreements or awards made thereunder), (v) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Plan, other than in the ordinary
course of business consistent with past practice, or (vi) adopt, enter into,
amend or terminate any contract, agreement, commitment or arrangement to do any
of the foregoing;
(e) the Company shall not, nor shall it permit its Subsidiaries to,
make any change in its accounting policies or procedures, except as required
under GAAP;
(f) the Company shall use its reasonable best efforts to refrain from
taking, and shall use its reasonable best efforts to cause its Subsidiaries to
refrain from taking, any action that would, or reasonably might be expected to,
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect as of the Effective Time, or in
any of the conditions to the Merger set forth in Article X not being satisfied,
or (unless such action is required by applicable law) that would adversely
affect the ability of the Company to obtain any of the regulatory approvals
required to consummate the Merger, as contemplated hereby;
(g) the Company shall not settle or compromise any claim for
dissenters' rights in respect of the Merger;
(h) the Company shall maintain in full force and effect all of its
policies of insurance in existence as of the date hereof or insurance comparable
to the coverage afforded by such policies; and
(i) the Company shall not enter into any natural gas or other future
or options trading or be a party to any price swaps, hedges, futures or similar
instruments without first obtaining the consent of Sub, which consent shall not
be unreasonably withheld.
Section 8.2 Obligations of JEDI and Sub. Each of JEDI and Sub shall
----------------------------
use its reasonable best efforts to refrain from taking any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect as of the Effective Time, or in any of the conditions to the Merger set
forth in Article X not being satisfied, or (unless such action is required by
applicable law) that would adversely affect the ability of JEDI or Sub to obtain
any of the regulatory approvals required to consummate the Merger, as
contemplated hereby.
Section 8.3 Notice of Breach. Each party shall promptly give written
----------------
notice to the other party upon becoming aware of the occurrence or, to its
knowledge, impending or threatened occurrence, of any event that would cause any
of the representations and warranties to be untrue on the Effective Time or
cause a breach of any covenant contained or referenced in this Agreement and
will use its reasonable best efforts to prevent or promptly remedy the same.
Any such notification shall not be deemed an amendment of the Company Disclosure
Schedule.
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<PAGE>
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 Access and Information. Upon reasonable notice, the
----------------------
Company and its Subsidiaries shall afford to Sub and to Sub's affiliates,
accountants, lenders, counsel and other representatives full access, during
normal business hours (and at such other times as the parties may mutually
agree) and in a manner so as not to materially interfere with the normal
business operations of the Company and its Subsidiaries throughout the period
prior to the Effective Time, to all of their properties (which shall include the
right to conduct an environmental assessment thereof), books, contracts,
commitments, records and personnel. During such period, the Company shall
furnish promptly to Sub (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as Sub may reasonably request. JEDI and Sub shall hold
all such information in confidence and hereby assume all of the obligations of
Enron Capital & Trade Resources Corp. ("ECT") set forth in that certain
Confidentiality Agreement, dated June 12, 1995, as amended, between ECT and the
Company (the "Confidentiality Agreement") the terms of which are incorporated
herein by reference and made a part of this Agreement, and, in the event of
termination of this Agreement for any reason, shall comply with the terms of the
Confidentiality Agreement regarding the return of information. During the
period prior to the Effective Time, the Company shall make its accountants,
counsel, lenders and other representatives available to Sub and to Sub's
affiliates, accountants, lenders, counsel and other representatives at
reasonable times.
Section 9.2 Proxy Statement. (a) As promptly as reasonably
---------------
practicable after the execution of this Agreement, the Company shall prepare and
file with the Commission preliminary proxy materials with respect to the actions
to be taken at the Company Meeting, which shall be in form and substance
reasonably satisfactory to Sub. As promptly as reasonably practicable after
comments are received from the Commission with respect to such preliminary proxy
materials, the Company shall use its reasonable best efforts to respond to the
comments of the Commission. Sub and JEDI shall provide the Company with such
information as may be required to be included in the proxy statement or as may
be reasonably required to respond to any comment of the Commission. After all
the comments received from the Commission have been cleared by the Commission
staff and all information required to be contained in the proxy statement has
been included therein by the Company, the Company shall file with the Commission
the Proxy Statement and the Company shall use its reasonable best efforts to
have the Proxy Statement cleared by the Commission as soon thereafter as
practicable. The Company shall cause the Proxy Statement to be mailed to its
stockholders of record as promptly as reasonably practicable after clearance by
the Commission. Unless the Company is advised by outside counsel that such a
recommendation is no longer consistent with the discharge of applicable
fiduciary duties of directors of the Company, the Proxy Statement shall include
the recommendation of the Board of Directors of the Company in favor of the
Merger. If requested by Sub, the Company shall use its reasonable best efforts
to obtain an "SAS No. 71 letter" from the Company's independent public
accountants addressed to the Company, in form and substance reasonably
satisfactory to Sub, with respect to interim financial statements included in
the Proxy Statement.
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(b) The Company shall retain the services of a proxy soliciting firm
reasonably acceptable to Sub for the purpose of communicating to the Company's
stockholders the recommendation of the Company's Board of Directors and of
seeking to ensure that sufficient votes are cast to satisfy the requirements of
applicable law for the completion of the Merger.
(c) Each of Sub and the Company shall make all necessary filings
applicable to it with respect to the Merger under the Exchange Act and the rules
and regulations thereunder and shall use its reasonable best efforts to obtain
required clearances with respect thereto.
Section 9.3 Indemnification. (a) The Certificate of Incorporation of
---------------
the Surviving Corporation and each of its Subsidiaries shall contain provisions
that acknowledge and agree that, to the fullest extent permitted by law, the
provisions relating to limitation on liability that are set forth in Article 10
of the Certificate of Incorporation of the Company as of the date of this
Agreement, shall remain effective for a period of six years from the Effective
Time with respect to individuals who at any time from and after the date of this
Agreement and to and including the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company or any of its Subsidiaries in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the matters contemplated by this Agreement), and
the Surviving Corporation shall not amend (in any manner that would diminish the
effect of such provisions) or repeal such provisions for a period of six years
from the Effective Time. If, at any time during such period of six years and
prior to an underwritten public offering of capital stock of the Surviving
Corporation, the Surviving Corporation is unable to make any indemnification
payments required by this Section 9.3, then JEDI shall be liable for such
payments, but only to the extent of all dividends or other distributions paid in
respect of capital stock of the Surviving Corporation prior to or upon the
dissolution of the Surviving Corporation that have been made to JEDI or any of
its Affiliates (as defined in Rule 405 of Regulation C promulgated under the
Securities Act) by the Surviving Corporation during such period.
(b) The Surviving Corporation shall, for six years from the Effective
Time, maintain in effect the current directors' and officers' liability
insurance coverage listed, and identified as such, on Schedule 7.22 of the
Company's Disclosure Schedule maintained by the Company (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to such officers and directors so long as substitution does not
result in gaps or lapses in coverage) with respect to matters occurring through
the Effective Time, provided that in no event shall the Surviving Corporation be
required to expend to maintain or procure insurance coverage pursuant to this
Section 9.3 any amount per annum in excess of 50% of the aggregate premiums paid
in 1995 on an annualized basis for such purpose.
(c) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation, or at JEDI's
option, JEDI, shall assume the obligations set forth in this Section 9.3.
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(d) The By-laws of the Surviving Corporation and each of its
Subsidiaries shall contain provisions that acknowledge and agree that, to the
fullest extent permitted by law, the provisions relating to indemnification and
advancement of expenses that are set forth in the By-laws of the Company as of
the date of this Agreement shall remain effective for a period of six years from
the Effective Time with respect to individuals who at any time from and after
the date of this Agreement and to and including the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company or any of
its Subsidiaries in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the matters contemplated by this
Agreement), and the Surviving Corporation shall not amend or repeal such
provisions for a period of six years from the Effective Time.
(e) The obligations of the Surviving Corporation under this Section
9.3 shall not be terminated or modified in such a manner as to adversely affect
any director, officer, employee, fiduciary and agent to whom this Section 9.3
applies without the consent of each affected director, officer, employee,
fiduciary and agent (it being expressly agreed that the directors, officers,
employees, fiduciaries and agents to whom this Section 9.3 applies shall be
third-party beneficiaries of this Section 9.3).
(f) Sub understands that the Company has entered into contractual
indemnification arrangements with each of its current directors, true and
correct copies of which have previously been delivered to Sub.
Section 9.4 HSR Act. The Company shall use its reasonable best
-------
efforts to file, and Sub shall use its reasonable best efforts to cause its
ultimate parent entity to file, as soon as practicable following the execution
of this Agreement, notifications under the HSR Act in connection with the Merger
and the transactions contemplated hereby, and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other governmental authority in connection with antitrust
matters relating to the transactions contemplated by this Agreement. Each of
the parties shall provide a copy of its filing materials under the HSR Act to
the other party prior to making such filing and the parties shall confer on the
matters set forth therein.
Section 9.5 Reasonable Best Efforts. (a) Subject to the terms and
-----------------------
conditions of this Agreement, each of the parties hereto agrees to cooperate
with each other and to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, in each case consistent with
the fiduciary duties of their respective Boards of Directors, all things
necessary, proper or advisable (i) under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings and
(ii) to lift any injunction or other legal bar to the Merger as soon as
reasonably practicable (and, in such case, to proceed with the Merger as
expeditiously as possible); provided, however, that nothing in this Section or
elsewhere in this Agreement shall require any party hereto to incur expenses in
connection with the transactions contemplated hereby which are not reasonable
under the circumstances in relation to the size of the transaction contemplated
hereby or to require any party
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or any affiliate of any party to hold separate or make any divestiture of a
significant asset or otherwise agree to any material restriction on the
operations of any party in order to obtain any waiver, consent or approval
required by this Agreement.
(b) In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
Surviving Corporation shall take all such necessary action.
(c) If at any time prior to the Effective Time any information, event
or circumstance shall be discovered that should be set forth in a supplement to
the Proxy Statement, the discovering party shall promptly inform the other party
of such information, event or circumstance, and the Company shall as soon as
practicable prepare a supplement to the Proxy Statement, which shall be in form
and substance reasonably satisfactory to Sub, and mail such supplement to its
stockholders.
Section 9.6 No Solicitation. Prior to the Effective Time, the
---------------
Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly, initiate, solicit, negotiate or encourage (including by way of
furnishing information), or take any other action to facilitate or entertain,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any proposal or offer to acquire all or substantially
all of the business of the Company and its Subsidiaries, or all or substantially
all of the capital stock of the Company, whether by merger, purchase of assets,
tender offer, exchange offer or otherwise, whether for cash, securities or any
other consideration or combination thereof (any such transaction being referred
to herein as an "Other Acquisition Transaction") or agree to endorse or
recommend any such Other Acquisition Transaction or enter into an agreement
relating to an Other Acquisition Transaction; provided, however, that the
Company and its Subsidiaries may negotiate with a corporation, partnership,
person or other entity or group (a "Potential Acquirer") if (i) the Potential
Acquirer has, in circumstances not involving any prior breach by the Company of
the foregoing provisions, made a tender or exchange offer for, or a proposal to
the Board of Directors of the Company to acquire, a majority of the capital
stock of the Company or made a proposal for a merger, purchase of all or
substantially all of the assets of the Company, or other business combination
transaction involving a change of control of the Company, (ii) the Company's
Board of Directors believes, based in part upon advice of its financial advisor,
and after having an opportunity to discuss any such proposal with the Potential
Acquirer, which contacts shall not be deemed a violation of this Section 9.6,
that such Potential Acquirer has the financial wherewithal to consummate such
offer or transaction and such offer or transaction would yield a better value to
the Company's stockholders than would the Merger (a "Superior Proposal"), and
(iii) based upon the advice of counsel to the Company to such effect given to
the Board of Directors of the Company (notice of which advice has been
communicated to Sub), the Company's Board of Directors determines in good faith
that there is a significant risk that the failure to negotiate with the
Potential Acquirer could constitute a breach of the Board's fiduciary duty to
the stockholders of the Company. The Company shall promptly advise Sub in
writing of any request for non-public written information or of any Other
Acquisition Transaction, or any inquiry that could reasonably be expected to
lead to any Other Acquisition Transaction, the terms and conditions of such
request, Other Acquisition Transaction or inquiry, the identity of the person
making any such request, Other Acquisition Transaction or inquiry, and whether
the Company has elected to negotiate
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with a Potential Acquirer in accordance with the preceding sentence. The Company
shall use its reasonable best efforts to keep Sub fully informed of the status
and details of any such request, Other Acquisition Transaction, inquiry, or
negotiation. The Company may not enter into a definitive agreement for an Other
Acquisition Transaction with a Potential Acquirer with which the Company is
permitted to negotiate pursuant to this Section 9.6 unless (i) at least 10
business days prior to the Company's execution thereof the Company shall have
furnished Sub with a description of all of the material terms thereof and (ii)
the Company shall terminate this Agreement in accordance with Section 11.1(e)
hereof. Notwithstanding the foregoing, the Taurus Disposition shall be excluded
from the provisions of this Section 9.6 for all purposes. Each of Sub and JEDI
agrees and acknowledges that any information furnished to it by the Company
pursuant to this Section 9.6 shall be subject to the terms and conditions set
forth in the Confidentiality Agreement.
Section 9.7 Taurus Disposition. The Company shall use its reasonable
------------------
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to promptly negotiate a
definitive agreement (the "Taurus Disposition Agreement") providing for the sale
of Taurus, whether by merger, sale of all or substantially all of the assets of
Taurus, sale of all of the capital stock of Taurus or otherwise (the "Taurus
Disposition") as soon as reasonably practicable. Prior to the execution of the
final version of the Taurus Disposition Agreement, Taurus shall deliver such
version to JEDI for review at least five business days prior to its execution.
JEDI may, by delivering notice to the Company within such five business days,
object to the terms or conditions of such agreement as it determines in its sole
discretion, and if such objection is not made then such agreement shall be an
"Approved Taurus Disposition Agreement." The Company shall use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to consummate the Taurus
Disposition if an Approved Taurus Disposition Agreement is executed and the
Company shall cause Taurus to repay all indebtedness owed to the Company or its
other Subsidiaries prior to the consummation of the Taurus Disposition. Except
as otherwise provided in the Taurus Disposition Agreement, neither the Company
nor any of its Subsidiaries (other than Taurus) shall make any capital
contribution to Taurus, engage in any transaction with Taurus not in conformance
with past practice or which would add material value to Taurus or otherwise
transfer value to Taurus (including the assumption of liabilities), unless Sub
shall otherwise consent in writing. The Company shall keep Sub informed of the
status of the transactions relating to the Taurus Disposition. Notwithstanding
the foregoing, if JEDI delivers its written objection to the Company of the
Taurus Disposition Agreement within the time period delineated above, the
Company may, in its sole discretion, proceed with the execution of the Taurus
Disposition Agreement and the consummation of such Taurus Disposition, but shall
deliver written notice to such effect to JEDI (the "Taurus Disposition Notice")
within five business days following the receipt by the Company of JEDI's written
objection notice. In such event, Sub shall have the right to terminate this
Agreement as set forth in Section 11.1(h).
Section 9.8 JEDI.
----
JEDI agrees to take all action necessary to cause Sub to perform all
of Sub's, and the Surviving Corporation to perform all of the Surviving
Corporation's, agreements, covenants and obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
Sub and JEDI shall be liable for any breach of any representation, warranty,
covenant or agreement of Sub or Surviving Corporation and for any breach of this
covenant;
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provided, however, that JEDI shall not have any responsibility for, or provide
any guaranties of, any actions of Sub or any obligation or liability otherwise
hereunder after the Effective Time, except as expressly provided in Sections 3.2
and 9.3.
Section 9.9 Certain Employee Benefit Matters. The Company and Sub
--------------------------------
acknowledge and agree that it is currently anticipated that the Surviving
Corporation will not become a participating employer in any employee benefit or
compensation plans sponsored or maintained by Enron Corp. for the benefit of its
subsidiaries or affiliated companies. For a period of 24 months following the
Effective Time, the Surviving Corporation will maintain in place the Company's
current health and 401(k) plans or substantially equivalent plans.
ARTICLE X
CONDITIONS PRECEDENT
Section 10.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- ------
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived in a writing executed by Sub
and the Company subject to and in accordance with Section 11.4 hereof:
(a) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the holders of the Company Common Stock.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) No United States or state governmental authority or other agency
or commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the Merger illegal or otherwise preventing or prohibiting consummation
of the Merger.
(d) The Company shall have received the written opinion of Bear,
Stearns & Co. Inc., financial advisor to the Company, dated the date of the
Proxy Statement, to the effect that the Merger is fair to the stockholders of
the Company from a financial point of view (except that such advice need not be
provided to management stockholders who will participate in the equity ownership
of the Surviving Corporation).
(e) At the time of the Company Meeting, the Company shall have
confirmed that the written opinion of Bear, Stearns & Co. Inc., referred to in
Section 10.1(d) hereof has not been withdrawn.
(f) There shall not be pending any action, proceeding or
investigation brought by any person or entity before any Governmental Entity
challenging, affecting, or seeking material damages in connection with, the
transactions contemplated by this Agreement.
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Section 10.2 Conditions to Obligation of the Company to Effect the
-----------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall be subject to
- ------
the fulfillment at or prior to the Effective Time of the following additional
conditions, unless waived in writing by the Company in accordance with Section
11.4 hereof:
(a) JEDI and Sub shall have performed in all material respects their
respective agreements contained in this Agreement required to be performed on or
prior to the Effective Time and the representations and warranties of JEDI and
Sub contained in this Agreement shall be true and correct in all material
respects when made and on and at the Effective Time as if made at such time
(except to the extent they expressly relate to the date of this Agreement or any
other particular date), and the Company shall have received a certificate of the
President or Chief Executive Officer (or comparable officer) of JEDI and Sub,
dated the Closing Date, to that effect.
(b) The Company shall have received the opinion of Vinson & Elkins
L.L.P., dated the Closing Date, substantially in the form of Exhibit A hereto.
Section 10.3 Conditions to Obligations of Sub to Effect the Merger.
-----------------------------------------------------
The obligations of Sub to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the following additional conditions, unless
waived in writing by Sub in accordance with Section 11.4 hereof:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of the Company
contained in this Agreement which are qualified with respect to materiality
shall be true and correct in all respects, and such representations and
warranties that are not so qualified shall be true and correct in all material
respects, in each case when made and on and at the Effective Time as if made at
such time (except to the extent they expressly relate to the date of this
Agreement or any other particular date), and Sub shall have received a
certificate signed on behalf of the Company by its President or Chief Executive
Officer, dated the Closing Date, to that effect. Notwithstanding anything to
the contrary herein, with respect to any representation or warranty in this
Agreement which refers to a Company Material Adverse Effect, a Company Material
Adverse Effect shall mean adverse effects resulting in an aggregate Loss in
excess of $5.0 million. "Loss" shall mean the amount that would be required to
be contributed to the Surviving Corporation at the Effective Time so that the
owners of the Surviving Corporation would be in the same economic position as
they would have been if such adverse effects had not occurred and would not
occur.
(b) All permits, consents, authorizations, approvals, registrations,
qualifications, designations and declarations set forth on Schedule 7.4 of the
Company Disclosure Schedule as a result of the last sentence of Section 7.4
hereof shall have been obtained, on terms and conditions reasonably satisfactory
to Sub, and, to the extent required to be submitted prior to the Effective Time,
all filings and notices set forth on Schedule 7.4 of the Company Disclosure
Schedule as a result of the last sentence of Section 7.4 hereof shall have been
submitted by the Company.
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(c) Sub shall have received the opinion of Haynes and Boone, L.L.P.
and Joe Callaway, General Counsel to the Company, dated the Closing Date,
substantially in the form of Exhibit B-1 and Exhibit B-2, respectively, hereto.
(d) The Company shall have consummated the Taurus Disposition in
accordance with the Approved Taurus Disposition Agreement.
(e) The number of Dissenting Shares shall not exceed 10% of the
number of outstanding shares of Company Common Stock.
(f) None of the Specified Parties to the Employment Agreements,
Subscription Agreements, Stockholders Agreement and Business Opportunity
Agreement as set forth in Schedule 10.3(f) of the Company Disclosure Schedule
shall have breached or anticipatorily breached any such agreements and none of
Douglas H. Miller, Grant W. Henderson or J. William Freeman shall have died or
become disabled.
(g) Sub shall have received the written resignations, effective as of
the Effective Time, of each director of each of the Company and its
Subsidiaries.
(h) Each holder of all Outstanding Warrants shall have executed a
Warrant Relinquishment and Release Agreement, as contemplated by Section 3.6.
(i) All members of management of the Company
shall have repaid all indebtedness owed by them to the Company.
(j) Assuming the representations and warranties of the Company were
made without regard to any "materiality qualifications," the amount that would
be required to be contributed to the Surviving Corporation at the Effective Time
so that the owners of the Surviving Corporation would be in the same economic
position as they would have been if the representations and warranties, without
regard to any such materiality qualifications, had been true and correct in all
respects, would in the aggregate not exceed $7.5 million. Without regard to any
"materiality qualifications" shall mean that references to "material" and words
of similar import shall, for such purpose, be considered to have been deleted
from the text herein and that references to exclusions or other qualifications
for items that would not, individually or in the aggregate, have or cause a
Company Material Adverse Effect or phrases of similar import shall, for such
purposes, be considered to have been deleted from the text herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Company:
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(a) by mutual consent of the Board of Directors of Sub and the Board
of Directors of the Company;
(b) by either Sub or the Company if the Merger shall not have been
consummated on or before March 15, 1996 (unless, such circumstance is the result
of a breach of the terms hereof by the party exercising the termination right);
(c) by Sub if there has been a material breach on the part of the
Company, or by the Company if there has been a material breach on the part of
Sub or JEDI, of any representation, warranty, covenant or agreement set forth in
this Agreement, which breach has not been cured within fifteen business days
following receipt by the breaching party of written notice of such breach;
(d) by either Sub or the Company upon written notice to the other
party if any Governmental Entity of competent jurisdiction shall have issued (i)
a final permanent order enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement, and in any such case the
time for appeal or petition for reconsideration of such order shall have expired
without such appeal or petition being granted, or (ii) any order or directive
that does not directly enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, but that would, if JEDI, Sub or the
Company were to comply with such order or directive as a condition to
consummating the transactions contemplated hereby, have a material adverse
effect on the business, operations or financial condition of either JEDI or the
Surviving Corporation and its Subsidiaries taken as a whole;
(e) by the Company if (i) the Board of Directors of the Company
reasonably believes that an Other Acquisition Transaction is a Superior
Proposal, (ii) the ten business day period referred to in Section 9.6 shall have
expired, and (iii) simultaneously with such termination the Company enters into
a definitive agreement to effect such Other Acquisition Transaction (a
"Terminating Other Acquisition Transaction");
(f) by either Sub or the Company if the required approval of the
Company's stockholders is not received in a vote duly taken at the Company
Meeting contemplated by Section 3.7 hereof;
(g) by Sub if the Board of Directors of the Company or any committee
thereof (i) shall have amended, modified, rescinded or repealed the
recommendation of the Company's Board of Directors to the stockholders of the
Company to approve the Merger and the adoption of this Agreement, or (ii) shall
have adopted any other resolution in connection with this Agreement and the
transactions contemplated hereby inconsistent with such recommendation of the
consummation of the transactions contemplated hereby;
(h) by Sub (i) upon written notice to the Company if the Company does
not present to JEDI within 60 days after the signing of this Agreement a Taurus
Disposition Agreement that is satisfactory to JEDI in its sole discretion,
provided however, that the Company may extend such 60 day period (A) for an
additional 30 days by notifying Sub prior to the 60th day in writing of its
decision to do so accompanied with a payment of $175,000 and (B) for an
additional 30 days by written notification to Sub prior to the 90th day
accompanied with an additional $75,000; or (ii) upon
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written notice to the Company within five business days after JEDI receives a
Taurus Disposition Notice as contemplated by Section 9.7;
(i) by Sub, if any representation or warranty of the Company shall
have become untrue such that the condition set forth in Section 10.3(a) would be
incapable of being satisfied by March 15, 1996 or by the Company if any
representation or warranty of Sub or JEDI shall have become untrue such that the
condition set forth in Section 10.2(a) would be incapable of being satisfied by
March 15, 1996.
Section 11.2 Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to Section 11.1, no party hereto shall have any
obligation or liability to any other party hereto except (i) that the
penultimate sentence of Section 9.1, this Section 11.2 and Sections 12.3 and
12.6 shall survive any such termination and (ii) that, except as set forth
herein, nothing herein and no termination pursuant hereto will relieve any party
from liability for any breach of this Agreement.
Section 11.3 Amendment. This Agreement may be amended by the parties
---------
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval hereof by the stockholders of the Company,
but, after such approval, no amendment shall be made that under applicable law
requires further approval of such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 11.4 Waiver. At any time prior to the Effective Time, the
------
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any documents delivered pursuant hereto by any other party and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Non-Survival of Representations and Warranties. All
----------------------------------------------
representations, warranties, agreements and covenants set forth in this
Agreement shall terminate at the Effective Time or upon termination of this
Agreement pursuant to Section 11.1, as the case may be, except that (i) the
agreements set forth in Sections 9.3, 9.5(b), 9.8 and 9.9 and Articles III and
XII (excluding Section 12.3) shall survive the Effective Time indefinitely and
(ii) the agreements set forth in the penultimate sentence of Section 9.1 and in
Article XII (including Section 12.3) shall survive termination indefinitely.
Section 12.2 Notices. All notices or other communications under this
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Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile transmission
(with a hard copy delivered by overnight delivery service) or by overnight
delivery service, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
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If to the Company:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: General Counsel
Telecopy No.: (214) 265-4777
With a copy to:
Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: William L. Boeing
Telecopy No.: (214) 651-5940
And with a copy to:
Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention: Dan Busbee
Telecopy No.: (214) 740-8800
If to Sub or JEDI:
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Keith Power/Brenda McGee, Specialist - 28th Floor
Telecopy No.: (713) 646-3602
Telephone No.: (713) 853-5259
With a copy to:
Tim Detmering
1400 Smith Street
Houston, Texas 77002
Telecopy No.: (713) 646-3750
and
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002
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<PAGE>
Attention: Scott N. Wulfe
Telecopy No.: (713) 758-2346
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 12.2.
Section 12.3 Expenses; Termination Fees.
--------------------------
(a) Subject to Sections 12.3(b), (c) and (e), whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated herein shall be paid by the party
incurring such expenses.
(b) If this Agreement is terminated by Sub pursuant to Sections
11.1(c), (e), (f) or (g), then the Company shall, by wire transfer of
immediately available funds to an account designated by Sub, reimburse Sub and
its affiliates, not later than two business days after Sub submits to the
Company statements therefor, for all reasonable and necessary out-of-pocket fees
and expenses (including, without limitation, all reasonable fees and expenses of
counsel, accountants, financial institutions, experts and consultants) incurred
in connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the arranging of financing for the
Merger and all other matters related to the consummation of the transactions
contemplated hereby up to a maximum amount of $750,000 (exclusive of any
expenses and fees specifically agreed to by the Company and incurred in
connection with any proposed placement of subordinated debt to finance or
refinance the transactions contemplated hereby) in the case of a termination
pursuant to Sections 11.1(c), (e) or (g) and up to a maximum amount of $500,000
(exclusive of any expenses and fees specifically agreed to by the Company and
incurred in connection with any proposed placement of subordinated debt to
finance or refinance the transactions contemplated hereby) in the case of a
termination pursuant to Section 11.1(f). A payment under this Section 12.3(b)
shall not limit Sub's or JEDI's right to pursue all other available remedies if
the Company has breached this Agreement, although neither JEDI nor Sub shall be
permitted to recover such fees and expenses more than once.
(c) If this Agreement is terminated by the Company pursuant to
Section 11.1(c), then JEDI shall, by wire transfer of immediately available
funds to an account designated by the Company, reimburse the Company, not later
than two business days after the Company submits to JEDI statements therefor,
for all reasonable and necessary out-of-pocket fees and expenses (including,
without limitation, all reasonable fees and expenses of counsel, accountants,
financial institutions, experts and consultants) incurred in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, and all other matters related to the consummation
of the transactions contemplated hereby up to a maximum amount of $750,000
(exclusive of any expenses and fees specifically agreed to by the Company and
JEDI and incurred in connection with any proposed placement of subordinated debt
to finance or refinance the transactions contemplated hereby). A payment under
this Section 12.3(c) shall not limit the Company's right to pursue all other
available remedies if Sub or JEDI has breached this Agreement, although the
Company shall not be permitted to recover such fees and expenses more than once.
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<PAGE>
(d) In addition to any amounts payable pursuant to Section 12.3(b),
if this Agreement is terminated for any reason other than a termination by Sub
pursuant to Section 11.1(b), (h) or (i) or by the Company pursuant to Section
11.1(c), then if (i) a Terminating Other Acquisition Transaction is consummated
or (ii) an Other Acquisition Transaction that provides a better value to the
holders of Company Common Stock than the Merger would have provided is
consummated prior to the first anniversary of the date of this Agreement, then
the Company shall pay to Sub, by wire transfer of immediately available funds to
an account designated by Sub, $3.5 million not later than the second business
day following such consummation. A payment under this Section 12.3(d) shall not
limit Sub's right to pursue all other available remedies if the Company has
breached this Agreement.
(e) If (i) prior to the termination of this Agreement, any person
(other than Sub or any affiliate thereof) or group (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) becomes the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of more than 20% or more of the outstanding Company Common
Stock; (ii) either this Agreement is terminated pursuant to Section 11.1(f) or
such beneficial owner takes any action to oppose or prevent the consummation of
the Merger and this Agreement is terminated for any reason; and (iii) an Other
Acquisition Transaction is consummated within one calendar year of the date of
the Company Meeting, then the Company shall pay to Sub, by wire transfer of
immediately available funds to an account designated by Sub $3.5 million plus
all out-of-pocket fees and expenses (of the type referred to in Section 12.3(b)
and subject to the limitations set forth in Section 12.3(b)) not later than two
business days after Sub submits to the Company a request therefore.
Notwithstanding the foregoing, no payment shall be required under Sections
12.3(b) or 12.3(d), if the payment specified by this Section 12.3(e) has been
made to Sub, and no payment shall be required under this Section 12.3(e) if the
payments specified by Sections 12.3(b) and (d) have been made to Sub. A payment
under this Section 12.3(e) shall not limit Sub's right to pursue all other
available remedies if the Company has breached this Agreement.
Section 12.4 Publicity. So long as this Agreement is in effect, none
---------
of JEDI, Sub nor the Company shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated by this Agreement
without the consent of the other, which consent shall not be unreasonably
withheld, unless such press release or public statement is required by law,
regulation or rules of any applicable market or exchange, in which case such
press release or public statement may be made after providing the other parties
hereto a reasonable opportunity to comment thereon.
Section 12.5 Interpretation. The headings contained in this
--------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 12.6 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
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<PAGE>
in order that the transactions contemplated hereby may be consummated to the
fullest extent possible.
Section 12.7 Miscellaneous. This Agreement (together with the
-------------
exhibits and the Company Disclosure Schedule referred to herein) and the
Confidentiality Agreement (i) constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, (ii) except
as provided in Section 9.3, is not intended to confer upon any other person any
rights or remedies hereunder and shall be binding upon and inure to the benefit
solely of each party hereto, and their respective successors and assigns, (iii)
shall not be assigned by operation of law or otherwise, except that Sub shall
have the right to assign to any direct wholly owned subsidiary of JEDI
incorporated under the laws of Delaware any and all rights and obligations of
Sub under this Agreement, and (iv) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Delaware with
respect to the procedures applicable to the Merger and the internal affairs of
the parties and the laws of the State of Texas, with respect to all other
matters (without giving effect to the provisions thereof relating to conflicts
of law). This Agreement may be executed in any number of counterparts which
together shall constitute a single agreement.
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<PAGE>
IN WITNESS WHEREOF, Sub, JEDI and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
CODA ACQUISITION, INC.
By:____________________________________________
Name: C. John Thompson
Title: Vice President
CODA ENERGY, INC.
By:____________________________________________
Name: Douglas H. Miller
Title: Chairman of the Board and Chief
Executive Officer
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management
Limited Partnership, its general partner
By: Enron Capital Corp., its general partner
By:____________________________________________
Name: C. John Thompson
Title: Agent and Attorney-in-Fact
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<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
<C> <C>
ARTICLE I THE MERGER..................................................................1
Section 1.1 The Merger..............................................................1
----------
Section 1.2 Effective Time of the Merger............................................1
----------------------------
ARTICLE II THE SURVIVING CORPORATION..................................................2
Section 2.1 Certificate of Incorporation............................................2
----------------------------
Section 2.2 By-Laws.................................................................2
-------
Section 2.3 Board of Directors and Officers of the Surviving Corporation............2
------------------------------------------------------------
Section 2.4 Effects of Merger.......................................................2
----------------
ARTICLE III CONVERSION OF SECURITIES..................................................2
Section 3.1 Merger Consideration....................................................2
--------------------
Section 3.2 Paying Agent and Surrender of Certificates..............................3
------------------------------------------
Section 3.3 Dissenting Shares.......................................................4
-----------------
Section 3.4 Conversion of Sub Securities............................................4
----------------------------
Section 3.5 Stockholders to Have No Further Rights..................................4
--------------------------------------
Section 3.6 Stock Options and Warrants..............................................5
--------------------------
Section 3.7 Stockholders' Meeting...................................................6
---------------------
Section 3.8 Closing of the Company's Transfer Books.................................6
---------------------------------------
Section 3.9 Closing.................................................................6
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ARTICLE IV DEFINITIONS................................................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SUB......................................12
Section 5.1 Organization and Qualification.........................................12
------------------------------
Section 5.2 Authority Relative to this Agreement...................................12
------------------------------------
Section 5.3 Information in Proxy Statement.........................................13
------------------------------
Section 5.4 Capitalization of Sub..................................................13
---------------------
Section 5.5 Financing..............................................................13
---------
Section 5.6 Operations of the Company Following the Merger.........................13
----------------------------------------------
Section 5.7 Finder's Fees..........................................................14
-------------
Section 5.8 Review of Company......................................................14
-----------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF JEDI....................................14
Section 6.1 Organization...........................................................14
------------
Section 6.2 Authority and Capacity.................................................14
----------------------
Section 6.3 Financial Information..................................................15
---------------------
Section 6.4 Operations of the Company Following the Merger.........................15
----------------------------------------------
Section 6.5 Information in Proxy Statement.........................................15
------------------------------
</TABLE>
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<TABLE>
<S> <C>
Section 6.6 Finder's Fees..........................................................16
-------------
Section 6.7 Review of Company......................................................16
-----------------
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................16
Section 7.1 Organization and Qualification.........................................16
------------------------------
Section 7.2 Capitalization.........................................................16
--------------
Section 7.3 Subsidiaries...........................................................17
------------
Section 7.4 Authority Relative to this Agreement...................................17
------------------------------------
Section 7.5 Reports and Financial Statements.......................................18
--------------------------------
Section 7.6 Absence of Certain Changes or Events...................................19
------------------------------------
Section 7.7 Litigation.............................................................19
----------
Section 7.8 Information in Disclosure Documents....................................19
-----------------------------------
Section 7.9 Employee Benefits Plans; Labor Matters.................................20
--------------------------------------
Section 7.10 Environmental Matters..................................................22
---------------------
Section 7.11 Public Utility Holding Company Act.....................................23
----------------------------------
Section 7.12 Futures Trading and Fixed Price Exposure...............................23
----------------------------------------
Section 7.13 Takeover Provisions Inapplicable.......................................23
--------------------------------
Section 7.14 Fairness Opinion.......................................................23
----------------
Section 7.15 Finder's Fees..........................................................23
-------------
Section 7.16 Compliance with Applicable Laws........................................23
-------------------------------
Section 7.17 Taxes..................................................................24
-----
Section 7.18. Certain Agreements.....................................................24
------------------
Section 7.19. Engineering Reports....................................................25
-------------------
Section 7.20 Oil and Gas Reserve Information........................................25
-------------------------------
Section 7.21 Title to Property......................................................26
-----------------
Section 7.22 Insurance..............................................................26
---------
Section 7.23 Affiliate Transactions.................................................26
----------------------
Section 7.24 Taurus Energy..........................................................26
-------------
ARTICLE VIII CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.........................26
Section 8.1 Conduct of Business by the Company.....................................26
----------------------------------
Section 8.2 Obligations of JEDI and Sub............................................29
----------------------------
Section 8.3 Notice of Breach.......................................................29
----------------
ARTICLE IX ADDITIONAL AGREEMENTS.....................................................29
Section 9.1 Access and Information.................................................29
----------------------
Section 9.2 Proxy Statement........................................................30
---------------
Section 9.3 Indemnification........................................................30
---------------
Section 9.4 HSR Act................................................................32
-------
Section 9.5 Reasonable Best Efforts................................................32
-----------------------
Section 9.6 No Solicitation........................................................33
---------------
Section 9.7 Taurus Disposition.....................................................34
------------------
Section 9.8 JEDI...................................................................34
----
Section 9.9 Certain Employee Benefit Matters.......................................34
--------------------------------
</TABLE>
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<TABLE>
<S> <C>
ARTICLE X CONDITIONS PRECEDENT.......................................................35
Section 10.1 Conditions to Each Party's Obligation to Effect the Merger.............35
----------------------------------------------------------
Section 10.2 Conditions to Obligation of the Company to Effect the Merger...........35
------------------------------------------------------------
Section 10.3 Conditions to Obligations of Sub to Effect the Merger..................36
-----------------------------------------------------
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.........................................37
Section 11.1 Termination............................................................37
-----------
Section 11.2 Effect of Termination..................................................39
---------------------
Section 11.3 Amendment..............................................................39
---------
Section 11.4 Waiver.................................................................39
------
ARTICLE XII GENERAL PROVISIONS.......................................................39
Section 12.1 Non-Survival of Representations and Warranties.........................39
----------------------------------------------
Section 12.2 Notices................................................................39
-------
Section 12.3 Expenses; Termination Fees.............................................40
--------------------------
Section 12.4 Publicity..............................................................42
---------
Section 12.5 Interpretation.........................................................42
--------------
Section 12.6 Severability...........................................................42
------------
Section 12.7 Miscellaneous..........................................................42
-------------
</TABLE>
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<PAGE>
SCHEDULES AND EXHIBITS
Exhibit A - Opinion of Vinson & Elkins L.L.P.
Exhibit B-1 - Opinion of Haynes and Boone L.L.P.
Exhibit B-2 - Opinion of Joe Callaway
Exhibit 2.1 - Restated Certificate of Incorporation of Surviving Corporation
Exhibit 3.6(a)(2) - Option Relinquishment and Release Agreement
Exhibit 3.6(b)(2) - Warrant Relinquishment and Release Agreement
Schedule 3.6(a)(1) - Specified Options and Warrants
Schedule 6.1 - JEDI Partners
Schedule 7.1 - Charter, By-laws and Jurisdictions
Schedule 7.3 - Subsidiaries of Company and Interests in Other Entities
Schedule 7.4 - Conflicting Provisions and Regulatory Requirements
Schedule 7.6 - Recent Developments
Schedule 7.7 - Litigation
Schedule 7.9(a) - Employee Benefit Plans
Schedule 7.9(b) - ERISA and Plan Exceptions
Schedule 7.9(d) - Severance Agreements
Schedule 7.9(e) - Employee Benefits
Schedule 7.9(f) - Plan Developments
Schedule 7.10 - Environmental Issues
Schedule 7.12 - Trading Positions
Schedule 7.15 - Finder's Fees
Schedule 7.16 - Violations of Laws
Schedule 7.17 - Delinquent Taxes
Schedule 7.18 - Additional Agreements
Schedule 7.20 - Oil and Gas Exceptions
Schedule 7.22 - Insurance Coverage
Schedule 7.23 - Affiliate Transactions
Schedule 7.24 - Taurus Transactions
Schedule 8.1(c) - Capital Expenditure Budget
Schedule 8.1(d) - Additional Benefit Arrangements
Schedule 10.3(f) - Employment, Subscription and Stockholder Agreements
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<PAGE>
EXHIBIT 99.1
CODA ENERGY, INC NEWS RELEASE
CODA ANNOUNCES EXECUTION OF DEFINITIVE MERGER AGREEMENT
Dallas, Texas, October 31, 1995....Coda Energy, Inc. (NASDAQ-NMS: CODA)
announced today that it has entered into a definitive merger agreement with
Joint Energy Development Investments Limited Partnership ("JEDI"), an affiliate
of Enron Capital & Trade Resources Corp., whereby JEDI will acquire in the
merger shares of common stock of Coda at a price of $8.00 per share in cash.
Coda currently has a total of 24,505,535 shares of Common Stock outstanding on a
fully diluted basis. The agreement has been approved by Coda's Board of
Directors and its Special Committee of outside directors. Concurrently with the
execution of the merger agreement, JEDI and a subsidiary of JEDI have entered
into certain agreements with members of management of Coda providing for a
continuing role of management in Coda after the acquisition.
Consummation of the acquisition is subject to the satisfaction of various
conditions, including (i) the approval of the transaction by the stockholders of
Coda, (ii) the receipt of all necessary consents and governmental approvals, and
(iii) the sale of Coda's gas gathering and processing subsidiary, Taurus Energy
Corp., on terms acceptable to JEDI. Coda currently expects to hold a special
meeting of its stockholders as soon as practicable after receipt of clearance
from the Securities and Exchange Commission for the purpose of voting on the
transaction.
Coda Energy, Inc. is an independent energy company primarily engaged in oil
and gas acquisition, exploitation, development and production, including natural
gas gathering, processing and extraction. Company headquarters are located in
Dallas, Texas with principal operations in Texas, Oklahoma and Kansas. The
Company's stock is traded on the NASDAQ National Market System under the symbol
CODA. Additional information about Coda Energy, Inc. may be obtained by
contacting the Company's Vice President and General Counsel, Joe Callaway, at
Coda's headquarters, 5735 Pineland Drive, Suite 300, Dallas, Texas 75231,
telephone number (214) 692-1800 or (800) 486-2632.
<PAGE>
EXHIBIT 99.2
STOCKHOLDERS AGREEMENT
DATED OCTOBER 30, 1995
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as of
October 30, 1995, among Coda Acquisition, Inc., a Delaware corporation ("Sub"),
and the Persons (as defined herein) listed on Schedule I hereto, and their
----------
permitted successors and assigns, and each owner of Common Stock, as defined
herein, who may hereafter execute in accordance with this Agreement a separate
agreement to be bound by the terms hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this Agreement,
Sub, Joint Energy Development Investments Limited Partnership, a Delaware
limited partnership ("JEDI"), and Coda Energy, Inc., a Delaware corporation (the
"Corporation"), are entering into an Agreement and Plan of Merger (the "Merger
Agreement") providing for the merger of Sub with and into the Corporation (the
"Merger");
WHEREAS, the Corporation shall be the surviving corporation of the Merger;
and
WHEREAS, upon the consummation of the Merger, the Initial Parties (as
defined herein) shall receive shares of Common Stock (as defined herein) and/or
Common Stock Equivalents (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
CERTAIN TERMS;
REPRESENTATIONS AND WARRANTIES
------------------------------
1.1 CERTAIN TERMS. When used herein the following terms shall have the
-------------
meanings indicated:
"ACCREDITED INVESTOR" shall mean any Person deemed to be an accredited
investor pursuant to Regulation D promulgated under the Securities Act, as
amended from time to time.
"ACCREDITED OFFEREE" shall have the meaning set forth in Section 3.1.
"ACQUISITION PROPOSAL" means a bona fide written proposal to a Party for
the acquisition of all or a portion of such Party's Common Stock for cash or
Publicly Traded Securities or both.
"ADOPTION AGREEMENT" means an agreement in the form of Exhibit "A" hereto
or in such other form that is reasonably satisfactory to the Corporation.
<PAGE>
"AFFILIATE" of a Person means any Person controlling, controlled by, or
under common control with such Person. For purposes of this Agreement only,
Enron Corp., a Delaware corporation, and each of its subsidiaries shall be
deemed to be Affiliates of JEDI.
"AGREEMENT" shall have the meaning set forth in the opening paragraph.
"ASSIGNMENT OFFER" shall have the meaning set forth in Section 4.4(i).
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday or (ii) a
day that is a banking holiday in Houston, Texas.
"BUSINESS OPPORTUNITY AGREEMENT" shall have the meaning set forth in
Section 2.1.
"CAPITAL STOCK" means any and all shares, interests, participations, or
other equivalents (however designated) of capital stock of a corporation, any
and all similar ownership interests in a Person (other than a corporation), and
any and all warrants, options, or other rights to purchase or acquire any of the
foregoing.
"CASH TRIGGER EVENT" shall have the meaning set forth in Section 6.3.
"CAUSE" shall mean (a) "cause" as defined in the applicable Management
Investor's employment agreement with the Corporation or (b) if no such
employment agreement exists, (i) the applicable Management Investor's gross
negligence or willful misconduct in the performance of the duties and services
required of such Management Investor by the Corporation, (ii) such Management
Investor's final conviction of a felony or of a misdemeanor involving moral
turpitude, or (iii) the Corporation's determination to terminate the employment
of such Management Investor as a result of such Management Investor's
involvement in a conflict of interest with the Corporation.
"CLAIMS" shall have the meaning set forth in Section 8.19.
"CLOSING" shall have the meaning set forth in Section 4.4(a).
"CLOSING DATE" shall have the meaning set forth in Section 4.4(a).
"COMMON STOCK" means shares of the common stock, par value $.01 per share,
of the Corporation or Successor Corporation issued and outstanding from time to
time after the consummation of the Merger and all securities of the Corporation
or any other Person issued in respect of shares of such common stock in
connection with any exchange, merger, recapitalization, consolidation,
reclassification, reorganization, stock dividend or distribution or other
transaction to which the Corporation is a party, but excluding any shares or
securities which cease to be outstanding.
"COMMON STOCK EQUIVALENTS" means any and all rights, warrants, options,
convertible securities, or exchangeable securities or indebtedness, or other
rights, exercisable for or convertible into or exchangeable for, directly or
indirectly, Common Stock, whether at the time of issuance or
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<PAGE>
upon the passage of time or the occurrence of some future event, but does not
include Common Stock or the Special Management Rights.
"CONTROL", including the correlative terms "controlling", "controlled by"
and "under common control with" means possession, directly or indirectly, of the
power to direct or cause the direction of management or policies (whether
through ownership of securities or any partnership or other ownership interest,
by contract or otherwise) of a Person. For the purposes of the preceding
sentence, control shall be deemed to exist when a Person possesses, directly or
indirectly, through one or more intermediaries (A) in the case of a corporation,
more than 50% of the outstanding voting securities thereof; (B) in the case of a
limited liability company, partnership, limited partnership or venture, the
right to more than 50% of the distributions therefrom (including liquidating
distributions); or (C) in the case of any other Person, more than 50% of the
economic or beneficial interest therein.
"CORPORATION" shall have the meaning set forth in the recitals.
"DIVORCED PARTY" shall have the meaning set forth in Section 4.3(c).
"DIVORCED SPOUSE" shall have the meaning set forth in Section 4.3(c).
"EFFECTIVE TIME" shall have the meaning ascribed to such term in the Merger
Agreement.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in Section 2.4.
"FAIR MARKET VALUE" shall have the meaning set forth in Section 4.4(c)(ii).
"FULLY-DILUTED COMMON STOCK" means, at any time, the then outstanding
Common Stock plus (without duplication) all shares of Common Stock issuable,
whether at such time or upon the passage of time or the occurrence of future
events, upon the exercise, conversion or exchange of all then-outstanding Common
Stock Equivalents.
"GROUP" means the JEDI Group or the Management Group.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended from time to time.
"INDEMNITEES" shall have the meaning set forth in Section 8.16.
"INDEMNITOR" shall have the meaning set forth in Section 8.16.
"INITIAL INVESTMENT" shall mean $90,000,000.
"INITIAL PARTIES" means JEDI and the Management Investors listed on
Schedule I.
"INITIAL SHARES" means the 900,000 shares of Common Stock to be owned by
the Non-Management Investors as of the Effective Time..
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<PAGE>
"INVALID TRANSFER" shall have the meaning set forth in Section 4.4(h).
"ISSUANCE" shall have the meaning set forth in Section 3.1.
"JEDI" shall have the meaning set forth in the recitals.
"JEDI ENTITY" means JEDI or any of its Affiliates including, without
limitation, for purposes of this Agreement only any direct or indirect
subsidiary of Enron Corp., a Delaware corporation, but excluding, for all
purposes, Enron Oil & Gas Company, a Delaware corporation.
"JEDI GROUP" means, as of the time in question, all JEDI Entities that are
Parties and all JEDI Special Transferees.
"JEDI PARTY" means any Person who, at the time in question, is included in
the JEDI Group.
"JEDI SPECIAL TRANSFEREE" means any Person (other than a JEDI Entity) who
has acquired more than 10% of the Common Stock from any one or more JEDI
Entities and/or JEDI Special Transferees in accordance with this Agreement
(other than any such Person that notifies the Corporation in writing, with a
copy to all Parties, that such Person has irrevocably elected not to be deemed
included as a member of the JEDI Group), but excluding any such Person that is
not a Party as of the time in question.
"MANAGEMENT GROUP" means all of the Management Investors.
"MANAGEMENT INVESTOR" means each of the Persons identified as a Management
Investor Party on Schedule I hereto, but excluding any such Person who ceases to
----------
be a Party.
"MANAGEMENT INVESTOR SPOUSES" means the Persons identified as such on the
execution pages of this Agreement and any future spouses of any Management
Investors who execute a counterpart of this Agreement or an Adoption Agreement.
"MARKET PRICE" of a Publicly Traded Security for any day means the reported
last sale price, regular way, on such day (unless such day is not a trading day,
in which event for the most recent trading day), or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on such day,
regular way, in either case as reported on the NYSE Composite Tape, or, if the
Publicly Traded Security is not listed or admitted to trading on the NYSE, on
the principal national securities exchange on which the Publicly Traded Security
is listed or admitted to trading, or if the Publicly Traded Security is not
listed or admitted to trading on a national securities exchange, on the National
Market System of the National Association of Securities Dealers, Inc., or, if
the Publicly Traded Security is not quoted or admitted to trading on such
quotation system, on the principal quotation system on which the Publicly Traded
Security is listed or admitted to trading or quoted, or, if not listed or
admitting to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of the Publicly Traded
Security in the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or, if not so available in such manner,
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<PAGE>
as furnished by any NYSE member firm selected from time to time by the Board of
Directors of the Corporation for that purpose.
"MERGER" shall have the meaning set forth in the recitals.
"MERGER AGREEMENT" shall have the meaning set forth in the recitals.
"NON-CASH TRIGGER EVENT" shall have the meaning set forth in Section 6.3.
"NON-MANAGEMENT INVESTORS" shall have the meaning set forth in Section
4.4(c)(iii).
"NOTICE" shall have the meaning set forth in Section 8.5.
"NYSE" means the New York Stock Exchange.
"OFFER" shall have the meaning specified in the applicable paragraph of
Section 4.3.
"OFFER DATE" shall have the meaning specified in the applicable paragraph
of Section 4.3.
"OFFER EXPIRATION TIME" means 5:30 p.m. Houston time on (a) in the case of
an Offer pursuant to Section 4.3(b) on the death of a Management Investor, six
months plus five business days following such Management Investor's death or (b)
in the case of all other Offers, the 25th business day following the Offer Date.
"OFFEROR" shall have the meaning specified in the applicable paragraph of
Section 4.3.
"OWN" or "OWNED", with respect to Common Stock, shall have the same meaning
as beneficial ownership under Rule 13d-3 under the Securities Exchange Act of
1934, as amended from time to time; provided, however, that (i) such ownership
shall be determined as if this Agreement did not exist and that there is no
agreement among the Parties to act in concert in any respect, (ii) such
ownership shall be determined without regard to any Common Stock Equivalents or
any Special Management Rights unless otherwise expressly provided to the
contrary herein, and (iii) with respect to the determination of the Common Stock
owned by a Group, such determination shall be made by aggregating the ownership
of all members of such Group but without duplication so that a share of Common
Stock will be deemed owned by only one member of the Group. All references
herein to Common Stock owned by a Party include the community interest or
similar marital property interest, if any, of the spouse of such Party in such
Common Stock.
"PARTY" means each Initial Party and each other Person that may become a
party to this Agreement pursuant to Section 4.5, but shall not mean (i) the
Corporation or (ii) any Person who executes this Agreement or an Adoption
Agreement solely in his or her capacity as a spouse of a Party; provided,
however, that if any Party ceases to own any Common Stock, Common Stock
Equivalents or Special Management Rights, then such Party shall cease to be a
Party hereunder and shall not thereafter be subject to this Agreement even if
such former Party thereafter acquires Common Stock, unless such former Party
thereafter acquires Common Stock in a transaction in which it becomes a Party
again pursuant to Section 4.5.
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<PAGE>
"PEER COMPANY" shall have the meaning set forth in Section 4.4(c)(iii).
"PERMITTED MANAGEMENT INVESTOR FAMILY TRANSFEREE" means with respect to any
Management Investor, his or her spouse, children or the legal guardian for the
benefit of his or her minor children or a trust established for the benefit of
his or her spouse and/or children.
"PERMITTED TRANSFEREE" means (i) with respect to any member of the JEDI
Group, any other JEDI Entity, (ii) with respect to any Management Investor, any
Permitted Management Investor Family Transferee, (iii) with respect to any other
Party or any JEDI Special Transferee, any Affiliate of such Party (including any
such JEDI Special Transferee), (iv) any Person who acquires Common Stock
pursuant to a Qualified IPO, and (v) any JEDI Special Transferee who acquires
Common Stock from JEDI on or prior to the date that is six months after the date
on which the Effective Time occurs.
"PERSON" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, or other organization, whether or not a legal entity, and any government
or agency or political subdivision thereof.
"POSITIVE RECEIPT NOTICE" shall have the meaning set forth in Section
4.4(a).
"PUBLICLY TRADED SECURITY" means a security that is listed or admitted to
trading on the NYSE or another national securities exchange or is quoted or
admitted to trading on the National Market System of the National Association of
Securities Dealers, Inc., or a security whose market price is available through
the National Quotation Bureau Incorporation or a similar generally accepted
reporting service.
"PURCHASE PRICE" shall have the meaning set forth in Section 4.4(c)(i).
"PUT REQUEST" shall have the meaning set forth in Section 5.2.
"PUT SHARES" shall have the meaning set forth in Section 5.2.
"QUALIFIED IPO" means a consummated public offering of Common Stock which
is underwritten on a firm commitment basis by a nationally-recognized investment
banking firm.
"QUALIFIED PUBLIC BUSINESS COMBINATION" means a merger or other business
combination involving the Corporation whereby the Common Stock becomes a
Publicly Traded Security.
"RECORD DATE" shall have the meaning set forth in Section 4.7.
"RELEVANT INVESTORS" shall have the meaning set forth in Section 6.3.
"REQUESTOR" shall have the meaning set forth in Section 5.2.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
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<PAGE>
"SECURITY AGREEMENT" has the meaning given such term in Section
1.2(a)(iii).
"SHARES SUBJECT TO THE OFFER" means with respect to an Offer (i) under
Section 4.3(a), all shares of Common Stock as to which the Party proposes to
accept the Acquisition Proposal in question, (ii) under Section 4.3(b), all
shares of Common Stock (including any Common Stock transferred, or to be
transferred, to such Management Investor under Article VI hereof) and Common
Stock Equivalents owned by the Offeror; (iii) under Section 4.3(c), the Divorced
Party's Common Stock and Common Stock Equivalents which have been Transferred to
or which are retained by or vested in the Divorced Spouse by virtue of the
divorce decree, property settlement or by operation of the community property or
similar marital property laws; (iv) under Section 4.3(d), all Common Stock and
Common Stock Equivalents vesting in or transferable to any heir or legatee other
than the Surviving Party or a Permitted Management Investor Family Transferee;
(v) under Sections 4.3(e)(i) and (ii), all Common Stock and Common Stock
Equivalents owned by the Offeror immediately prior to the event triggering the
Offer; (vi) under Section 4.3(e)(iii), all Common Stock and Common Stock
Equivalents owned by the Party immediately prior to his death; and (vii) under
Section 4.3(e)(iv), all Common Stock and Common Stock Equivalents, but only such
Common Stock and Common Stock Equivalents that were involuntarily Transferred.
"SPECIAL MANAGEMENT RIGHTS" shall have the meaning set forth in Section
6.1.
"SPECIAL MANAGEMENT SHARES" shall have the meaning set forth in Section
6.4(b).
"SUB" shall have the meaning set forth in the opening paragraph.
"SUBSIDIARY" means (i) any corporation or other entity a majority of the
Capital Stock of which having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions is at the time
owned, directly or indirectly, with power to vote, by the Corporation or (ii) a
partnership, joint venture or limited liability company in which the Corporation
or any Subsidiary is a general partner, joint venturer or member.
"SUCCESSOR CORPORATION" shall have the meaning set forth in Section 8.2.
"SURVIVING PARTY" shall have the meaning set forth in Section 4.3(d).
"TERMINATION DATE" means October 30, 2005.
"TRANSFER", including the correlative terms "TRANSFERRING" or
"TRANSFERRED", means any transfer, assignment, sale, gift, pledge, hypothecation
or other encumbrance, or any other disposition (whether voluntary or involuntary
or by operation of law), of Common Stock (or any interest therein or right
thereto), Common Stock Equivalents, or Special Management Rights; provided,
however, that an exchange, merger, recapitalization, consolidation or
reorganization involving the Corporation in which securities of the Corporation
or any other Person are issued in respect of shares of the common stock of the
Corporation shall not be deemed a Transfer if all shares of Common Stock are
treated identically in such transaction.
"TRIGGER EVENT" shall have the meaning set forth in Section 6.2.
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<PAGE>
"VOLUNTARY TERMINATION" shall mean the voluntary termination by a
Management Investor of his employment with the Corporation other than upon the
termination of such employment upon the later of (i) his retirement at age 65 or
older or (ii) the end of the scheduled term of his employment agreement, if any,
with the Corporation.
1.2 REPRESENTATIONS AND WARRANTIES. (a) Each of the Initial Parties (as
------------------------------
to itself only) represents and warrants to Sub and other Initial Parties that as
of the date hereof:
(i) such Party has full power and authority to execute and deliver
this Agreement and the execution and delivery by such Party of this
Agreement have been duly authorized by all necessary action;
(ii) this Agreement has been duly and validly executed and delivered
by such Party and constitutes the binding obligation of such Party,
enforceable against such Party in accordance with its terms; and
(iii) assuming that the Common Stock to be issued to it pursuant to
the Merger Agreement is duly and validly issued free and clear of all liens
and other encumbrances, immediately after the consummation of the Merger,
such Party shall own as of the Effective Time the number of shares of
Common Stock and such Common Stock Equivalents as are set forth on Schedule
--------
I, and such Common Stock and Common Stock Equivalents shall be owned by
-
such Party free and clear of all liens and other encumbrances arising by,
through or under such Party except for this Agreement, the Security
Agreement, if any, dated as of the date on which the Effective Time occurs,
executed by such Initial Party in favor of Sub (the "Security Agreement")
and the agreements creating such Common Stock Equivalents.
(b) Sub hereby represents and warrants to each Initial Party that:
(i) it is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, it has full
corporate power and authority to execute, deliver, and perform this
Agreement and to consummate the transactions contemplated hereby, and the
execution, delivery, and performance by it of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action; and
(ii) this Agreement has been duly and validly executed and delivered
by Sub and constitutes the binding obligation thereof, enforceable against
Sub in accordance with its terms.
ARTICLE II
CERTAIN MATTERS
---------------
2.1 CERTAIN ACTIVITIES OF THE PARTIES. The Initial Parties acknowledge
---------------------------------
that all such Parties and certain other Persons are executing and delivering a
Business Opportunity Agreement
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<PAGE>
(the "Business Opportunity Agreement") concurrently with the execution and
delivery of this Agreement.
2.2 ANNUAL MEETINGS. The Corporation shall hold annual meetings of
---------------
stockholders in accordance with the General Corporation Law of the State of
Delaware, which annual meetings shall be held in May of each year unless
otherwise determined by the Board of Directors of the Corporation.
2.3 REPORTING OBLIGATIONS. The Corporation shall provide to the Parties
---------------------
copies of (i) audited annual consolidated financial statements of the
Corporation within 90 days after the end of each fiscal year, (ii) unaudited
quarterly consolidated financial statements of the Corporation within 45 days
after the end of each of the first three fiscal quarters of each fiscal year,
(iii) unaudited monthly consolidated financial statements of the Corporation
within 45 days after the end of each month, and (iv) annual reserve reports,
prepared by an independent petroleum engineering firm, within 90 days after the
end of each fiscal year.
2.4 CERTAIN EMPLOYEE MATTERS. Promptly after the Effective Time, the
------------------------
Corporation shall issue or contribute to an employee benefit plan (the "Employee
Benefit Plan") for the benefit of the Corporation's employees, other than the
Management Investors, to the fullest extent permitted by law 2,000 shares of
Common Stock with such terms and conditions as the Board of Directors shall
determine.
ARTICLE III
CERTAIN STOCK PURCHASE RIGHTS
-----------------------------
3.1 CERTAIN STOCK PURCHASE RIGHTS. If the Corporation proposes to issue,
-----------------------------
sell, or grant (collectively, an "issuance") any of its Capital Stock (including
Common Stock Equivalents) then the Corporation shall, no later than 30 days
prior to the consummation of such issuance, give written notice to each JEDI
Party and each Management Investor of such proposed issuance. Such notice shall
describe the proposed issuance, identify the proposed purchaser or purchasers,
and contain an offer to each such Party that in the reasonable judgment of the
Corporation is an Accredited Investor (each an "Accredited Offeree") to sell to
such Accredited Offeree, at the same price and for the same consideration to be
paid by the proposed purchasers, such Accredited Offeree's pro rata portion
(which is the ratio of the number of shares of Fully-Diluted Common Stock owned
by such Accredited Offeree immediately prior to such issuance to the total
number of shares of Fully-Diluted Common Stock owned by all Accredited Offerees
immediately prior to such issuance) of such Capital Stock included in such
issuance. Each Accredited Offeree shall have a right of over-allotment such
that if any Accredited Offeree fails to exercise its rights hereunder to
purchase its pro rata portion, the other Accredited Offerees may purchase the
non-purchasing Accredited Offeree's portion on a pro rata basis or such other
basis as such Accredited Offerees shall agree. Any Accredited Offeree desiring
to exercise an over-allotment right shall so indicate in its response to the
Corporation. Any Accredited Offeree desiring to purchase a portion or all of
the issuance shall indicate its acceptance of the Corporation's offer by written
notice within 15 days after its receipt of the Corporation's notice. If the
Accredited Offerees collectively fail, after taking into account exercises of
over-allotment rights, to elect to purchase all of the Capital Stock proposed to
be issued,
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<PAGE>
then the Corporation may, within the 60 days following the expiration of such 15
day period, proceed with that portion of the issuance that the Accredited
Offerees did not elect to purchase, free of any right on the part of such
Accredited Offeree under this Section 3.1 in respect thereof. This Section 3.1
shall not apply to (i) issuances to employees pursuant to compensation
arrangements or pursuant to employee benefit or stock option plans that have
been approved by the board of directors of the Corporation in accordance with
the Corporation's Bylaws; (ii) sales or issuances of Common Stock upon exercise
of any Common Stock Equivalent issued in connection with the Merger or which,
when issued, was subject to or exempt from the preemptive rights under this
Section 3.1; (iii) securities distributed or set aside ratably to all holders of
Common Stock on a per share equivalent basis, including rights issued pro-rata
to holders of Common Stock to purchase Capital Stock of the Corporation; (iv)
Capital Stock issued pursuant to the acquisition of a business entity or assets
by way of merger, purchase of assets or otherwise; and (v) Capital Stock issued
in a Qualified IPO or a Qualified Public Business Combination.
ARTICLE IV
RESTRICTIONS ON TRANSFERS
-------------------------
4.1 GENERAL RULE. No Party shall make any Transfer of Common Stock,
------------
Common Stock Equivalents, or Special Management Rights, directly or indirectly,
through an Affiliate or otherwise except as expressly permitted herein.
4.2 TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHT.
-------------------------------------------
(a) Certain Pledges. Any Party may (i) pledge Common Stock such Party
---------------
owns to a commercial lending institution as security for indebtedness of such
Party if, but only if, prior to any such pledge, the pledgee shall deliver to
the Corporation such pledgee's written agreement, in form and substance
satisfactory to the Corporation, (A) that such lender will not Transfer such
Common Stock except in compliance with the provisions of this Agreement, and (B)
that any Transfer of such stock upon or in lieu of foreclosure of its security
interest will be subject to Section 4.3(e)(iv) and that the pledgee or its
assignee must offer to sell the stock pursuant to Section 4.3(e)(iv) before it
may accept any offer at foreclosure or in lieu of foreclosure or before it or
its assignee may acquire such shares and (ii) pledge Common Stock to Sub
pursuant to the Security Agreement, if any, dated as of the date of which the
Effective Time occurs, by such Party in favor of Sub.
(b) Certain Transfers. Subject to Section 4.5, any Party may Transfer,
-----------------
from time to time, any Common Stock owned by such Party to a Permitted
Transferee of such Party.
4.3 TRANSFERS SUBJECT TO PREFERENTIAL RIGHT.
---------------------------------------
(a) Transfer in Response to Acquisition Proposals. Except as may
---------------------------------------------
otherwise be expressly permitted herein, a Party may Transfer Common Stock to a
transferee other than a Permitted Transferee if, but only if, an Acquisition
Proposal is received by such Party from such transferee with respect to such
Common Stock, and then only in compliance with this Agreement. Upon a Party's
receipt of an Acquisition Proposal which such Party is permitted hereunder to
accept and desires to accept, such Party (the "Offeror") shall offer (the
"Offer"), by written notice to the Corporation, to
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<PAGE>
sell the Shares Subject to the Offer to the Corporation for the Purchase Price
pursuant to the terms of this Agreement. Any Offer under this Section 4.3(a)
shall be irrevocable for so long as the Corporation has the right to purchase
any Shares Subject to the Offer. The Offer shall be delivered to the
Corporation, and shall (i) state the Shares Subject to the Offer, the
consideration to be paid therefor, the Offer Date and the Offer Expiration Time
and (ii) contain a true and complete copy of the Acquisition Proposal. The date
the Offer has been deemed received pursuant to Section 8.5 by the Corporation
shall be the "Offer Date."
(b) Termination of Employment. If the employment of a Management Investor
-------------------------
with the Corporation and its Subsidiaries terminates for any reason other than
such Management Investor's Voluntary Termination, then such Party, or his or her
legal representatives, as the case may be, and all Permitted Management Investor
Family Transferees to whom such Management Investor has transferred Common Stock
(collectively, the "Offeror"), shall be deemed to have made an offer (the
"Offer") to sell all Shares Subject to the Offer to the Corporation for the
Purchase Price. The Offer Date shall be deemed to be the date of such
termination of employment.
(c) Divorce of Party. If the marital relationship of a Management
----------------
Investor is terminated by divorce, and pursuant to such divorce, any property
settlement or otherwise in connection with such divorce, a Transfer (including
any Transfer involving community property or other marital property) is made by
such Party ("Divorced Party") to the former spouse of the Divorced Party
("Divorced Spouse"), the Divorced Party shall promptly notify the Corporation of
such event. The Divorced Party shall have the option to purchase all of the
Divorced Party's Common Stock and Common Stock Equivalents which have been
Transferred to or which are retained by or vested in the Divorced Spouse by
virtue of the divorce decree, property settlement, or by operation of the
community property or similar marital property laws for the Purchase Price, and
the Divorced Spouse shall be obligated to sell such Common Stock and Common
Stock Equivalents to the Divorced Party for the Purchase Price. Such option must
be exercised, and the purchase consummated, within 20 business days after the
Common Stock and Common Stock Equivalents are Transferred to or allowed to be
retained by or vested in the Divorced Spouse. The option shall be exercised by
the giving of written notice of exercise to the Divorced Spouse. The Divorced
Party shall, within five days after the expiration of such 20 business day
period, deliver written notice to the Corporation as to whether the Divorced
Party has purchased all of the Common Stock and Common Stock Equivalents so
Transferred to or otherwise vested in or retained by the Divorced Spouse. In the
event such written notice states that the Divorced Party has not purchased all
such Common Stock and Common Stock Equivalents or no such notice is delivered to
the Corporation within the time required, the Divorced Spouse (the "Offeror")
shall be deemed to have made an irrevocable offer (the "Offer") to sell all such
Common Stock and Common Stock Equivalents to the Corporation for the Purchase
Price. The Offer Date shall be deemed to be the date such written notice is
received by the Corporation or if such notice is not delivered within the time
required, the receipt by the Corporation of evidence, satisfactory to it, that
all such Common Stock was not purchased by the Divorced Party within such 20
business day period.
(d) Death of Spouse. If the spouse of a Management Investor dies, and all
---------------
or any portion of the Common Stock and Common Stock Equivalents registered in
the name of such Party ("Surviving Party") vests in or is Transferred to any
heir or legatee other than the Surviving Party or any Permitted Management
Investor Family Transferee, the Surviving Party shall promptly notify
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<PAGE>
the Corporation of such event. The Surviving Party shall have the option to
purchase all of the Common Stock and Common Stock Equivalents vesting in or
Transferred to such heir or legatee for the Purchase Price, and such heir or
legatee and the estate of the deceased spouse shall be obligated to sell such
Common Stock and Common Stock Equivalents to the Surviving Party for the
Purchase Price. Such option must be exercised, and the purchase consummated,
within 20 business days after the last to occur of (i) the entry of an order of
a probate or similar court (having jurisdiction over the estate of the deceased
spouse) (a) admitting to probate the will of the deceased spouse, or (b)
determining the heirs of the deceased spouse if the deceased spouse is
determined to have died intestate, or (ii) the appointment of the executor,
administrator or legal representative of the estate of the deceased spouse. The
option shall be exercised by the giving of written notice of exercise to the
executor, administrator or legal representative of the deceased spouse's estate.
The Surviving Party shall, within five days after the expiration of such 20
business day period, deliver written notice to the Corporation as to whether the
Surviving Party has purchased all of the Common Stock and Common Stock
Equivalents vesting in or Transferred to any such heir or legatee. In the event
such written notice states that the Surviving Party has not purchased all such
Common Stock and Common Stock Equivalents, or no such notice is delivered to the
Corporation within the time required, all such heirs and legatees (collectively,
the "Offeror") shall be deemed to have made an irrevocable offer (the "Offer")
to sell such Common Stock and Common Stock Equivalents to the Corporation for
the Purchase Price. The Offer Date shall be deemed to be the date such written
notice of the Offer is received by the Corporation or if such notice is not
given within the time required, the date of the receipt by the Corporation of
evidence, satisfactory to it, that all such Common Stock was not purchased by
the Surviving Party within such 20 business day period.
(e) Insanity, Bankruptcy and Certain Other Events. If any of the following
---------------------------------------------
events occur (which does not result in a deemed offer pursuant to Section
4.3(b)):
(i) any judicial determination of the insanity or incompetence of a
Management Investor;
(ii) the filing of a petition in bankruptcy by a Party, the filing
of a petition in bankruptcy against a Party that is not dismissed within 90
days, the appointment of a receiver of a Party's property or the admission
by a Party of such Party's inability to pay such Party's debts generally;
(iii) death of a Management Investor; or
(iv) any involuntary Transfer by a Party (including by operation of
law) other than, subject to Section 4.5, a Transfer to a Permitted
Transferee of such Party;
then such Party, or his or her legal representatives or transferee, as the case
may be, and all Permitted Management Investor Family Transferees to whom such
Party has Transferred Common Stock (collectively, the "Offeror"), shall be
deemed to have made an offer (the "Offer") to sell all Shares Subject to the
Offer to the Corporation for the Purchase Price, and shall promptly notify the
Corporation of such event. The Offer Date shall be deemed to be the date such
written notice of the Offer is received by the Corporation or, if no such notice
is delivered to the Corporation by such
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<PAGE>
Offeror, the date of the Corporation's receipt of evidence, satisfactory to it,
of any of the foregoing events.
4.4 PROCEDURES WITH RESPECT TO TRANSFERS SUBJECT TO SECTION 4.3.
-----------------------------------------------------------
(a) Election Procedure. With respect to any Offer made or deemed made
------------------
pursuant to Section 4.3, the Corporation shall have the option and preferential
right, but shall not be obligated, to elect by the Offer Expiration Time, to
purchase the Shares Subject to the Offer. If the Corporation desires to
purchase the Shares Subject to the Offer it shall, prior to the Offer Expiration
Time, deliver a written notice (a "Positive Receipt Notice") to the Offeror
stating that the Corporation elects to purchase, subject to the requirements of
Section 4.4(b), all of the Shares Subject to the Offer. The Positive Receipt
Notice shall specify the number of shares of Common Stock and Common Stock
Equivalents that the Corporation is electing to purchase and the time, date (the
"Closing Date") and place of the closing of the acquisition of Shares Subject to
the Offer by the Corporation (the "Closing") and shall specify the Purchase
Price. The Closing Date shall be no less than 5 business days and no more than
20 business days following the delivery of the Positive Receipt Notice.
(b) Requirement to Purchase Some or All. With respect to Offers made, or
-----------------------------------
deemed made, pursuant to Section 4.3, the Corporation (or its assignees) may not
elect to purchase less than all of the Shares Subject to the Offer.
(c) Determination of Purchase Price.
-------------------------------
(i) The "Purchase Price" for purposes of the purchase of Shares
Subject to the Offer under Section 4.3(a) shall be the price per share set
forth in the Acquisition Proposal, subject to the terms of Section 4.4(f).
The "Purchase Price" for purposes of the purchase of Common Stock under all
other provisions of Section 4.3 shall be the Fair Market Value of a share
of Common Stock as of the applicable Offer Date and for purposes of the
purchase of Common Stock under Section 5.2 shall be the Fair Market Value
of a share of Common Stock as of the date of the applicable termination of
employment. The "Purchase Price" for any Common Stock Equivalents shall be
equal to (A) the number of shares of Common Stock then acquirable upon the
exercise or conversion of such Common Stock Equivalents multiplied by the
applicable Fair Market Value per share of Common Stock, less (B) the
aggregate consideration required to be paid so to exercise or convert such
Common Stock Equivalents.
(ii) "Fair Market Value" means the value of a share of Common Stock
as most recently determined in good faith by the Board of Directors in
accordance with the procedures set forth in Schedule II hereto, which shall
-----------
be made available to any Management Investor upon request.
(iii) "Peer Company" means each of one or more companies with
business and operations similar to the Corporation's selected in accordance
with the procedures set forth in this Section 4.4(c)(iii). The Peer
Companies shall be selected by a committee of two members appointed by the
Board of Directors, which committee shall consist of one Management
Investor who is a member of the Board of Directors (if a Management
Investor
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<PAGE>
is a member of the Board of Directors) and one of the members of the Board
of Directors nominated or elected by Parties other than the Management
Investors (the "Non-Management Investors"). Such committee shall select by
mutual agreement of the members of the committee a list of Peer Companies
prior to the last day of the first calendar quarter following the Effective
Time and on or prior to March 15 of each year thereafter. If the members of
the committee are unable to agree on the list of Peer Companies on or prior
to March 15 of each such year, the Board of Directors shall use the list of
Peer Companies selected in the immediately preceding year for purposes of
determining the Fair Market Value. If committee members initially appointed
by the Board of Directors for purposes of making the first selection of a
list of Peer Companies pursuant to this Section 4.4(c)(iii) are unable to
agree on such list on or prior to the last day of the first calendar
quarter following the Effective Time, the initial list of Peer Companies
shall be the list attached to this Agreement as Schedule IV.
-----------
(d) Election Not to Purchase. If the Corporation does not elect to
------------------------
purchase all of the Shares Subject to the Offer made under Section 4.3(a), the
Offeror desiring to make the Transfer pursuant to Section 4.3(a) shall be
permitted at any time within, but not after, 30 days after the Offer Expiration
Time, to make a Transfer of all (but not less than all) of the Shares Subject to
the Offer; provided, however, that no such Transfer shall be made on more
favorable terms (including lower price) than the terms specified in the
Acquisition Proposal or to a Person other than the proposed transferee specified
in the Acquisition Proposal. All Common Stock Transferred by a Party (whether
voluntarily, involuntarily, by operation of law or otherwise), even if one or
more Parties had the right to purchase such Shares pursuant to Section 4.3 and
failed to do so, and Common Stock owned by a Party that became subject to an
Offer, whether or not such Common Stock was acquired by the Corporation, shall
nonetheless remain subject to the terms of this Agreement, including becoming,
under the applicable circumstances, subject again under Section 4.3 to the right
of the Corporation to purchase such shares.
(e) Closing. Unless otherwise agreed to by the Offeror and the
-------
Corporation, the Closing shall be at 9:00 a.m., on the Closing Date at the
Corporation's principal office. At the Closing, the Purchase Price shall be
delivered to the transferor of the Common Stock and Common Stock Equivalents or
the transferor's representative, and the transferor or the transferor's
representative shall deliver to the Corporation such share certificates and
agreements representing the Shares Subject to the Offer so purchased, duly
endorsed for transfer or accompanied by duly executed stock powers or
assignments, free and clear of all liens, encumbrances and adverse claims with
respect thereto and such other matters as are deemed necessary by the
Corporation for the proper Transfer of the Shares Subject to the Offer so
purchased to the Corporation on the books of the Corporation.
(f) Form of Payment. The Purchase Price of any Shares Subject to the
---------------
Offer purchased pursuant to an Offer made under Section 4.3(a) shall be on such
terms as contemplated by the Acquisition Proposal; provided, however, that if
part or all of the consideration to be paid pursuant to the Acquisition Proposal
consists of Publicly Traded Securities the Corporation may consummate the
acquisition of Shares Subject to the Offer (pursuant to the terms hereof) wholly
in cash, and the Market Price of the Publicly Traded Security as of the Offer
Date shall be used to determine the equivalent cash price per share. The
Purchase Price of all Shares Subject to the Offer pursuant to an Offer made
under Sections 4.3(b) through 4.3(e) shall be paid in cash.
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(g) Delay for Approvals. If any Positive Receipt Notice is delivered by
-------------------
the Corporation, the Offeror and the Corporation shall cooperate in good faith
in obtaining all necessary governmental and other third party approvals, waivers
and consents. Any Closing pursuant to Section 4.4(e) shall be delayed, to the
extent required, until the next succeeding business day following the expiration
of any required waiting periods under the HSR Act and the obtaining of all
necessary governmental approvals; provided, however, such delay shall not exceed
90 days, and if governmental approvals and waiting periods shall not have been
obtained or expired by such 90th day following the applicable Closing Date, then
the Corporation shall be deemed to have elected not to purchase any of the
Shares Subject to the Offer and, if applicable, the Offeror shall be entitled to
Transfer the Shares Subject to the Offer in accordance with Section 4.4(d)
(except that such 90th day shall be deemed to be the applicable Offer Expiration
Time).
(h) Invalid Transfers. Any Transfer or attempted Transfer in breach of
-----------------
this Agreement ("Invalid Transfer") shall be void and of no effect; provided
that the Corporation may determine to treat any Invalid Transfer as an
involuntary Transfer pursuant to Section 4.3(e)(iv). In connection with any
Invalid Transfer, the Corporation may hold and refuse to transfer any Common
Stock or any certificate therefor tendered to it for transfer, in addition to
and without prejudice to any and all other rights or remedies which may be
available to it or the Parties.
(i) Assignment of Rights. Notwithstanding anything to the contrary
--------------------
herein, the Corporation may from time to time assign some or all of its rights
under Sections 4.3 and 4.4 herein to the Parties in accordance with this Section
4.4(i). In such an event, the Corporation shall continue to receive and provide
the notices referred to in Section 4.4, but the applicable Shares Subject to the
Offer shall be acquired by, and paid for by, any such assignees. If the
Corporation receives an Offer under Section 4.3 and desires to assign some or
all of its rights to purchase the Shares Subject to the Offer to the Parties,
the Corporation shall give notice thereof to each Accredited Offeree other than
the Offeror (the "Assignment Offer"). The Assignment Offer shall describe the
Offer and state the number of Shares Subject to the Offer the right to purchase
which the Corporation desires to assign. Each Accredited Offeree shall have the
right, exercisable by notice to the Corporation on the day specified in the
Assignment Offer, to acquire its pro-rata portion (which is the ratio of the
number of shares of Fully-Diluted Common Stock owned by such Accredited Offeree
over the total number of shares of Fully-Diluted Common Stock owned by all
Accredited Offerees other than the Offeror) of such Shares Subject to the Offer
for the Purchase Price. Each such Accredited Offeree shall have a right of over-
allotment such that if any Accredited Offeree fails to exercise its rights
hereunder to purchase its pro rata portion, the other Accredited Offerees may
purchase the non-purchasing Accredited Offeree's portion on a pro rata basis or
such other basis as such Accredited Offerees shall agree. Any Accredited Offeree
desiring to exercise an over-allotment right shall so indicate in its response
to the Corporation. If the Accredited Offerees collectively fail, after taking
into account exercises of over-allotment rights, to elect to purchase all of
such Shares Subject to the Offer, then the Corporation shall have the right to
purchase such Shares Subject to the Offer in accordance with Sections 4.3 and
4.4, and unless the Corporation and its assignees collectively elect to purchase
all of the Shares Subject to the Offer, neither the Corporation or any of such
assignees shall have the right to purchase any of such Shares Subject to the
Offer. The decision by the Corporation to assign some or all of its rights under
Sections 4.3 or 4.4 herein shall be made by the directors of the Corporation not
then associated or affiliated with the Offeror even if less than a quorum. The
Corporation's assignment of such rights shall not affect or extend the Offer
Expiration Time.
-15-
<PAGE>
4.5 CONDITIONS TO PERMITTED TRANSFERS; CONTINUED APPLICABILITY OF
-------------------------------------------------------------
AGREEMENT. (a) As a condition to any Transfer permitted hereunder or if any
- ---------
Transfer otherwise occurs, any transferee of Common Stock (i) shall be required
to become a Party to this Agreement, by executing (together with such Person's
spouse, if applicable) an Adoption Agreement, and shall have all the obligations
of a Party hereunder and the rights that are expressly provided for herein and
(ii) shall be required to become a party to the Business Opportunity Agreement.
If any Person acquires Common Stock from a Party in a Transfer notwithstanding
such Person's failure to execute an Adoption Agreement in accordance with the
preceding sentence (whether such Transfer resulted by operation of law or
otherwise), such Person and such Common Stock shall be subject to this
Agreement, including the provisions of Sections 4.3 and 4.4, even if such Person
is not a Party.
(b) No Party shall make any Transfer at any time if such action would
constitute a violation of any federal or state securities laws.
4.6 RESTRICTIONS ON OTHER AGREEMENTS. Except as otherwise expressly
--------------------------------
provided herein or in a Security Agreement, no Party shall grant any proxy or
enter into or agree to be bound by any voting trust with respect to Common Stock
or Common Stock Equivalents nor shall any Party enter into any stockholder
agreement or arrangements of any kind with any Person with respect to Common
Stock or Common Stock Equivalents (whether or not such agreements and
arrangements are with other Parties), including, without limitation, agreements
or arrangements with respect to the acquisition, disposition or voting of shares
of Common Stock, in each case that is inconsistent with the terms of this
Agreement.
4.7 EFFECT OF DISTRIBUTIONS AND CERTAIN TRANSACTIONS. If, in connection
------------------------------------------------
with any Offer, any record date for any dividend or distribution by the
Corporation (other than any regular quarterly cash dividend) or any record date
for the issuance of any securities of the Corporation or any other Person in
respect of Common Stock in connection with any exchange, merger,
recapitalization, consolidation, reorganization or other transaction involving
the Corporation (in any such case, a "Record Date") occurs on or after the date
on which the Purchase Price is determined and prior to the Closing, then the
Corporation (or its assignees under Section 4.4(i)) shall be entitled to receive
any such dividends, distributions or securities, as the case may be, in respect
of the Common Stock it acquires pursuant to such Offer and appropriate
documentation shall be delivered at the Closing by the Offeror to evidence the
Corporation's right to receive such dividends, distributions or securities.
4.8 SPECIAL JEDI TRANSFER RESTRICTION. Any other provisions of this
---------------------------------
Agreement notwithstanding, JEDI shall not transfer any Common Stock to any
Person, by liquidating or other distribution or otherwise, if immediately
following such transfer the Corporation would be included in the consolidated
federal income tax return of any Person unless the Corporation and such Person
shall have entered into a tax sharing agreement that is fair to the Corporation;
provided, however, that this Section 4.8 shall not apply to any transfer, if
immediately following such transfer, a Cash Trigger Event shall have occurred.
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<PAGE>
ARTICLE V
CERTAIN TAGALONG AND PUT RIGHTS
-------------------------------
5.1 TAGALONG RIGHTS. On or before the fifth business day after the Offer
---------------
Date with respect to any Offer made pursuant to Section 4.3(a), unless the
Corporation or its assignees have elected to purchase the Shares Subject to the
Offer, the Corporation shall deliver a copy of such Offer to each Party other
than the Offeror. Unless the Corporation or its assignees elect to purchase the
Shares Subject to the Offer, each such Party shall have the right to include in
the proposed sale a number of shares of Common Stock designated by such Party
not to exceed the number of shares equal to the product of (a) the aggregate
number of shares to be sold by the Offeror to the proposed transferee and (b) a
fraction with a numerator equal to the number of shares of Fully-Diluted Common
Stock held by such other Party and a denominator equal to the number of shares
of Fully-Diluted Common Stock held by all the Parties; provided that if the
consideration to be received by the Offeror includes any securities, only
Parties who are Accredited Investors shall be entitled to include their shares
in such sale (but in such a case, each Party shall be entitled to include in
such a sale a number of its shares, without duplication, equal to the total
number of shares held by its Affiliates which are excluded from such sale by the
operation of this proviso). Each Party who wishes to include shares of Common
Stock in the proposed sale in accordance with the terms of this Section 5.1
shall so notify the Offeror not more than 10 business days after the Offer Date
with respect to such Offer. The participation of any other Party in the sale
made by the Offeror shall be conditioned upon the Offeror's sale of shares
pursuant to the transactions contemplated in the Acquisition Proposal with the
transferee named therein. If any other Party or other Parties have elected to
participate in such sale by the Offeror, the Offeror shall cause the transferee
that proposes to purchase the Common Stock of the Offeror to offer to purchase,
on such terms, such number of shares of Common Stock from such Party or Parties;
provided, however, that, if such transferee is for any reason unwilling or
unable to purchase the aggregate number of shares from the Offeror as well as
such other Party or Parties, then the Offeror shall reduce to the extent
necessary the number of shares it otherwise would have sold in the proposed sale
so as to permit other Parties who have elected to participate in such sale to
sell the number of shares that they are entitled to sell under this Section 5.1,
and the Offeror and such other Party or Parties shall sell the number of shares
specified in the Acquisition Proposal to the proposed transferee in accordance
with the terms thereof.
5.2 PUT RIGHTS.
----------
(a) If a Management Investor's employment with the Corporation or its
Subsidiaries terminates for any reason (including such Management Investor's
death or disability) other than for Cause or such Management Investor's
Voluntary Termination, then upon the written request (the "Put Request") of such
Management Investor or his or her legal representative, as the case may be (the
"Requestor"), delivered to the Corporation no later than 20 business days
following the date of such termination of employment (or, in the case of the
death of the Management Investor, within six months of such Management
Investor's death), the Corporation shall, subject to Section 5.2(b) and to the
extent it has not acquired or elected to acquire pursuant to Article IV hereof
all the Common Stock (including any Common Stock transferred, or to be
transferred, to such Management Investor pursuant to Article VI hereof) and
Common Stock Equivalents owned by such Management Investor, purchase from the
Requestor, all (but not less than all) of the Common Stock and Common Stock
-17-
<PAGE>
Equivalents owned by such Requestor (the "Put Shares") at the Purchase Price.
The Corporation shall purchase the Put Shares at the Corporation's principal
office at a closing to be held at the time and date specified by the Corporation
(which shall be a date within 25 business days of the receipt of the Put
Request). The provisions of Section 4.4(e) shall apply to such closing.
(b) Notwithstanding any other provision of this Article V, the Corporation
shall not be obligated to repurchase any Put Shares from a Requestor if there
exists and is continuing an event of default which would, without further
passage of time or further notice, permit acceleration of the indebtedness under
the Corporation's loan or credit agreement with its principal lender or lenders
or under any other material agreement for borrowed money, or if such purchase
would result in a default or any event of default (without regard to the further
passage of time or the giving of such notice) as defined in any such agreement,
or if the capital of the Corporation is then impaired or such purchase would
cause an impairment of the capital of the Corporation or would otherwise violate
applicable law.
ARTICLE VI
SPECIAL MANAGEMENT RIGHTS
-------------------------
6.1 GRANT OF RIGHTS. The Parties desire to provide to the Management
---------------
Investors an incentive to maximize the rate of return to stockholders of the
Corporation. Subject to the terms and conditions of this Article VI, on the
occurrence of the Trigger Event, each Management Investor shall have the right
(collectively, the "Special Management Rights") to receive from JEDI the
percentage set forth beside such Management Investor's name on Schedule III
------------
attached hereto of (a) in the case of a Cash Trigger Event, cash in the amount
specified in Section 6.4(a), or (b) in the case of a Non-Cash Trigger Event, the
number of shares of Common Stock specified in Section 6.4(b) for no additional
consideration.
6.2 TRIGGER EVENT. The "Trigger Event" shall be the first of the
-------------
following events to occur after the Merger:
(a) the consummation of a Qualified IPO or a Qualified Public Business
Combination;
(b) any merger of the Corporation with or into any other Person (whether
or not the Corporation is the survivor of such merger), any sale of Common Stock
by the holder or holders thereof, any issuance of Common Stock by the
Corporation to any Person, or any other transaction in each case resulting in
any Person other than a JEDI Entity or a group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934) of Persons not including any
JEDI Entities owning a number of shares of Fully-Diluted Common Stock in excess
of 50% of the number of shares of Fully-Diluted Common Stock outstanding after
giving effect to such merger, sale, or issuance of Common Stock; and
(c) the liquidation of the Corporation.
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<PAGE>
The occurrence of any of the events described in this Section 6.2(a) - (c)
following the first thereof to occur shall not constitute a Trigger Event and
shall not give rise to any right to receive any cash or Common Stock under this
Article VI.
6.3 AMOUNT OF PROCEEDS. The proceeds or imputed proceeds to holders of
------------------
the Initial Shares (the "Relevant Investors") of the Trigger Event shall be (A)
in the case of a Trigger Event resulting in all outstanding Common Stock being
acquired from the holders thereof for cash (a "Cash Trigger Event"), the amount
of cash proceeds from such acquisition payable to the Relevant Investors in
respect of the Initial Shares, (B) in the case of the consummation of a
Qualified IPO, the product of the number of Initial Shares multiplied by the
per-share offering price at which public investors purchase the shares offered
in the Qualified IPO, (C) in the case of any other Trigger Event whereby any
Person acquires Common Stock for cash, the product of the number of Initial
Shares multiplied by the per-share price paid by such Person for such Common
Stock, (D) in the case of the consummation of a Qualified Public Business
Combination or any other Trigger Event in which a Person acquires Common Stock
in exchange for a Publicly Traded Security (with or without any additional cash
consideration) the product of the number of Initial Shares multiplied by the
Market Price of the Publicly Traded Security as of the Trigger Event (plus any
additional per-share cash consideration paid in consideration for such Common
Stock), or (E) in the case of any other Trigger Event, the product of the number
of Initial Shares multiplied by the per-share Fair Market Value of such shares
(each of (B) through (E) a "Non-Cash Trigger Event").
6.4 PAYMENT OF CASH OR TRANSFER OF COMMON STOCK PURSUANT TO SPECIAL
---------------------------------------------------------------
MANAGEMENT RIGHTS.
- -----------------
(a) If the Trigger Event is a Cash Trigger Event, on the occurrence of the
Trigger Event, JEDI shall pay or cause to be paid to each Management Investor,
in cash in immediately available funds, an amount equal to the product of (i)
one-third of the Excess Proceeds multiplied by (ii) the percentage set forth
beside such Management Investor's name on Schedule III attached hereto.
-------------
"Excess Proceeds" shall mean the excess of (A) the proceeds or deemed proceeds
to the Relevant Investors as a result of the Trigger Event as determined
pursuant to Section 6.3 over (B) the product of (1) the Initial Investment
multiplied by (2) the value set forth in the "Factor" column on Schedule V
----------
attached hereto for the number of days from the date on which the Effective Time
occurs through the date of the Trigger Event; provided that if the Excess
Proceeds is not a positive amount, then no payment of cash or assignment of
Common Stock shall be made pursuant to this Article VI.
(b) If the Trigger Event is a Non-Cash Trigger Event, on the occurrence of
the Trigger Event, JEDI shall assign or cause to be assigned to each Management
Investor the percentage of the Special Management Shares set forth beside such
Management Investor's name on Schedule III attached hereto. "Special Management
------------
Shares" means the number of shares of Common Stock equal to "X" in the following
formula:
[INSERT EQUATION HERE]
-19-
<PAGE>
where:
"Excess Proceeds" has the meaning given such term in Section 6.4(a).
"Proceeds Per Share" means the amount of proceeds or deemed proceeds to the
Relevant Investors as a result of the Trigger Event as determined pursuant to
Section 6.3 divided by the number of Initial Shares.
If the Trigger Event results in the then outstanding Common Stock being
exchanged for other securities on other than a one-to-one basis, then the
Special Management Shares shall be multiplied by the number of such securities
issued in exchange for each share of Common Stock pursuant to such Trigger
Event.
(c) The Parties acknowledge that the calculation of the amount of cash or
the number of shares of Common Stock that the Management Investors are entitled
to receive pursuant to the Special Management Rights is designed to result in
the Management Investors receiving in connection with a Trigger Event one-third
of the proceeds attributable to the Initial Shares above the amount of proceeds
necessary for an internal rate of return on the Initial Investment of 15% and
that the product of the applicable value from the "Factor" column on Schedule V
----------
attached hereto multiplied by the Initial Investment determines the amount of
proceeds necessary to achieve a 15% internal rate of return on the Initial
Investment. The factors included in Schedule V assume that the Corporation pays
----------
no dividends or distributions and does not repurchase any of the Initial Shares
from the Effective Time through the Trigger Event. It is the intention of the
Parties to amend Schedule V contemporaneously with the occurrence of any such
----------
event such that it accurately determines the amount of such proceeds taking into
account any such dividends, distributions or share repurchase. If the Parties
do not so amend Schedule V following any such event and the Trigger Event occurs
----------
prior to Schedule V being amended to take such event into account, the "Excess
----------
Proceeds" shall be deemed to mean the amount of proceeds to the Relevant
Investors as a result of the Trigger Event above the amount of proceeds
necessary for an internal rate of return of 15% on the Initial Investment,
taking into account any such dividends, distributions or share repurchases.
(d) Notwithstanding the foregoing, JEDI shall have the right, in lieu of
the issuance of the Special Management Shares to the Management Investors
pursuant to Section 6.4(b), to pay or cause to be paid to each Management
Investor for each Special Management Share that would otherwise be issued to
such Management Investor under this Article VI an amount equal to the per-share
proceeds or deemed proceeds to the Relevant Investors of the Trigger Event,
determined as specified in Section 6.3.
(e) Upon the issuance of the Special Management Shares or the payment of
cash pursuant to this Section 6.4, the Special Management Rights shall
terminate.
(f) An example calculation of the Special Management Rights is attached
hereto as Schedule III-A.
--------------
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<PAGE>
(g) To the extent that the receipt by the Management Investors of Common
Stock or cash in accordance with the Special Management Rights or the
disposition of such shares of Common Stock results in compensation income to any
Management Investor for federal or state income tax purposes, such Management
Investor shall deliver to the Corporation (or JEDI if required under applicable
tax laws or regulations) on the date of the Trigger Event, and as a condition to
such Management Investor's receipt of such Common Stock or cash, such amount of
money as the Corporation (or JEDI if required under applicable tax laws or
regulations) may require to meet its withholding obligation under applicable tax
laws or regulations. If such Management Investor fails to do so but JEDI
nonetheless agrees to assign such Common Stock or pay such cash to such
Management Investor, the Corporation (or JEDI if required under applicable tax
laws or regulations) is authorized to satisfy any such withholding requirement
out of any cash or shares of Common Stock such Management Investor is entitled
to receive on the occurrence of the Trigger Event and to withhold from any cash
or Common Stock remuneration then or thereafter payable to such Management
Investor any tax required to be withheld by reason of such resulting
compensation income.
6.5 TERMINATION OF MANAGEMENT INVESTOR. If the employment of any
----------------------------------
Management Investor with the Corporation terminates for any reason (including
such Management Investor's death or disability) other than for Cause or such
Management Investor's Voluntary Termination, then such termination shall be
deemed to be a Non-Cash Trigger Event of the type referred to in clause (E) of
the last sentence of Section 6.3 with respect to such Management Investor only,
and JEDI shall assign, or cause to be assigned by a Person other than the
Corporation, to such Management Investor the number of Special Management Shares
that such Management Investor would have received had an actual Non-Cash Trigger
Event of such type occurred as of the date of such Management Investor's
termination, and the Special Management Rights shall terminate with respect to
such Management Investor; provided, however, that if the Board of Directors
determines in good faith that the Trigger Event is reasonably likely to occur
within one year after such Management Investor's termination, the Board of
Directors shall have the right upon notice to the Management Investor within 20
business days of such Management Investor's termination to defer the issuance of
the Special Management Shares to such Management Investor until the earlier of
(a) one year after such Management Investor's termination (in which case the
number of Special Management Shares shall be calculated based on the Fair Market
Value as of such Management Investor's termination) and (b) the Trigger Event
(in which case such Management Investor's Special Management Rights shall be
determined as though he remained employed on the date of the Trigger Event).
The Special Management Rights shall terminate without any payment or issuance as
to any Management Investor whose employment by the Corporation is terminated for
Cause or upon such Management Investor's Voluntary Termination. Even if a
Management Investor's Special Management Rights terminate under this Section 6.5
or otherwise, the percentages set forth on Schedule III with respect to other
Management Investors shall not change. Notwithstanding anything to the contrary
in this Article VI, if any Management Investor commits actual fraud against the
Corporation that could have affected or in any way could affect, in any material
respect, the calculation of the cash or shares due to the Management Investors
in respect of the Special Management Rights, such Management Investor shall
forfeit his Special Management Rights and, in the event that such Management
Investor receives cash or shares in respect of his Special Management Rights
prior to the time that such actual fraud is discovered, such Management Investor
shall be obligated to return to JEDI or to the
-21-
<PAGE>
applicable Party the cash or shares, as applicable, received by such Management
Investor in respect of his Special Management Rights.
6.6 OTHER EMPLOYEE INVESTORS. Four percent of the Special Management
-------------------------
Shares, or the cash paid in lieu thereof, shall be reserved for employees of the
Corporation at the time of the Trigger Event other than the Management Investors
and shall be subject and allocated to the Employee Benefit Plan.
6.7 SUBSEQUENT HOLDERS OF COMMON STOCK. With respect to Persons that
-----------------------------------
acquire Common Stock from JEDI and become Parties, JEDI and such Person may
enter into such arrangements as they deem appropriate at the time of the
transfer of Common Stock to such Person with regard to such Person's obligations
to assign Common Stock or make payments in lieu thereof in connection with the
Special Management Rights. If any Person or Persons pursuant to this Section
6.7 assumes some or all of the obligations of JEDI under this Article VI, then a
copy of the document pursuant to which such Persons have assumed such
obligations shall be sent to the Management Investors. If (i) such Person
assuming such obligation then has debt with a maturity of at least five years
that has a credit rating of BBB or higher from Standard & Poor's (or equivalent
ratings from another nationally recognized rating agency) or (ii) Management
Investors sufficient to consent to an amendment of this Agreement pursuant to
Section 8.1 consent in writing to the assumption of such liability, then JEDI
shall be relieved of liability under this Article VI to the extent such Persons
have assumed JEDI's obligations hereunder, and in such event references to JEDI
in this Article VI shall then be deemed to mean JEDI and such transferee, it
being understood that the obligations of JEDI and such transferee under this
Article VI are several and not joint. If neither condition referred to in
clause (i) or (ii) of the preceding sentence is satisfied, then JEDI shall not
be relieved of liability under this Article VI notwithstanding the assumption of
such obligation by other Persons.
ARTICLE VII
TERMINATION
-----------
7.1 TERMINATION. This Agreement shall terminate and no Party shall have
-----------
any further obligations or rights hereunder upon the earliest of (i) the
termination of the Merger Agreement in accordance with its terms, (ii) the
Termination Date, (iii) the date a Qualified IPO or a Qualified Public Business
transaction is consummated (other than the provisions of Article VI which shall
terminate as soon as the Corporation has complied with its obligations under
Article VI hereof, if any, with respect thereto), (iv) the date of the
dissolution, liquidation or winding-up of the Corporation and (v) the date of
the delivery to the Corporation of a written termination notice executed by each
JEDI Party and by Management Investors owning a majority of the Common Stock
owned by the Management Group.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 AMENDMENT; WAIVERS. This Agreement may only be altered, supplemented,
------------------
amended or waived by the written consent of (i) the Corporation, (ii) each JEDI
Party that owns at least 5% of the Common Stock and (iii) either (A) Douglas H.
Miller and other Management Investors owning at least one-third of the Fully-
Diluted Common Stock owned by all Management Investors other than Douglas H.
Miller or (B) Management Investors other than Douglas H. Miller owning a
majority of the Fully-Diluted Common Stock owned by all Management Investors
other than Douglas H. Miller; provided, however, that in no event shall any
amendment impose any additional material obligation on any Party without such
Party's written consent; provided further, however, (i) any Party may (without
the consent of any other Person) waive, in writing, any obligation owed to it
hereunder by any other Party or the Corporation, and (ii) any Party may (without
the consent of any other Person) waive, in writing, any right it has hereunder.
Any waiver permitted hereunder may be made prospectively or retroactively.
8.2 ASSIGNMENT. Except as otherwise expressly provided herein, the terms
----------
and conditions of this Agreement shall inure to the benefit of and be binding
upon the Parties, the Corporation and their permitted assigns; provided,
however, assigns shall only have those rights that are expressly provided for
herein in accordance with Section 4.5. No such assignment shall relieve the
assignor from any liability accruing hereunder prior to an assignment permitted
hereunder. The Corporation agrees that it shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety, unless the Person formed by such consolidation or
into which the Corporation merges or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Corporation
substantially as an entirety shall be a corporation organized and existing under
the laws of the United States of America or a State thereof (the "Successor
Corporation") and shall expressly assume, by written agreement signed by the
Corporation and the Successor Corporation and delivered to each Party, the
performance and observance of every obligation on the part of the Corporation to
be performed or observed hereunder.
8.3 SHARES SUBJECT TO THIS AGREEMENT. Except as otherwise provided for
--------------------------------
herein, all shares of Common Stock or Common Stock Equivalents now or hereafter
owned by any of the Parties shall be subject to the terms of this Agreement
including, without limitation, Common Stock acquired pursuant to the Special
Management Rights. Common Stock and Common Stock Equivalents issued by the
Corporation after the Effective Time that are not expressly subject to this
Agreement pursuant to the terms hereof shall not be subject to this Agreement
and the transferees of such Common Stock and Common Stock Equivalents shall not
be Parties unless the Corporation, in connection with such issuance, elects that
such Common Stock or Common Stock Equivalents be subject to this Agreement and
promptly after such election the Corporation notifies the Parties of such
election.
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<PAGE>
8.4 LEGENDS. Each certificate for Common Stock and each agreement
-------
representing Common Stock Equivalents that are subject to this Agreement shall
include a legend in substantially the following form:
THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS ON
TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS
AGREEMENT, DATED AS OF OCTOBER 30, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
8.5 NOTICES. Any and all notices, designations, consents, offers,
-------
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by personal delivery, overnight courier, telegram, or
telecopy which shall be addressed, or sent, to the respective addresses or
telecopy numbers as follows (or such other address or telecopy number as the
Corporation or any Party may specify for itself to the Corporation and all other
Parties by Notice):
The Corporation: Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Chief Financial Officer
Telecopy No. 214-265-4777
Telephone No. 214-265-4751
With a copy to: Enron Corp.
1400 Smith
Houston, Texas 77002
Attention: Keith Power/Brenda McGee, Specialist - 28th Floor
Telecopy No. 713-646-3602
Telephone No. 713-853-5259
Each Party: To such address or telecopy number of such Party as is set
forth on Schedule I hereto or, if such address is not so
----------
provided, to such Party's address as is reflected on the stock
transfer records of the Corporation at the time in question.
All Notices shall be deemed effective, delivered and received (a) if given by
personal delivery, when such Notice is personally delivered at the address
specified above; (b) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified above and receipt thereof is confirmed; (c) if
given by overnight courier, on the business day immediately following the day on
which such Notice is delivered to a reputable overnight courier service; or (d)
if given by telegram, when such Notice is delivered at the address specified
above.
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8.6 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
8.7 HEADINGS. Headings contained in this Agreement are inserted only as a
--------
matter of convenience and in no way define, limit, or extend the scope or intent
of this Agreement or any provisions hereof.
8.8 CHOICE OF LAW. This Agreement shall be governed by the internal laws
-------------
of the State of Delaware without regard to the principles of conflicts of laws
thereof.
8.9 ENTIRE AGREEMENT. This Agreement contains the entire understanding of
----------------
the parties hereto respecting the subject matter hereof and supersedes all prior
agreements, discussions and understandings with respect thereto.
8.10 CUMULATIVE RIGHTS. The rights of the Parties and the Corporation
-----------------
under this Agreement are cumulative and in addition to all similar and other
rights of the Parties and the Corporation under other agreements.
8.11 NO PARTNERSHIP. No term or provision of this Agreement shall be
--------------
construed to establish any relationship of partnership, agency or joint venture
between the parties hereto.
8.12 NUMBER; GENDER; WITHOUT LIMITATION; INTERPRETATION OF CERTAIN DEFINED
---------------------------------------------------------------------
TERMS. Pronouns, wherever used in this Agreement, and of whatever gender, shall
- -----
include Persons of every kind and character, and the singular shall include the
plural whenever and as often as may be appropriate. Any reference herein to
"including" and words of similar import refer to "including without limitation."
When reference is made herein to one or more Groups or other specified Parties
or Persons, the determination as to which Persons are thereby referenced shall
be made as of the time in question. Unless the context otherwise requires, any
reference herein to "or" shall also include "and," so that "A or B" shall
include the possibilities of A, B, and A and B.
8.13 SEVERABILITY. In the event any one or more of the provisions
------------
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which approximates as nearly as possible that of the
invalid, illegal or unenforceable provisions.
8.14 THIRD PERSON. Nothing herein expressed or implied is intended or
------------
shall be construed to confer upon or to give any Person not a party hereto any
rights or remedies under or by reason of this Agreement.
8.15 U.S. CURRENCY. All payments required or permitted hereunder shall be
-------------
paid in U.S. dollars or other lawful currency constituting legal tender of the
United States of America.
-25-
<PAGE>
8.16 INDEMNIFICATION. Each Party and the Corporation (the "Indemnitor")
---------------
hereby agrees to protect, defend, indemnify and hold harmless all other Parties
and their respective successors, heirs and assigns (the "Indemnitees") against
any and all claims, lawsuits, damages and other liabilities and expenses
(including reasonable attorneys' fees) suffered or incurred by any of the
Indemnitees and which arise out of any breach by the Indemnitor of its
representations, warranties, covenants or other obligations hereunder.
8.17 SPOUSAL CONSENTS. Each Management Investor represents and warrants
----------------
that his or her spouse is the Management Investor Spouse set forth next to such
Management Investor's name on the execution pages hereof. Each Management
Investor Spouse represents and warrants, and each Management Investor represents
and warrants with respect to his or her spouse, that such Management Investor
Spouse has duly and validly executed and delivered this Agreement. Each spouse
of a Party, including each Management Investor Spouse, that executes and
delivers to the Corporation, in his or her capacity as a spouse, this Agreement,
a counterpart of this Agreement or an Adoption Agreement, agrees that such
execution and delivery constitutes an acknowledgment that such spouse is fully
aware of, understands and fully consents and agrees to the provisions of this
Agreement and its binding effect upon any community property interests or
similar marital property interests in the Common Stock or Common Stock
Equivalents he or she may now or hereafter own, agrees that the termination of
his or her marital relationship with any Party for any reason shall not have the
effect of removing any Common Stock or Common Stock Equivalents otherwise
subject to this Agreement from the coverage hereof and agrees that such spouse
shall have no rights of any nature hereunder (including any preferential
purchase rights or preemptive rights) unless and until such spouse becomes a
Party in accordance with this Agreement. Furthermore, each individual Party
agrees to cause his or her spouse (and any subsequent spouse) to execute and
deliver to the Corporation a counterpart of this Agreement, or an Adoption
Agreement.
8.18 CERTAIN RECORDS. In order to effectuate the purposes of this
---------------
Agreement, the Corporation (i) shall maintain a record of the names and
addresses of the Parties and the number of shares of Common Stock and Common
Stock Equivalents owned by the Parties and each Group, (ii) at the request of
any Party, it will provide such Party with a copy of the record, (iii) shall
promptly notify the Parties in the event the Corporation receives notice that
any shares of Common Stock or Common Stock Equivalents have been (or have
purported to be) Transferred by or to any Party (including the name of the
transferor and transferee or purported transferor or transferee and the number
of shares transferred or purported to be transferred), (iv) shall not register,
in the name of any Person, any shares subject to this Agreement unless the
transferor and transferee have complied with the terms of this Agreement
including Section 4.5 and (v) shall not issue to any Person any stock
certificate representing shares subject to this Agreement or any agreement
representing Common Stock Equivalents unless in each case the legend referred to
in Section 8.4 hereof is set forth thereon.
8.19 ARBITRATION. Any and all claims, demands, causes of action,
-----------
disputes, controversies and other matters in question arising out of or relating
to this Agreement, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement ("Claims"), even though some or all of such
Claims allegedly are extracontractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
shall be resolved and decided exclusively by binding
-26-
<PAGE>
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. The arbitration proceeding shall be conducted in Dallas, Texas. The
arbitration shall be before a panel of three arbitrators. Each party to such
dispute shall select one arbitrator (with all Management Investors parties to
the dispute considered to be one party) and the two arbitrators selected by the
parties shall select the third arbitrator. The arbitrators are authorized to
issue subpoenas for depositions and other discovery mechanisms, as well as trial
subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party
may initiate a proceeding in the appropriate United States District Court to
enforce this provision. This agreement to arbitrate shall be enforceable in
either federal or state court. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction. The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including the construction and
interpretation of this agreement to arbitrate, the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act. The arbitrators shall have no authority
to award punitive (including without limitation any exemplary damages, treble
damages, or any other penalty or punitive type of damages), consequential,
incidental or indirect damages (in tort, contract or otherwise) under any
circumstances that exceed, with respect to any claim (regardless of the number
of Persons asserting such Claim or the number of Persons against whom such Claim
is asserted), the lesser of (i) the amount equal to the amount of actual damages
awarded, if any and (ii) $500,000, regardless of whether such damages in excess
of such amount may be available under applicable law or otherwise, the parties
hereto hereby waiving their right, if any, to recover such damages in excess of
such amount in connection with any Claims. The arbitrators shall be entitled to
award costs of the arbitration and attorney's fees as they deem appropriate.
Prior to the institution of a Claim under this Agreement by any Person, such
Person shall provide to the Corporation and all other Parties to this Agreement
a written notice specifying the nature and basis of the Claim. The Persons who
are the subject of any Claim shall be given thirty (30) days to cure any breach
before any Claim is filed. It is further agreed that prior to such Claims being
submitted to the arbitrators on such Claims, the parties to the Claims shall
attempt to resolve such Claims through non-binding mediation of such Claims.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written, but effective for all purposes as of the Effective
Time.
CODA ACQUISITION, INC.
By:___________________________________
Name: C. John Thompson
Title: Vice President
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED
PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By: _________________________________
Name: C. John Thompson
Title: Agent and Attorney-in-Fact
MANAGEMENT INVESTOR SPOUSES: MANAGEMENT INVESTORS:
__________________________ ______________________________________
Debbie Bodenhamer Randell A. Bodenhamer
__________________________ ______________________________________
Karan Callaway Joe I. Callaway
__________________________ ______________________________________
Cathy Choisser J. David Choisser
__________________________ ______________________________________
Ryan Freeman J. W. Freeman
-28-
<PAGE>
__________________________ ________________________________
Sharon Harney Roy G. Harney
__________________________ ________________________________
Jill Henderson Grant W. Henderson
__________________________ ________________________________
Jana Hensley Jarvis A. Hensley
__________________________ ________________________________
Karen Jackson Chris A. Jackson
__________________________ ________________________________
Naydene Johnson Jarl P. Johnson
________________________________
Douglas H. Miller
__________________________ ________________________________
Donnetta Nelson Gary M. Nelson
__________________________ ________________________________
Betty Scoggins Gary R. Scoggins
__________________________ ________________________________
Karen Seaman Claude A. Seaman
__________________________ ________________________________
Patricia Spencer Jay W. Spencer, III
__________________________ ________________________________
Kate Studdard Scott E. Studdard
-29-
<PAGE>
EXHIBIT "A"
ADOPTION AGREEMENT (form)
This Adoption Agreement ("Adoption") is executed pursuant to the terms of
the Stockholders Agreement dated as of October __, 1995, a copy of which is
attached hereto and is incorporated herein by reference (the "Stockholders
Agreement"), by the transferee ("Transferee") executing this Adoption. By the
execution of this Adoption, the Transferee agrees as follows:
1. Acknowledgment; Representations and Warranties. ____________________
----------------------------------------------
("Transferee") acknowledges that Transferee is acquiring _______ [number of
shares to be acquired to be inserted] shares of the Common Stock from
_______________, a Party, subject to the terms and conditions of the
Stockholders Agreement. Capitalized terms used herein without definition are
defined in the Stockholders Agreement and are used herein with the same meanings
set forth therein. Transferee represents and warrants to the Corporation and
the Parties that (i) Transferee has full power and authority to execute and
deliver this Adoption and the execution and delivery by such Transferee of this
Adoption have been duly authorized by all necessary action; (ii) this Adoption
has been duly and validly executed and delivered by the Transferee and
constitutes the binding obligation of the Transferee, enforceable against the
Transferee in accordance with its terms; and (iii) the Transferee owns _______
shares of Common Stock in addition to those being acquired as hereinabove
referenced.
2. Agreement. Transferee (i) agrees that shares of the Common Stock
---------
acquired by Transferee, and shares of Common Stock and certain other securities
that are currently owned or that may be acquired by Transferee in the future,
shall be bound by and subject to the terms of the Stockholders Agreement
pursuant to the terms thereof, and (ii) hereby adopts the Stockholders Agreement
with the same force and effect as if he were originally a party thereto.
3. Notice. Any notice required as permitted by the Stockholders
------
Agreement shall be given to Transferee at the address listed beside Transferee's
signature below.
4. Joinder. The spouse of the undersigned Transferee, if applicable,
-------
executes this Adoption to acknowledge its fairness and that this Adoption is in
such spouse's best interests, and to agree that such spouse's community
interest, if any, in the shares of Common Stock and other securities referred to
above and in the Stockholders Agreement shall be subject to the terms of the
Stockholders Agreement.
EXECUTED AND DATED this the ____ day of _____________, 19___.
TRANSFEREE:
A-1
<PAGE>
By:______________________________________
Name:____________________________________
Address:_________________________________
_________________________________
SPOUSE:
By:_____________________________________
Name:___________________________________
Agreed to on behalf of the Corporation and all Parties pursuant to Section 4.5
of the Stockholders Agreement.
Coda Energy, Inc.
(for itself and the Parties)
By:_____________________________________
Name:___________________________________
Title:__________________________________
A-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
CERTAIN TERMS;
REPRESENTATIONS AND WARRANTIES
- ------------------------------
<S> <C>
1.1 CERTAIN TERMS.............................................................1
-------------
1.2 REPRESENTATIONS AND WARRANTIES............................................8
------------------------------
ARTICLE II
CERTAIN MATTERS
---------------
2.1 CERTAIN ACTIVITIES OF THE PARTIES......................................... 9
-----------------------------------
2.2 ANNUAL MEETINGS........................................................... 9
-----------------------------------
2.3 REPORTING OBLIGATIONS..................................................... 9
-----------------------------------
2.4 CERTAIN EMPLOYEE MATTERS.................................................. 9
-----------------------------------
ARTICLE III
CERTAIN STOCK PURCHASE RIGHTS
-----------------------------
3.1 CERTAIN STOCK PURCHASE RIGHTS............................................. 9
-----------------------------
ARTICLE IV
RESTRICTIONS ON TRANSFERS
-------------------------
4.1 GENERAL RULE..............................................................10
------------
4.2 TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHT...............................10
-------------------------------------------
4.3 TRANSFERS SUBJECT TO PREFERENTIAL RIGHT...................................11
---------------------------------------
4.4 PROCEDURES WITH RESPECT TO TRANSFERS SUBJECT TO SECTION 4.3...............13
-----------------------------------------------------------
4.5 CONDITIONS TO PERMITTED TRANSFERS; CONTINUED APPLICABILITY OF AGREEMENT...16
-----------------------------------------------------------------------
4.6 RESTRICTIONS ON OTHER AGREEMENTS..........................................17
--------------------------------
4.7 EFFECT OF DISTRIBUTIONS AND CERTAIN TRANSACTIONS..........................17
------------------------------------------------
4.8 SPECIAL JEDI TRANSFER RESTRICTION.........................................17
---------------------------------
ARTICLE V
CERTAIN TAGALONG AND PUT RIGHTS
-------------------------------
5.1 TAGALONG RIGHTS...........................................................17
---------------
5.2 PUT RIGHTS................................................................18
----------
ARTICLE VI
SPECIAL MANAGEMENT RIGHTS
-------------------------
6.1 GRANT OF RIGHTS...........................................................19
---------------
6.2 TRIGGER EVENT.............................................................19
-------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.3 AMOUNT OF PROCEEDS..................................................19
------------------
6.4 PAYMENT OF CASH OR TRANSFER OF COMMON STOCK PURSUANT TO SPECIAL
---------------------------------------------------------------
MANAGEMENT RIGHTS
-----------------...................................................20
6.5 TERMINATION OF MANAGEMENT INVESTOR..................................22
----------------------------------
6.6 OTHER EMPLOYEE INVESTORS............................................23
------------------------
6.7 SUBSEQUENT HOLDERS OF COMMON STOCK..................................23
----------------------------------
ARTICLE VII
TERMINATION
-----------
7.1 TERMINATION.........................................................23
-----------
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 AMENDMENT; WAIVERS.................................................23
------------------
8.2 ASSIGNMENT.........................................................24
----------
8.3 SHARES SUBJECT TO THIS AGREEMENT...................................24
--------------------------------
8.4 LEGENDS............................................................24
-------
8.5 NOTICES............................................................25
-------
8.6 COUNTERPARTS.......................................................26
------------
8.7 HEADINGS...........................................................26
--------
8.8 CHOICE OF LAW......................................................26
-------------
8.9 ENTIRE AGREEMENT...................................................26
----------------
8.10 CUMULATIVE RIGHTS..................................................26
-----------------
8.11 NO PARTNERSHIP.....................................................26
--------------
8.12 NUMBER; GENDER; WITHOUT LIMITATION; INTERPRETATION OF CERTAIN DEFINED
---------------------------------------------------------------------
TERMS..............................................................26
8.13 SEVERABILITY.......................................................26
------------
8.14 THIRD PERSON.......................................................26
------------
8.15 U.S. CURRENCY......................................................26
-------------
8.16 INDEMNIFICATION....................................................27
---------------
8.17 SPOUSAL CONSENTS...................................................27
----------------
8.18 CERTAIN RECORDS....................................................27
---------------
8.19 ARBITRATION........................................................27
-----------
</TABLE>
Exhibits and Schedules
- ----------------------
Schedule I - Parties
Schedule II - Fair Market Value Calculation
Schedule II-A - Sample Fair Market Value Calculation
Schedule III - Special Management Rights
Schedule III-A - Sample Special Management Rights Calculation
Schedule IV - Peer Companies
Schedule V - Factors
Exhibit A - Adoption Agreement
ii
<PAGE>
EXHIBIT 99.3
================================================================================
SUBSCRIPTION AGREEMENT
among
CODA ACQUISITION, INC.
and
THE MANAGEMENT INVESTORS
dated
October 30, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
CERTAIN TERMS............................................................. 1
1.1 Certain Terms................................................... 1
-------------
ARTICLE II
TENDER OF COMPANY COMMON STOCK; OPTION AGREEMENT; SUBSCRIPTION
------------------------------
OF SHARES............................................................. 2
2.1 Contribution of Company Common Stock............................ 2
------------------------------------
2.2 Option Agreement................................................ 2
----------------
2.3 Subscription of Shares for Note................................. 2
-------------------------------
2.4 Subscription of Shares for Cash................................. 3
-------------------------------
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF MANAGEMENT INVESTOR.......... 3
3.1 Company Common Stock and Company Options........................ 3
----------------------------------------
3.2 Power and Authority; Enforceability............................. 3
-----------------------------------
3.3 Stockholders Agreement.......................................... 3
----------------------
3.4 Investment Representations...................................... 4
--------------------------
3.5 Additional Representations...................................... 4
--------------------------
3.6 Equity Contribution and Financing............................... 4
---------------------------------
3.7 Fees............................................................ 5
----
ARTICLE IV
MISCELLANEOUS............................................................. 5
4.1 Amendment; Waivers.............................................. 5
------------------
4.2 Assignment...................................................... 5
----------
4.3 Notices......................................................... 6
-------
4.4 Counterparts.................................................... 6
------------
4.5 Headings........................................................ 7
--------
4.6 Choice of Law................................................... 7
-------------
4.7 Entire Agreement................................................ 7
----------------
4.8 Cumulative Rights............................................... 7
-----------------
4.9 No Partnership.................................................. 7
--------------
4.10 Number; Gender; Without Limitation.............................. 7
----------------------------------
4.11 Severability.................................................... 7
------------
4.12 Third Person.................................................... 7
------------
4.13 Arbitration..................................................... 7
-----------
4.14 Termination..................................................... 8
-----------
4.15 Expenses........................................................ 8
--------
</TABLE>
<PAGE>
Schedule I Participation Schedule
Exhibit A Nonstatutory Stock Option Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Security Agreement
Exhibit D Debt Term Sheet
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is entered into as of
October 30, 1995, among Coda Acquisition, Inc., a Delaware corporation ("Sub"),
and the persons listed on Schedule I hereto (the "Management Investors").
----------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this
Agreement, Sub, Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI"), and Coda Energy, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of Merger
(the "Merger Agreement") providing for the merger of Sub with and into the
Company (the "Merger").
WHEREAS, the Management Investors are the owners and holders of (a)
certain Company Common Stock (as defined in the Merger Agreement) and (b) the
Specified Options and Specified Warrants (each as defined in the Merger
Agreement).
WHEREAS, each Management Investor desires to (a) contribute to Sub
certain of the Company Common Stock owned by such Management Investor, to
provide for the termination of the Specified Options and Specified Warrants
owned by such Management Investor as of the Effective Time (as defined in the
Merger Agreement), and/or to purchase shares of common stock of Sub ("Sub Common
Stock") and (b) to enter into this Agreement, pursuant to which such Management
Investor will (i) enter into an option agreement with Sub whereby the Management
Investor will be granted options (the "Post-Merger Options") to acquire common
stock of the Surviving Corporation (as defined in the Merger Agreement) and/or
(ii) agree to contribute to Sub shares of Company Common Stock in exchange for
shares of Sub Common Stock and/or (iii) subscribe for and purchase Sub Common
Stock, which Sub Common Stock will be converted, pursuant to the Merger, into
common stock of the Surviving Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
CERTAIN TERMS
-------------
1.1 CERTAIN TERMS. Capitalized terms used but not defined herein
-------------
shall have the meanings given such terms in the Merger Agreement.
<PAGE>
ARTICLE II
TENDER OF COMPANY COMMON STOCK;
OPTION AGREEMENT; SUBSCRIPTION OF SHARES
----------------------------------------
2.1 CONTRIBUTION OF COMPANY COMMON STOCK. Each Management Investor
------------------------------------
hereby agrees to contribute to Sub those shares of the Company Common Stock
owned by such Management Investor, if any, described on Schedule I - Part C
-------------------
attached hereto. Subject to the satisfaction of the conditions to the
obligations of the parties to the Merger Agreement to effect the Merger or the
waiver thereof by the applicable parties to the Merger Agreement in accordance
therewith, such Company Common Stock shall be deemed to be contributed to Sub
effective immediately prior to the Effective Time. At the Closing, and
effective immediately prior to the Effective Time, Sub shall issue the shares of
Sub Common Stock indicated on Schedule I - Part C to each Management Investor in
-------------------
consideration for such Company Common Stock.
2.2 OPTION AGREEMENT. Each Management Investor agrees and consents,
----------------
with respect to the Specified Options and Specified Warrants that such
Management Investor owns, if any, as described on Schedule I - Part A attached
-------------------
hereto, not to exercise any such Specified Options or Specified Warrants prior
to the Effective Time and that such Specified Options and Specified Warrants
shall, as of the Effective Time, be canceled without exercise and without
payment of consideration and shall cease to exist. At the Closing, Sub, the
Company, and each of the applicable Management Investors shall enter into a
Nonstatutory Stock Option Agreement in the form attached hereto as Exhibit A
(the "Option Agreement") providing that each Management Investor listed on
Schedule I attached hereto will have, from and after the Effective Time, the
- ----------
right to acquire the number of shares of common stock, par value $.01 per share
("Post-Merger Common Stock"), of the Surviving Corporation specified on such
Schedule I - Part A.
- -------------------
2.3 SUBSCRIPTION OF SHARES FOR NOTE. Subject to the satisfaction of
-------------------------------
the conditions to the obligations of the parties to the Merger Agreement to
effect the Merger or the waiver thereof by the applicable parties to the Merger
Agreement in accordance therewith, (a) each Management Investor listed on
Schedule I - Part B attached hereto hereby subscribes for and agrees to
- -------------------
purchase, and Sub hereby agrees to sell to such Management Investor, the number
of shares of Sub Common Stock set forth on such Schedule I - Part B for the
-------------------
purchase price of $100.00 per share, (b) at the Closing, such Management
Investor shall execute and deliver to Sub (i) a Promissory Note in the form
attached hereto as Exhibit B in an original principal amount equal to the
---------
product of the number of shares of Sub Common Stock being subscribed to by such
Management Investor and the per-share purchase price (the "Promissory Note") and
(ii) a Security Agreement in the form attached hereto as Exhibit C covering the
---------
shares of Sub Common Stock being subscribed to by such Management Investor (the
"Security Agreement"), with each of the Promissory Note and the Security
Agreement being effective immediately prior to the Effective Time, and (c) at
the Closing and effective immediately prior to the Effective Time, Sub shall
issue the shares of Sub Common Stock being subscribed to by such Management
Investor in the name of such Management Investor and shall retain the same as
security for such Management Investor's obligations under the Promissory Note in
accordance with the terms and conditions of the Security Agreement.
-2-
<PAGE>
2.4 SUBSCRIPTION OF SHARES FOR CASH. Subject to the satisfaction of
-------------------------------
the conditions to the obligations of the parties to the Merger Agreement to
effect the Merger or the waiver thereof by the applicable parties to the Merger
Agreement in accordance therewith, (a) each Management Investor listed on
Schedule I - Part D attached hereto hereby subscribes for and agrees to
- -------------------
purchase, and Sub hereby agrees to sell to such Management Investor, the number
of shares of Sub Common Stock set forth on such Schedule I - Part D for the cash
-------------------
purchase price of $100.00 per share, (b) at the Closing, such Management
Investor shall deliver to Sub cash (by check or wire transfer) in an amount
equal to the product of the number of shares of Sub Common Stock being
subscribed to by such Management Investor and the per-share purchase price, and
(c) at the Closing and effective immediately prior to the Effective Time, Sub
shall issue the shares of Sub Common Stock being subscribed to by such
Management Investor in the name of such Management Investor and deliver same to
him.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
-------------------------------
COVENANTS OF MANAGEMENT INVESTOR
--------------------------------
3.1 COMPANY COMMON STOCK AND COMPANY OPTIONS. Each Management
----------------------------------------
Investor hereby represents and warrants to Sub that (a) the Company Common
Stock, Specified Options, and Specified Warrants described on Schedule I, if
----------
any, as being owned by such Management Investor are held of record by such
Management Investor, that such Company Common Stock is fully paid and
nonassessable, and that, at the time same are contributed hereunder, such
Management Investor will own such Company Common Stock, Specified Options and
Specified Warrants free and clear of all encumbrances and (b) such Management
Investor has not appointed or granted any proxy or power of attorney or entered
into any voting agreement with respect to the Company Common Stock, if any,
owned by such Management Investor. Each Management Investor shall not sell,
assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of, or
appoint or grant any proxy or power of attorney or enter into any voting
agreement with respect to, any of the Company Common Stock owned by such
Management Investor at any time prior to the Effective Time.
3.2 POWER AND AUTHORITY; ENFORCEABILITY. Each Management Investor
-----------------------------------
hereby represents and warrants to Sub that (a) such Management Investor has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby and (b) this Agreement has been duly and validly executed and delivered
by such Management Investor and constitutes the binding obligation thereof,
enforceable against such Management Investor in accordance with its terms.
3.3 STOCKHOLDERS AGREEMENT. Concurrently with the execution hereof,
----------------------
each Management Investor and his or her spouse have executed the Stockholders
Agreement dated as of the date hereof among Sub and the Management Investors
(the "Stockholders Agreement"). Each Management Investor agrees and
acknowledges that the Sub Common Stock, if any, being subscribed to hereunder by
such Management Investor, the Post-Merger Common Stock issued in exchange
therefor and the Post-Merger Common Stock issuable upon exercise of such
Management Investor's options under such Management
-3-
<PAGE>
Investor's Option Agreement, if any (collectively, the "Acquired Securities"),
are in each case subject to the terms of the Stockholders Agreement.
3.4 INVESTMENT REPRESENTATIONS. Each Management Investor represents
--------------------------
and warrants to Sub that (a) he is acquiring the Acquired Securities being
acquired hereunder or under such Management Investor's Option Agreement without
a view to the distribution thereof except as permitted by the Securities Act of
1933, as amended, and the General Rules and Regulations thereunder (the "Act"),
(b) he has been advised that the Sub Common Stock has not been and the other
Acquired Securities will not be registered under the Act, the Acquired
Securities must be held indefinitely and such Management Investor must continue
to bear the economic risk of the investment in the Acquired Securities unless
they are subsequently registered under the Act or an exemption from such
registration is available, and no public market for the Acquired Securities can
be anticipated, (c) he is familiar with the business and financial condition,
properties, operations and prospects of Sub and the Company and the terms and
the effects of the Merger, (d) he has been given the opportunity to obtain any
information or documents and to ask questions and receive answers about Sub and
the Company and the business and prospects of Sub and the Company that he deems
necessary to evaluate the merits and risks related to his investment in the
Acquired Securities, including, without limitation, information, documents,
questions and answers related to the Merger, and no representations concerning
such matters or any other matters have been made to the Management Investor, (e)
his financial condition is such that he can afford to bear the economic risk of
holding the unregistered Acquired Securities for an indefinite period of time
and he has adequate means for providing for his current needs and personal
contingencies, and (f) his knowledge and experience in financial and business
matters are such that he is capable of evaluating the merits and risks of his
purchase of the Acquired Securities as contemplated by this Agreement. Each
Management Investor acknowledges that this Agreement constitutes, and
accordingly the Acquired Securities are to be issued pursuant to, either (i) a
written compensatory or benefit plan satisfying the requirements of Rule 701
promulgated under the Act or (ii) another exemption from the registration
requirements of federal and state securities laws.
3.5 ADDITIONAL REPRESENTATIONS. Each Management Investor hereby
--------------------------
represents and warrants to Sub that such Management Investor has been
represented by counsel in connection with the negotiation of this Agreement and
such Management Investor's execution and delivery of this Agreement and that
such Management Investor has discussed with such Management Investor's counsel
the legal effect of this Agreement and the rights and obligations arising
hereunder. Each Management Investor hereby acknowledges that neither Sub nor
any other party to the Merger Agreement nor any of their affiliates or advisors
has made any representation or warranty to the Management Investor concerning
the tax effects of the transactions contemplated by this Agreement. Each
Management Investor also represents and warrants to Sub that such Management
Investor has reviewed and approved the form of Certificate of Incorporation for
the Surviving Corporation attached to the Merger Agreement and acknowledges that
the same are in form and substance acceptable to such Management Investor.
3.6 EQUITY CONTRIBUTION AND FINANCING. Each Management Investor
---------------------------------
acknowledges that, subject to the consummation of the Merger, (a) JEDI will make
a capital contribution to Sub at or prior to the Effective Time in the amount of
$90 million in consideration for common stock of Sub that immediately after the
Effective Time will represent 94.94% of the outstanding common
-4-
<PAGE>
stock of the Surviving Corporation on a fully diluted basis, (b) JEDI will
procure for Sub, or lend or cause an Affiliate of JEDI to lend to Sub, debt up
to an aggregate principal amount of $100,000,000 on the terms and conditions
specified in the term sheet attached hereto as Exhibit D (and such other terms
---------
and conditions as are not inconsistent therewith), and (c) that other than the
capital contributions referred to in (a) and the debt referred to in (b), JEDI
has no obligation at any time prior to or after the Effective Time to contribute
capital to, lend funds to, or otherwise invest any sums in Sub, the Company, or
the Surviving Corporation except to the extent otherwise provided in the Merger
Agreement.
3.7 FEES. Each Management Investor hereby acknowledges and agrees
----
that. subject to and after the consummation of the Merger and the Company's
receipt of all of the amounts specified in Section 3.6, Sub has agreed to pay to
ECT Securities Corp., an indirect wholly-owned subsidiary of Enron Corp., (a) a
transaction fee in the amount of $1.8 million in connection with the Merger
(based on capital contributions of not less than $90 million by Persons other
than the Management Investors), (b) a fee as provided in Exhibit D regarding the
placement of any subordinated debt placed to finance the transactions
contemplated by the Merger Agreement or this Agreement upon the issuance of such
debt, (c) a fee in the amount of up to 2% of the cash received by the Company
from the grantee of any production payment entered into by the Company that is
arranged or procured by ECT Securities Corp. at the closing of such transaction,
and (d) such additional fees as are specified in Exhibit D attached hereto.
---------
ARTICLE IV
MISCELLANEOUS
-------------
4.1 AMENDMENT; WAIVERS. This Agreement may only be altered,
------------------
supplemented, amended or waived by the written consent of (a) Sub and (b) either
(i) Douglas H. Miller and the other Management Investors who will receive at
least one-third of the Fully-Diluted Common Stock (as defined in the
Stockholders Agreement) to be issued to all Management Investors other than
Douglas H. Miller pursuant to this Agreement and the Option Agreements or (ii)
Management Investors other than Douglas H. Miller who will receive a majority of
the Fully-Diluted Common Stock to be issued to all Management Investors other
than Douglas H. Miller pursuant to this Agreement and the Option Agreements;
provided, however, that in no event shall any amendment impose any additional
material obligation on any party hereto without such party's written consent;
provided further, however, that (A) any party hereto may (without the consent of
any other Person) waive, in writing, any obligation owed to it hereunder by any
other party hereto and (B) any party hereto may (without the consent of any
other Person) waive, in writing, any right it has hereunder. Any waiver
permitted hereunder may be made prospectively or retroactively.
4.2 ASSIGNMENT. The terms and conditions of this Agreement shall
----------
inure to the benefit of and be binding upon the parties hereto and their
permitted successors and assigns; provided, however, that no party hereto shall
have the right to assign this Agreement without the consent of the other parties
hereto; and provided further that this Agreement will terminate as to any
Management Investor if such Management Investor dies or ceases to be employed by
the Company for any reason prior to the Effective Time, any Company Common
Stock, contributed to Sub by such
-5-
<PAGE>
Management Investor hereunder shall be returned to such Management Investor or,
if applicable, the legal representative of such Management Investor, any Option
Agreement executed by such Management Investor shall terminate, and neither Sub
nor such Management Investor nor, if applicable, any of the heirs, successors,
or legal representatives of such Management Investor shall have any further
obligations to one another hereunder.
4.3 NOTICES. Any and all notices, designations, consents, offers,
-------
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by personal delivery, overnight courier, telegram, or
telecopy which shall be addressed, or sent, to the respective addresses or
telecopy numbers as follows (or such other address or telecopy number as any
party hereto may specify for itself by Notice given in accordance with this
Section 4.3):
Sub: c/o Enron Corp.
1400 Smith
Houston, Texas 77002
Attention: Keith Power/Brenda McGee,
Specialist - 28th Floor
Telecopy No. 713-646-3602
Telephone No. 713-853-5259
with a copy to:
Enron Corp.
1400 Smith
Houston, Texas 77002
Attention: Tim Detmering - 29th Floor
Telecopy No. 713-646-3750
Telephone No. 713-853-6973
Management Investors: To the addresses or telecopy numbers set forth in
Schedule I hereto for each such Management Investor.
----------
All Notices shall be deemed effective, delivered and received (a) if given by
personal delivery, when such Notice is personally delivered at the address
specified above; (b) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified above and receipt thereof is confirmed; (c) if
given by overnight courier, on the business day immediately following the day on
which such Notice is delivered to a reputable overnight courier service; or (d)
if given by telegram, when such Notice is delivered at the address specified
above.
4.4 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which counterparts shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
4.5 HEADINGS. Headings contained in this Agreement are inserted
--------
only as a matter of convenience and in no way define, limit, or extend the scope
or intent of this Agreement or any provisions hereof.
-6-
<PAGE>
4.6 CHOICE OF LAW. This Agreement shall be governed by the internal
-------------
laws of the State of Delaware without regard to the principles of conflicts of
laws thereof.
4.7 ENTIRE AGREEMENT. This Agreement contains the entire
----------------
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions and understandings with respect
thereto.
4.8 CUMULATIVE RIGHTS. The rights of the parties hereto under this
-----------------
Agreement are cumulative and in addition to all similar and other rights of the
parties under other agreements.
4.9 NO PARTNERSHIP. No term or provision of this Agreement shall be
--------------
construed to establish any relationship of partnership, agency or joint venture
among the parties hereto.
4.10 NUMBER; GENDER; WITHOUT LIMITATION. Pronouns, wherever used in
----------------------------------
this Agreement, and of whatever gender, shall include Persons of every kind and
character, and the singular shall include the plural whenever and as often as
may be appropriate. Any reference herein to "including" and words of similar
import refer to "including without limitation."
4.11 SEVERABILITY. In the event any one or more of the provisions
------------
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which approximates as nearly as possible that of the
invalid, illegal or unenforceable provisions.
4.12 THIRD PERSON. Nothing herein expressed or implied is intended
------------
or shall be construed to confer upon or to give any Person not a party hereto
any rights or remedies under or by reason of this Agreement.
4.13 ARBITRATION. Any and all claims, demands, causes of action,
-----------
disputes, controversies and other matters in question arising out of or relating
to this Agreement, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement ("Claims"), even though some or all of such
Claims allegedly are extracontractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
shall be resolved and decided exclusively by binding arbitration pursuant to the
Federal Arbitration Act in accordance with the Commercial Arbitration Rules then
in effect with the American Arbitration Association. The arbitration proceeding
shall be conducted in Dallas, Texas. The arbitration shall be before a panel of
three arbitrators. Each party to such dispute shall select one arbitrator, with
all Management Investors party to the dispute considered to be one party, and
the two arbitrators selected by the parties shall select the third arbitrator.
The arbitrators are authorized to issue subpoenas for depositions and other
discovery mechanisms, as well as trial subpoenas, in accordance with the Federal
Rules of Civil Procedure. Either party may initiate a proceeding in the
appropriate United States District Court to enforce this provision. This
agreement to arbitrate shall be enforceable in either federal or state court.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction. The enforcement of
this agreement to arbitrate and all procedural aspects
-7-
<PAGE>
of this agreement to arbitrate, including the construction and interpretation of
this agreement to arbitrate, the scope of the arbitrable issues, allegations of
waiver, delay or defenses to arbitrability, and the rules governing the conduct
of the arbitration, shall be governed by and construed pursuant to the Federal
Arbitration Act. The arbitrators shall have no authority to award punitive
(including, without limitation, any exemplary damages, treble damages or any
other penalty or punitive type of damages), consequential, incidental or
indirect damages (in tort, contract or otherwise) under any circumstances that
exceed, with respect to any Claim (regardless of the number of Persons asserting
such Claim or the number of Persons against whom such Claim is asserted) the
lesser of (i) the amount equal to the amount of actual damages awarded, if any
and (ii) $500,000, regardless of whether such damages in excess of such amount
may be available under applicable law or otherwise, the parties hereto hereby
waiving their right, if any, to recover such damages in excess of such amount in
connection with any Claims. The arbitrators shall be entitled to award costs of
the arbitration and attorney's fees as they deem appropriate. Prior to any
Person instituting a Claim under this Agreement, such Person shall provide to
the other party hereto a written notice specifying the nature and basis of the
Claim. The Persons who are the subject of any Claim shall be given thirty (30)
days to cure any breach before any Claim is filed. It is further agreed that
prior to such Claims being submitted to the arbitrators on such Claims, the
parties to the Claims shall attempt to resolve such Claims through non-binding
mediation of such Claims.
4.14 TERMINATION. If the Merger Agreement is terminated in
-----------
accordance with its terms, this Agreement shall terminate and the parties hereto
shall have no further obligations to any other party hereunder; provided,
however that Sub shall return to the Management Investors any Company Common
Stock, Specified Options, or Specified Warrants tendered to it hereunder.
4.15 EXPENSES. Sub acknowledges that if the Merger is consummated,
--------
promptly after request therefor, the Surviving Corporation shall pay or
reimburse the reasonable fees and expenses of the attorneys and accountants for
the Management Investors in respect of the transactions contemplated by this
Agreement and the other agreements referenced in this Agreement. If the Merger
is not consummated, Sub acknowledges that such fees and expenses shall be the
responsibility of the Company.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CODA ACQUISITION, INC.
By:____________________________________________
Name: C. John Thompson
Title: Vice-President
MANAGEMENT INVESTORS:
_______________________________________________
Randell A. Bodenhamer
_______________________________________________
Joe I. Callaway
_______________________________________________
J. David Choisser
_______________________________________________
J. W. Freeman
_______________________________________________
Roy G. Harney
_______________________________________________
Grant W. Henderson
_______________________________________________
Jarvis A. Hensley
_______________________________________________
Chris A. Jackson
-9-
<PAGE>
_______________________________________________
Jarl P. Johnson
_______________________________________________
Douglas H. Miller
_______________________________________________
Gary M. Nelson
_______________________________________________
Gary R. Scoggins
_______________________________________________
Claude A. Seaman
_______________________________________________
Jay W. Spencer, III
_______________________________________________
Scott E. Studdard
-10-
<PAGE>
EXHIBIT A
NONSTATUTORY STOCK OPTION AGREEMENT
AGREEMENT made as of the ____ day of __________, 199_, between Coda
Energy, Inc., a Delaware corporation (the "Company"), Coda Acquisition, Inc., a
Delaware corporation ("Sub"), and ___________
____________________________________________ ("Employee").
WHEREAS, pursuant to the option and/or warrant agreement or agreements
identified on the attached Exhibit A (the "Specified Agreement," whether one or
---------
more), the Company has heretofore granted to Employee one or more options and/or
warrants (the "Specified Right," whether one or more) to purchase shares of
common stock of the Company, par value $.02 per share ("Pre-Merger Stock"); and
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement") dated October 30, 1995, among the Company, Sub, and Joint
Energy Development Investments Limited Partnership, a Delaware limited
partnership ("JEDI"), Sub has agreed, subject to certain conditions, to merge
with and into the Company (the "Merger"), the Company will be the surviving
corporation in the Merger, each share of Pre-Merger Stock will, subject to
certain exceptions, be converted into the right to receive $8.00 per share, and
each share of common stock of Sub will be converted into one share of common
stock, par value $.01 per share, of the surviving corporation in the Merger
("Stock"); and
WHEREAS, Sub, the Company and Employee desire to provide for the
cancellation of the part of the Specified Right and Specified Agreement set
forth under "Specified Options" on Exhibit A (the "Specified Options") upon the
consummation of the Merger and the issuance in consideration therefore of a new
option;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto agree as follows:
1. CANCELLATION OF SPECIFIED RIGHT; ISSUANCE OF NEW OPTION. Upon the
-------------------------------------------------------
effectiveness of the Merger (the "Effective Time"), the Specified Options shall
be void and of no further force and effect and are hereby surrendered and
relinquished by Employee and shall be canceled by the Company at the Effective
Time. Subject to the cancellation of the Specified Options and the
effectiveness of the Merger, Employee is hereby granted the right and option
("Option") to purchase all or any part of an aggregate of ______ shares of Stock
(subject to adjustment as provided herein), on the terms and conditions set
forth herein . This Option shall not be treated as an incentive stock option
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). Employee agrees that on and after the date hereof and
prior to the earlier of the Effective Time or the termination of the Merger
Agreement, Employee will not exercise, assign, or encumber the Specified Right
or the Specified Agreement.
<PAGE>
If the Merger Agreement is terminated in accordance with its terms, this
Agreement shall terminate and shall have no force or effect.
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to
--------------
the exercise of this Option shall be $0.01 per share.
3. EXERCISE OF OPTION. Subject to the earlier expiration of this
------------------
Option as herein provided, this Option may be exercised, by written notice to
the Company at its principal executive office addressed to the attention of its
Chief Executive Officer, at any time and from time to time after the Effective
Time.
This Option may be exercised only while Employee remains an employee
of the Company and will terminate and cease to be exercisable upon Employee's
termination of employment with the Company, except that:
(a) If Employee's employment with the Company terminates by
reason of disability (within the meaning of section 22(e)(3) of the
Code), this Option may be exercised by Employee (or Employee's estate
or the person who acquires this Option by will or the laws of descent
and distribution or otherwise by reason of the death of Employee) at
any time during the period of six months following such termination.
(b) If Employee dies while in the employ of the Company,
Employee's estate, or the person who acquires this Option by will or
the laws of descent and distribution or otherwise by reason of the
death of Employee, may exercise this Option at any time during the
period of six months following the date of Employee's death.
(c) If Employee's employment with the Company terminates for any
reason other than as described in (a) or (b) above, this Option may be
exercised by Employee at any time during the period of three months
following such termination, or by Employee's estate (or the person who
acquires this Option by will or the laws of descent and distribution
or otherwise by reason of the death of Employee) during a period of
six months following Employee's death if Employee dies during such
three-month period.
This Option shall not be exercisable in any event after the expiration
of ten years from the date hereof. The purchase price of shares as to which
this Option is exercised shall be paid in full at the time of exercise in cash
(including check, bank draft or money order payable to the order of the
Company). No fraction of a share of Stock shall be issued by the Company upon
exercise of an Option or accepted by the Company in payment of the purchase
price thereof; rather, the number of shares of Stock subject to this Option
shall be rounded down to the nearest whole share. Unless and until a
certificate or certificates representing such shares shall have been issued by
the Company to Employee, Employee (or the person permitted to exercise this
Option in the event of Employee's death) shall not be or have any of the rights
or privileges of a stockholder of the Company with respect to shares acquirable
upon an exercise of this Option.
4. RESTRICTIONS ON TRANSFERS; STOCKHOLDERS AGREEMENT. Except as
-------------------------------------------------
otherwise provided in the Stockholders Agreement (as defined herein), this
Option and all rights granted
-2-
<PAGE>
hereunder shall not be transferable other than by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Code or the rules thereunder, and shall be exercisable during Employee's
lifetime only by Employee or Employee's guardian or legal representative. This
Option and all shares of Stock acquired pursuant to an exercise of this Option
shall be subject to the terms of that certain Stockholders Agreement dated
October 30, 1995, among the Sub and certain of its stockholders, as the same may
be amended or restated from time to time (the "Stockholders Agreement").
Employee agrees that, as a condition to acquiring Stock pursuant to an exercise
of this Option, Employee (or the person permitted to exercise this Option in the
event of Employee's death or incapacity), and the spouse, if any, of Employee
will execute and deliver to the Company such documents and instruments as the
Company, in its discretion, may require to evidence such person's agreement to
be bound by the terms of the Stockholders Agreement.
5. WITHHOLDING OF TAX. To the extent that the exercise of this
------------------
Option or the disposition of shares of Stock acquired by exercise of this Option
results in compensation income to Employee for federal or state income tax
purposes and as a condition to the exercise of this Option, Employee shall
deliver to the Company at the time of such exercise or disposition such amount
of money as the Company may require to meet its withholding obligation under
applicable tax laws or regulations. If Employee fails to do so and the Company
nonetheless elects to permit such exercise, the Company is authorized to satisfy
any such withholding requirement out of any cash or shares of Stock
distributable to Employee upon such exercise and to withhold from any cash or
Stock remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income (with Stock having such
value for such purpose as shall be determined in accordance with the
Stockholders Agreement).
6. STATUS OF STOCK. Employee understands that at the time of the
---------------
execution of this Agreement the shares of Stock to be issued upon exercise of
this Option have not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities law, and that the Company does not
currently intend to effect any such registration. Until the shares of Stock
acquirable upon the exercise of the Option have been registered for issuance
under the Act, the Company will not issue such shares unless the Company
receives advice of legal counsel, who shall be satisfactory to the Company, to
the effect that the proposed issuance of such shares to such Option holder may
be made without registration under the Act. In the event exemption from
registration under the Act is available upon an exercise of this Option,
Employee (or the person permitted to exercise this Option in the event of
Employee's death), if requested by the Company to do so, will execute and
deliver to the Company in writing an agreement containing such provisions as the
Company may require to assure compliance with applicable securities laws.
Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the shares under the Act and applicable state securities laws or
an applicable exemption from the registration requirements of the Act and any
applicable state securities laws. Employee also agrees that the shares of Stock
which Employee may acquire by exercising this Option will not be sold or
otherwise disposed of in any manner which would constitute a violation of any
applicable securities laws, whether federal or state.
-3-
<PAGE>
In addition, Employee agrees (a) that the certificates representing
the shares of Stock purchased under this Option may bear such legend or legends
as the Company deems appropriate in order to assure compliance with applicable
securities laws, (b) that the Company may refuse to register the transfer of the
shares of Stock purchased under this Option on the stock transfer records of the
Company if such proposed transfer would in the opinion of counsel satisfactory
to the Company constitute a violation of any applicable securities law and (c)
that the Company may give related instructions to its transfer agent, if any, to
stop registration of the transfer of the shares of Stock purchased under this
Option.
7. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Employee
-----------------------
shall be considered to be in the employment of the Company as long as Employee
remains an employee of either the Company or subsidiary corporation (as defined
in section 424 of the Code) of the Company, or a corporation or subsidiary of
such corporation assuming or substituting a new option for this Option.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to
--------------
the benefit of any successors to the Company and all persons lawfully claiming
under Employee.
9. RECAPITALIZATION OR REORGANIZATION. (a) The existence of the
----------------------------------
Option granted hereunder shall not affect in any way the right or power of the
Board of Directors of the Company or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change in
the Company's capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities, the dissolution or
liquidation of the Company or any sale, lease, exchange or other disposition of
all or any part of its assets or business or any other corporate act or
proceeding.
(b) The shares with respect to which the Option is granted are shares
of Stock as constituted immediately after the Effective Time, but if, and
whenever, prior to the expiration of this Option, the Company shall effect a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend on Stock without receipt of consideration by the Company, the number of
shares of Stock with respect to which this Option may thereafter be exercised
(i) in the event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure by way of merger or otherwise (a
"recapitalization"), the number and class of shares of Stock covered by this
Option shall be adjusted so that this Option shall thereafter cover the number
and class of shares of stock and securities to which Employee would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
the recapitalization, the Employee had been the holder of record of the number
of shares of Stock then covered by this Option. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company),
-4-
<PAGE>
or (iii) the Company is to be dissolved and liquidated, then the number and
class of shares of Stock covered by this Option shall be adjusted so that this
Option shall thereafter cover (in lieu of the right to acquire Stock) the number
and class of shares of stock or other securities or property (including, without
limitation, cash) to which Employee would have been entitled pursuant to the
terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution, Employee had been the holder of record of the number of
shares of Stock then covered by this Option. The above provisions of this
Section 9(c) shall similarly apply to successive transactions of the foregoing
type.
(d) In the event that the Company declares a dividend upon the Stock
or makes any other distribution in respect of the Stock (other than a stock
dividend or distribution for which an adjustment is made pursuant to (b) above),
then, thereafter, the Employee, upon exercise of this Option, shall receive the
number of shares of Stock purchasable upon such exercise and, in addition and
without further payment, the cash, stock, or other securities and/or property
which the Employee would have received if the Employee had exercised this Option
prior to the dividend or distribution.
(e) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to this Option or the purchase price per
share.
10. LEGEND. THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS,
------
RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 30, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
11. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Texas.
12. ARBITRATION. Any and all claims, demands, causes of action,
-----------
disputes, controversies and other matters in question arising out of or relating
to this Option, the alleged breach thereof, or in any way relating to the
subject matter of this Option ("Claims"), even though some or all of such Claims
allegedly are extracontractual in nature, whether such Claims sound in contract,
tort or otherwise, at law or in equity, under state or federal law, whether
provided by statute or the common law, for damages or any other relief, shall be
resolved and decided exclusively by binding arbitration pursuant to the Federal
Arbitration Act in accordance with the Commercial Arbitration Rules then in
effect with the American Arbitration Association. The arbitration proceeding
shall be conducted in Dallas, Texas. The arbitration shall be before a panel of
three arbitrators. Each party to such dispute shall select one arbitrator, with
all Management Investors (as defined in the Stockholders Agreement) party to the
dispute considered
-5-
<PAGE>
to be one party, and the two arbitrators selected by the parties shall select
the third arbitrator. The arbitrators are authorized to issue subpoenas for
depositions and other discovery mechanisms, as well as trial subpoenas, in
accordance with the Federal Rules of Civil Procedure. Either party may initiate
a proceeding in the appropriate United States District Court to enforce this
provision. This agreement to arbitrate shall be enforceable in either federal or
state court. Judgment upon any award rendered in any such arbitration proceeding
may be entered by any federal or state court having jurisdiction. The
enforcement of this agreement to arbitrate and all procedural aspects of this
agreement to arbitrate, including the construction and interpretation of this
agreement to arbitrate, the scope of the arbitrable issues, allegations of
waiver, delay or defenses to arbitrability, and the rules governing the conduct
of the arbitration, shall be governed by and construed pursuant to the Federal
Arbitration Act. The arbitrators shall have no authority to award punitive
(including, without limitation, any exemplary damages, treble damages or any
other penalty or punitive type of damages), consequential, incidental or
indirect damages (in tort, contract or otherwise) under any circumstances that
exceed the lesser of (i) the amount equal to the amount of actual damages
awarded, if any and (ii) $500,000, regardless of whether such damages in excess
of such amount may be available under applicable law or otherwise, the parties
hereto hereby waiving their right, if any, to recover such damages in excess of
such amount in connection with any Claims. The arbitrators shall be entitled to
award costs of the arbitration and attorney's fees as they deem appropriate.
Prior to the institution of a Claim under this Option by any person, such person
shall provide to the other parties to this Option a written notice specifying
the nature and basis of the Claim. The persons who are the subject of any Claim
shall be given thirty (30) days to cure any breach before any Claim is filed. It
is further agreed that prior to such Claims being submitted to the arbitrators
on such Claims, the parties to the Claims shall attempt to resolve such Claims
through non-binding mediation of such Claims.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
CODA ENERGY, INC.
BY:______________________________________
NAME:____________________________________
TITLE:___________________________________
CODA ACQUISITION, INC.
BY:_______________________________________
NAME:_____________________________________
TITLE:____________________________________
EMPLOYEE
__________________________________________
NAME:_____________________________________
-7-
<PAGE>
EXHIBIT B
LIMITED RECOURSE PROMISSORY NOTE
$____________ ____________, 199__
For value received, the undersigned, [Name of Management Investor]
("Maker"), promises and agrees to pay, in the manner hereinafter provided, to
the order of Coda Acquisition, Inc., a Delaware corporation ("Payee"), at 5735
Pineland Drive, Suite 300, Dallas, Texas 75231 or at such other place as Payee
may specify by notice to Maker, in lawful money of the United States of America,
the principal sum of ____________ Dollars (____________), together with interest
on the unpaid principal balance from time to time outstanding hereunder from the
date hereof to maturity at a rate of [Insert Mid-Term Applicable Federal Rate,
annual compounding, for the calendar month in which this Note is executed] % per
annum.
Interest on this Promissory Note shall accrue at the rate specified above
(compounded annually) and shall be payable from time to time when Payee, as
employer of Maker, pays to Maker any cash bonus in addition to Maker's base
salary. The amount of such payment shall be equal to the amount of such cash
bonus less (i) the amount of income taxes payable by Maker on such bonus (which
shall be deemed to be the product of the highest marginal rate (expressed as a
fraction) applicable to individuals on the date such bonus is paid under the
Internal Revenue Code of the United States, as amended from time to time,
multiplied by the amount of such bonus), and (ii) other amounts legally required
to be withheld by Payee from such bonus; provided that in no event shall the
amount of such payment exceed the outstanding accrued interest as of the date
the bonus is paid. The unpaid principal amount of this Promissory Note,
together with all accrued and unpaid interest, is payable in full on _________,
200__ [fifth anniversary] (the "Maturity Date").
This Promissory Note may be prepaid at any time, in whole or in part,
without penalty or premium.
This Promissory Note is secured by and is entitled to the benefits of a
Security Agreement dated as of the date of this Promissory Note covering certain
common stock, par value $.01 per share, of Payee and the securities of Coda
Energy, Inc., a Delaware corporation (the "Company"), into which such securities
of Payee are to be converted as of the date hereof pursuant to a merger of Payee
into the Company, with the Company being the surviving corporation, as well as
certain additional shares of such common stock that may be acquired by Maker in
accordance with the Stockholders Agreement (as hereinafter defined) upon a
Trigger Event (as defined in the Stockholders Agreement). Upon any transfer,
assignment, sale, or other disposition of any of such shares of common stock
(other than a transfer under Section 4.2(b) or the second and third sentences of
Sections 4.3(c) and 4.3(d) of the Stockholders Agreement dated as of October 30,
1995, among Maker, Payee, and certain other stockholders of Payee (the
"Stockholders
<PAGE>
Agreement")), all proceeds of such transfer, assignment, sale, or disposition
shall be paid to Payee as a mandatory prepayment on this Promissory Note, and,
if Maker sells all or the remaining portion of such shares held by Maker, the
entire outstanding principal amount of this Promissory Note, together with all
accrued and unpaid interest, shall be immediately and mandatorily payable in
full. If Payee is the transferee of such common stock in accordance with the
Stockholders Agreement, the purchase price payable by Payee for such common
stock will be credited against accrued and unpaid interest and outstanding
principal under this Promissory Note.
Each payment made on this Promissory Note will be credited first to payment
of accrued interest and then to reduction of principal.
If any payment due hereunder is not received by the due date specified
above, the owner and holder of this Promissory Note shall provide written notice
of such nonpayment to Maker by personal delivery, overnight courier, telegram or
telecopy, which shall be addressed, or sent, to the respective addresses or
telecopy numbers as provided on Schedule 1 hereto (or such other addresses or
telecopy number as Maker may specify in writing). All notices shall be deemed
effective, delivered and received (a) if given by personal delivery, when such
notice is actually received at the address specified on Schedule 1 hereto; (b)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified above and receipt thereof is confirmed; (c) if given by overnight
courier, on the business day immediately following the day on which such notice
is delivered to a reputable overnight courier service; or (d) if given by
telegram, when such notice is actually received at the address specified on
Schedule 1 hereto. If the payment is not received by the owner and holder of
this Promissory Note by the end of the tenth business day following receipt of
the notice, the owner and holder of this Promissory Note may, without any
further notice or demand (both of which are expressly waived by Maker), declare
the Promissory Note to be in default and declare the entire unpaid principal
balance hereof and accrued interest at once due and payable.
Except as otherwise provided herein, Maker and any and each co-maker,
guarantor, accommodation party, endorser or other person liable for the payment
or collection of this Promissory Note expressly waive demand and presentment for
payment, notice of nonpayment, notice of intent to accelerate, notice of
acceleration, protest, notice of protest, notice of dishonor, bringing of suit,
and diligence in taking any action to collect amounts called for hereunder and
in the handling of property at any time existing as security in connection
herewith, and shall be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any amount called for
hereunder or in connection with any lien at any time had or existing as security
for any amount called for hereunder.
In the event default is made in the prompt payment of this Promissory Note
when due or declared due, and the same is placed in the hands of an attorney for
collection, or suit is brought on same, or the same is collected through
probate, bankruptcy or other judicial proceedings, then Maker agrees and
promises to pay, in addition to the principal and interest then owing, all costs
of collection, including reasonable attorney's fees.
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<PAGE>
This is a limited recourse promissory note. Payee shall not be permitted
to make demand upon Maker for the payment of any amounts due under this
Promissory Note or file any claim or petition or otherwise institute any
proceeding against Maker for the collection of any amounts due and owing under
this Promissory Note (whether for the payment of interest or principal or costs
of collection and attorney's fees) until Payee shall have exhausted all remedies
available to it with respect to all collateral securing this Promissory Note
pursuant to the Security Agreement or otherwise, including the sale or
disposition of all such collateral and the application of the proceeds thereof
to amounts due and owing under this Promissory Note. In no event shall Maker's
liability under this Promissory Note for any deficiency due and owing on this
Promissory Note (whether for the payment of interest or principal or costs of
collection and attorney's fees) after the sale and disposition of all collateral
securing this Promissory Note (pursuant to the Security Agreement or otherwise)
exceed thirty-five percent (35%) of the original principal balance of this
Promissory Note.
It is the intention of Maker and Payee to conform strictly to usury laws
applicable to Payee. Accordingly, if the transactions contemplated hereby would
be usurious under applicable state or federal law, then, notwithstanding
anything to the contrary in this Promissory Note or in any other agreement
entered into in connection with or as security for the obligations of Maker
under this Promissory Note or under any such agreement (the "Obligations"), it
is agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to Payee that is contracted for, taken, reserved,
charged or received under the Obligations, this Promissory Note or under any of
such other agreements or otherwise in connection with the Obligations shall
under no circumstances exceed the maximum amount allowed by such applicable law,
(ii) in the event that the maturity of the Obligations is accelerated for any
reason, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to Payee may never
include more than such maximum amount, and (iii) excess interest, if any,
provided for in this Promissory Note or otherwise shall be canceled
automatically and, if theretofore paid, shall be credited by Payee on the
principal amount of the Obligations (or, to the extent that the principal amount
of the Obligations shall have been or would thereby be paid in full, refunded by
Payee to Maker). The right to accelerate the maturity of the Obligations does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and Payee does not intend to collect any
unearned interest in the event of acceleration. All sums paid or agreed to be
paid to Payee for the use, forbearance or detention of sums included in the
initial Obligations shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of the
Obligations until payment in full so that the rate or amount of interest on
account of the initial Obligations does not exceed the applicable usury ceiling,
if any. To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to Payee for the purpose of determining the maximum rate of
nonusurious interest allowed from time to time by applicable law, Payee hereby
elects to determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling from time to time in effect, subject to Payee's
right subsequently to change such method in accordance with applicable law.
This Promissory Note shall inure to the benefit of the successors, personal
representatives, and assigns of Payee and shall be binding upon the successors,
personal representatives, and assigns of Maker.
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<PAGE>
THE TERMS OF THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE PROVISIONS OF THE LAWS OF THE STATE OF TEXAS.
Any and all claims, demands, causes of action, disputes, controversies and
other matters in question arising out of or relating to this Promissory Note,
the alleged breach thereof, or in any way relating to the subject matter of this
Promissory Note ("Claims"), even though some or all of such Claims allegedly are
extracontractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, shall be resolved
and decided exclusively by binding arbitration pursuant to the Federal
Arbitration Act in accordance with the Commercial Arbitration Rules then in
effect with the American Arbitration Association. The arbitration proceeding
shall be conducted in Dallas, Texas. The arbitration shall be before a panel of
three arbitrators. Each party to such dispute shall select one arbitrator, with
all Management Investors (as defined in the Stockholders Agreement) party to the
dispute considered to be one party, and the two arbitrators selected by the
parties shall select the third arbitrator. The arbitrators are authorized to
issue subpoenas for depositions and other discovery mechanisms, as well as trial
subpoenas, in accordance with the Federal Rules of Civil Procedure. Either
party may initiate a proceeding in the appropriate United States District Court
to enforce this provision. This agreement to arbitrate shall be enforceable in
either federal or state court. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction. The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including the construction and
interpretation of this agreement to arbitrate, the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act. The arbitrators shall have no
authority to award punitive (including, without limitation, any exemplary
damages, treble damages or any other penalty or punitive type of damages),
consequential, incidental or indirect damages (in tort, contract or otherwise)
under any circumstances that exceed, with respect to any Claim (regardless of
the number of Persons asserting such Claim or the number of Persons against whom
such Claim is asserted) the lesser of (i) the amount equal to the amount of
actual damages awarded, if any and (ii) $500,000, regardless of whether such
damages in excess of such amount may be available under applicable law or
otherwise, the parties hereto hereby waiving their right, if any, to recover
such damages in excess of such amount in connection with any Claims. The
arbitrators shall be entitled to award costs of the arbitration and attorney's
fees as they deem appropriate.
This Promissory Note has been executed and delivered as of the date first
written above.
___________________________________
[Management Investor]
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<PAGE>
A:\NOTE.
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<PAGE>
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of _________,
199_, between [Name of Management Investor] ("Pledgor"), and Coda Acquisition,
Inc., a Delaware corporation with offices at 5735 Pineland Drive, Suite 300,
Dallas, Texas 75231 ("Secured Party").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Secured Party, Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, and Coda Energy, Inc., a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of Merger
(the "Merger Agreement") providing for the merger of Secured Party with and into
the Company (the "Merger"), with the Company being the surviving corporation of
the Merger.
WHEREAS, Pledgor is acquiring shares of the $.01 par value common
stock of Secured Party effective immediately prior to the Effective Time (as
defined in the Merger Agreement), which common stock will be converted pursuant
to the Merger into common stock of the Company as the survivor of the Merger.
WHEREAS, in consideration for the issuance of such stock to Pledgor
pursuant to a Subscription Agreement dated October 30, 1995 (the "Subscription
Agreement"), Pledgor has executed and delivered to Secured Party a promissory
note of even date herewith (together with all extensions for any period,
renewals, rearrangements and/or increases thereof, the "Promissory Note") in the
original principal amount set forth on Schedule I attached hereto, which
----------
Promissory Note is payable to the order of Secured Party with interest as
provided therein.
WHEREAS, Secured Party has agreed to the same upon certain terms and
conditions, one of which is the execution and delivery by Pledgor of this
Agreement, and Pledgor has agreed to enter into this Agreement.
WHEREAS, upon the consummation of the Merger, the Company, as the
surviving corporation of the Merger, shall be the Secured Party for all purposes
hereof.
NOW, THEREFORE, in order to secure the Obligations, as hereinafter
defined, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
<PAGE>
ARTICLE I
SECURITY INTEREST
-----------------
1.1 PLEDGE. Pledgor hereby pledges, assigns and grants to Secured
------
Party a security interest in and right of set-off against the assets referred to
in Section 1.2 (the "Collateral") to secure the prompt payment and performance
of the Obligations and the performance by Pledgor of this Agreement.
1.2 COLLATERAL. The Collateral consists of the following types or
----------
items of property:
(a) The number of shares of the $.01 par value common stock of
Secured Party specified in Schedule I attached hereto, and the common stock of
----------
the Company into which such common stock will be converted pursuant to the
Merger (collectively, the "Common Stock").
(b) All additional shares of the common stock of the Company received
by Pledgor in connection with a Trigger Event, as defined in Stockholders
Agreement (as hereinafter defined).
(c) (i) The certificates or instruments, if any, representing such
securities, (ii) all dividends (cash, stock or otherwise), cash, instruments,
rights to subscribe, purchase or sell and all other rights and property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such securities, (iii) all replacements, additions to
and substitutions for any of the property referred to in this Section 1.2,
including, without limitation, claims against third parties, and (iv) the
proceeds, interest, profits and other income of or on any of the property
referred to in this Section 1.2.
1.3 TRANSFER OF COLLATERAL. All certificates or instruments
----------------------
representing or evidencing the Pledged Securities (as hereinafter defined) shall
be delivered to and held pursuant hereto by Secured Party or a person or entity
designated by Secured Party and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, or (in the case of either certificated or uncertificated
securities) Secured Party shall have been provided with evidence that the
Pledged Securities have been otherwise transferred to Secured Party in
accordance with Section 8.301 of the Code, all in form and substance
satisfactory to Secured Party. Notwithstanding the preceding sentence, at
Secured Party's discretion, all Pledged Securities must be delivered or
transferred in such manner as to permit Secured Party to be a "protected
purchaser" to the extent of its security interest as provided in Section 8.303
of the Code. Secured Party shall have the right, at any time that an Event of
Default (as defined in Section 6.1) has occurred and is continuing and without
further notice to Pledgor, to transfer to or to register in the name of Secured
Party or any of its nominees any or all of the Pledged Securities. In addition,
Secured Party shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Securities for certificates or
instruments of smaller or larger denominations.
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<PAGE>
ARTICLE II
DEFINITIONS
-----------
2.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms
-------------------
defined above shall have the meanings respectively assigned to them.
2.2 CERTAIN DEFINITIONS. As used in this Agreement, the following
-------------------
terms shall have the following meanings, unless the context otherwise requires:
"AGREEMENT" means this Security Agreement, as the same may from time
to time be amended or supplemented.
"CODE" means the Uniform Commercial Code as presently in effect in the
State of Texas, Business and Commerce Code, Chapters 1 through 9. Unless
otherwise indicated by the context herein, all uncapitalized terms which are
defined in the Code shall have their respective meanings as used in Chapters 8
and 9 of the Code.
"EVENT OF DEFAULT" means any event specified in Section 6.1.
"HIGHEST LAWFUL RATE" means the maximum rate of nonusurious interest
allowed from time to time by applicable law.
"OBLIGATIONS" means the obligations of the Pledgor under the
Promissory Note, including, without limitation, all interest, charges, expenses,
attorneys' or other fees and any other sums payable to or incurred by Secured
Party in connection with the enforcement of Secured Party's rights and remedies
hereunder or any other agreement with Pledgor.
"PLEDGED SECURITIES" means all of the securities and other property
(whether or not the same constitutes a "security" under the Code) referred to in
Section 1.2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Secured Party to accept this Agreement, Pledgor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
3.1 OWNERSHIP OF COLLATERAL; ENCUMBRANCES; VALID AND BINDING
--------------------------------------------------------
AGREEMENT. Assuming that the Common Stock to be issued pursuant to the
- ---------
Subscription Agreement is duly and validly issued free and clear of all liens
and other encumbrances, immediately after the consummation of the Merger,
Pledgor shall be the legal and beneficial owner of the Collateral free and clear
of any adverse claim, lien, security interest, option or other charge or
encumbrance arising by, through or under Pledgor, except for the Stockholders
Agreement and the security interest created by this Agreement, and Pledgor has
full right, power and authority to pledge, assign and grant a
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<PAGE>
security interest in the Collateral to Secured Party. This Agreement constitutes
a legal, valid and binding obligation of Pledgor enforceable against Pledgor in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance. The execution, delivery and performance of this Agreement
will not violate the terms of any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which Pledgor is subject and does not
require the consent or approval of any other person or entity.
3.2 NO REQUIRED CONSENT. No authorization, consent, approval or
-------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the due execution, delivery and performance
by Pledgor of this Agreement, (ii) the grant by Pledgor of the security interest
granted by this Agreement, (iii) the perfection of such security interest or
(iv) the exercise by Secured Party of its rights and remedies under this
Agreement.
3.3 FIRST PRIORITY SECURITY INTEREST. The pledge of Pledged
--------------------------------
Securities pursuant to this Agreement creates a valid and perfected first
priority security interest in the Collateral, secures payment of the
Obligations, and is enforceable against Pledgor and all third parties.
ARTICLE IV
COVENANTS AND AGREEMENTS
------------------------
Pledgor will at all times comply with the covenants and
agreements contained in this Article IV, from the date hereof and for so long as
any part of the Obligations are outstanding.
4.1 SALE, DISPOSITION OR ENCUMBRANCE OF COLLATERAL. Pledgor will not
----------------------------------------------
in any way encumber any of the Collateral (or permit or suffer any of the
Collateral to be encumbered) or sell, pledge, assign, lend or otherwise dispose
of or transfer any of the Collateral to or in favor of any person or entity
other than Secured Party except in accordance with the Stockholders Agreement
dated as of October 30, 1995, among Pledgor, Secured Party, and certain other
stockholders of Secured Party (the "Stockholders Agreement").
4.2 DIVIDENDS OR DISTRIBUTIONS. So long as no Event of Default shall
--------------------------
have occurred and be continuing, Pledgor shall be entitled to receive and retain
any and all dividends and other distributions paid in respect of the Collateral,
provided, however, that any and all
(a) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for (including, without limitation,
any certificate or share purchased or exchanged in connection with a tender
offer or merger agreement), any Collateral,
(b) dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital or reclassification,
and
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<PAGE>
(c) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Collateral,
shall be, and shall be forthwith delivered to Secured Party to hold as,
Collateral and shall, if received by Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to Secured Party as Collateral in the same
form as so received (with any necessary endorsement); provided, however, that
Pledgor shall in any event be entitled to receive and retain an amount equal to
the amount paid on the Collateral less the amount of income taxes payable by
Maker on such amount (which shall be deemed to be the product of the highest
marginal rate (expressed as a fraction) applicable to individuals on the date
such amount is paid under the Internal Revenue Code of the United States, as
amended from time to time, multiplied by the amount so received on the
Collateral. Without limiting the generality of the foregoing, upon any
transfer, assignment, sale, or other disposition of any of the Collateral (other
than a transfer under Section 4.2(b) or the second and third sentences of
Sections 4.3(c) and 4.3(d) of the Stockholders Agreement), all proceeds of such
transfer, assignment, sale, or disposition shall be paid to Secured Party as a
mandatory prepayment on the Promissory Note, and, if Pledgor sells all or the
remaining portion of the Collateral, the entire outstanding principal amount of
the Promissory Note, together with all accrued and unpaid interest, shall be
immediately and mandatorily paid in full. If Secured Party is the transferee of
the Pledged Securities in accordance with the Stockholders Agreement, the
purchase price payable by Secured Party for the Pledged Securities will be
credited against the Obligations in accordance with the terms of the Promissory
Note.
4.3 PAYMENT OF TAXES AND LIENS. Pledgor will pay prior to
--------------------------
delinquency all taxes, charges, liens and assessments against the Collateral.
4.4 CERTAIN INFORMATION. Pledgor will promptly provide written
-------------------
notice to Secured Party of all information reasonably requested which in any way
relates to or affects the filing of any financing statement or other public
notices or recordings, or the delivery and possession of items of Collateral for
the purpose of perfecting a security interest in the Collateral.
4.5 PERFORMANCE OF OBLIGATIONS. Pledgor will promptly and properly
--------------------------
perform all of its obligations under this Agreement and the Promissory Note.
4.6 REIMBURSEMENT OF EXPENSES. Except as provided in Section 6.3
-------------------------
hereof, Pledgor will pay to Secured Party all advances, charges, costs and
expenses (including, without limitation, all costs and expenses of preparing for
sale and selling, collecting or otherwise realizing upon the Collateral if an
Event of Default occurs and all attorneys' fees, legal expenses and court costs)
incurred by Secured Party in connection with the exercise of Secured Party's
rights and remedies hereunder. All amounts for which Pledgor is liable pursuant
to this Section 4.6 shall be due and payable by Pledgor to Secured Party upon
demand, except as provided in Section 6.3. If Pledgor fails to make such
payment upon demand (or if demand is not made due to an injunction or stay
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Pledgor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
Highest Lawful Rate.
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<PAGE>
4.7 FURTHER ASSURANCES. Upon the request of Secured Party, Pledgor
------------------
shall (at Pledgor's expense) execute and deliver all such assignments,
certificates, instruments, securities, financing statements, notifications to
financial intermediaries, clearing corporations, issuers of securities or other
third parties or other documents and give further assurances and do all other
acts and things as Secured Party may reasonably request to perfect Secured
Party's interest in the Collateral or to protect, enforce or otherwise effect
Secured Party's rights and remedies hereunder.
4.8 STOCK POWERS. Pledgor shall furnish to Secured Party such stock
------------
powers and other instruments as may be required by Secured Party to assure the
transferability of the Collateral when and as often as may be reasonably
requested by Secured Party.
4.9 VOTING AND OTHER CONSENSUAL RIGHTS. Except to the extent
----------------------------------
otherwise provided in subsection 6.5(d), Pledgor shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose.
ARTICLE V
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
------------------------------------------
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default occurs and is continuing:
5.1 NON-JUDICIAL ENFORCEMENT. Secured Party may enforce its rights
------------------------
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by law Pledgor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
5.2 DISCHARGE ENCUMBRANCES. Secured Party may, at its option if
----------------------
Pledgor has failed to do so after ten business days' notice from Secured Party,
discharge any taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral. Pledgor agrees to reimburse Secured Party
upon demand for any payment so made, plus interest thereon from the date of
Secured Party's demand at the Highest Lawful Rate.
5.3 ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Secured
----------------
Party as Pledgor's attorney-in-fact, with full authority in the place and stead
of Pledgor and in the name of Pledgor or otherwise in the event that an Event of
Default has occurred and is continuing, from time to time in Secured Party's
discretion, but at Pledgor's cost and expense and without notice to Pledgor, to
take any action and to execute any assignment, certificate, financing statement,
stock power, notification, document or instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to receive, endorse and collect all instruments made payable
to Pledgor representing any dividend, interest payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.
5.4 CUMULATIVE AND OTHER RIGHTS. The rights, powers and remedies of
---------------------------
Secured Party hereunder are in addition to all rights, powers and remedies given
by law or in equity. The exercise by Secured Party of any one or more of the
rights, powers and remedies herein shall not be construed
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<PAGE>
as a waiver of any other rights, powers and remedies, including, without
limitation, any other rights of set-off. If any of the Obligations are given in
renewal, extension for any period or rearrangement, or applied toward the
payment of debt secured by any lien, Secured Party shall be, and is hereby,
subrogated to all the rights, titles, interests and liens securing the debt so
renewed, extended, rearranged or paid.
5.5 DISCLAIMER OF CERTAIN DUTIES. The powers conferred upon Secured
----------------------------
Party by this Agreement are to protect its interest in the Collateral and shall
not impose any duty upon Secured Party to exercise any such powers. Pledgor
hereby agrees that Secured Party shall not be liable for, nor shall the
indebtedness evidenced by the Obligations be diminished by, Secured Party's
delay or failure to collect upon, foreclose, sell, take possession of or
otherwise obtain value for the Collateral.
5.6 WAIVER OF NOTICE; DEMAND AND PRESENTMENT. Except as provided in
----------------------------------------
the Promissory Note, Pledgor hereby waives any demand, notice of default, notice
of acceleration of the maturity of the Obligations, notice of intention to
accelerate the maturity of the Obligations, presentment, protest and notice of
dishonor as to any action taken by Secured Party in connection with this
Agreement, or any instrument or document.
5.7 CUSTODY AND PRESERVATION OF THE COLLATERAL. Secured Party shall
------------------------------------------
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that Secured Party shall
not have responsibility for (i) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not Secured Party has or is deemed to have knowledge
of such matters, or (ii) taking any necessary steps to preserve rights against
persons or entities with respect to any Collateral.
ARTICLE VI
EVENTS OF DEFAULT
-----------------
6.1 EVENTS. Any of the following events shall constitute an Event of
------
Default under this Agreement:
(a) Payments. Pledgor defaults in any payment due and owing pursuant
--------
to the terms of the Promissory Note and such default continues beyond the grace
period provided therein;
(b) Representations and Warranties. Any representation or warranty
------------------------------
made by Pledgor to Secured Party in this Agreement proves to have been incorrect
in any material respect as of the date thereof;
(c) Covenants. Default is made by Pledgor in the performance of any
----------
covenant or agreement contained in this Agreement and such default is not cured
on or before the 20th business day after notice of such default from Secured
Party to Pledgor; or
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<PAGE>
(d) Voluntary Proceedings. Pledgor shall commence a voluntary
----------------------
proceeding seeking liquidation, reorganization or other relief with respect to
Pledgor or Pledgor's debts under any debtor relief law or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other similar
official of Pledgor or a substantial part of Pledgor's property or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against Pledgor or
shall make a general assignment for the benefit of creditors or shall generally
fail to pay Pledgor's debts as they become due or shall admit in writing
Pledgor's inability to pay Pledgor's debts as they become due.
(e) Involuntary Proceedings. An involuntary proceeding shall be
------------------------
commenced against Pledgor seeking liquidation, reorganization, or other relief
with respect to Pledgor or Pledgor's debts under any debtor relief law or
seeking the appointment of a trustee, receiver, liquidator, custodian, or other
similar official for Pledgor or a substantial part of Pledgor's property, and
such involuntary proceeding (i) shall not have been duly contested within 30
days after the commencement of the proceeding or (ii), if duly contested within
such 30 days, shall for any reason remain undismissed and unstayed for a period
of 90 days after the commencement of the proceeding.
6.2 REMEDIES. Upon the occurrence and during the continuance of any
--------
Event of Default and except as provided in Section 6.3, Secured Party may take
any or all of the following actions without notice (except where expressly
required below or by applicable law) or demand to Pledgor:
(a) Declare all or part of the indebtedness pursuant to the
Obligations immediately due and payable and enforce payment of the same by
Pledgor or any Obligor.
(b) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in any commercially reasonable
manner as Secured Party may elect, in a public or private transaction, at any
location as deemed reasonable by Secured Party either for cash or credit or for
future delivery at such price as Secured Party may deem fair, and (unless
prohibited by the Code, as adopted in any applicable jurisdiction) Secured Party
may be the purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Without limiting the
generality of the foregoing, Pledgor agrees that a sale by Secured Party to a
stockholder of Secured Party for a price per share equal to the "Fair Market
Value," as defined in the Stockholders Agreement, shall be deemed to be a
commercially reasonable private sale. Any such sale or transfer by Secured
Party either to itself or to any other person or entity shall be absolutely free
from any claim of right by Pledgor, including any equity or right of redemption,
stay or appraisal which Pledgor has or may have under any rule of law,
regulation or statute now existing or hereafter adopted. Upon any such sale or
transfer, Secured Party shall have the right to deliver, assign and transfer to
the purchaser or transferee thereof the Collateral so sold or transferred. If
Secured Party deems it advisable to do so, it may restrict the bidders or
purchasers of any such sale or transfer to persons or entities who will
represent and agree that they are purchasing the Collateral for their own
account and not with the view to the distribution or resale of any of the
Collateral. Secured Party may, at its discretion, provide for a public sale,
and any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Secured Party may fix in the
notice of such sale. Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or publication,
adjourn any public or private sale by announcement at any time and place fixed
for such sale, and such sale may be made at any
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<PAGE>
time or place to which the same may be so adjourned. In the event any sale or
transfer hereunder is not completed or is defective in the opinion of Secured
Party, such sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If only part of the
Collateral is sold or transferred such that the Obligations remain outstanding
(in whole or in part), Secured Party's rights and remedies hereunder shall not
be exhausted, waived or modified, and Secured Party is specifically empowered to
make one or more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event that Secured
Party elects not to sell the Collateral, Secured Party retains its rights to
dispose of or utilize the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply the proceeds of the
same towards payment of the Obligations. Each and every method of disposition
of the Collateral described in this subsection shall constitute disposition in a
commercially reasonable manner.
(c) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the Code or
otherwise permitted by law or in equity. Such application may include, without
limitation, the reasonable attorneys' fees and legal expenses incurred by
Secured Party.
(d) Appoint any person or entity as agent to perform any act or acts
necessary or incident to any sale or transfer by Secured Party of the
Collateral.
(e) Apply and set-off (i) any deposits of Pledgor now or hereafter
held by Secured Party; (ii) all claims of Pledgor against Secured Party, now or
hereafter existing; (iii) any other property, rights or interests of Pledgor
which come into the possession or custody or under the control of Secured Party;
and (iv) the proceeds of any of the foregoing as if the same were included in
the Collateral. Secured Party agrees to notify Pledgor promptly after any such
set-off or application; provided, however, the failure of Secured Party to give
any notice shall not affect the validity of such set-off or application.
(f) Exercise all other rights and remedies permitted by law or in
equity.
6.3 LIABILITY FOR DEFICIENCY. Pledgor's liability for the
------------------------
Obligations is expressly limited in the manner provided in the Promissory Note
and this Section 6.3. Secured Party shall not be permitted to make demand upon
Pledgor for the payment or performance of any unperformed or unpaid Obligations
or file any claim or petition or otherwise institute any proceeding against
Pledgor for the collection or enforcement of any of the Obligations (whether
unpaid interest or principal or costs of collection and attorneys fees) until
Payee shall have exhausted all remedies available to it with respect to all
Collateral, including the sale or disposition of all such Collateral in the
manner provided in Section 6.2(b) hereof, and the application of the proceeds
thereof to Obligations then due and owing. In no event shall Pledgor's
liability for the payment of any deficiency due and owing on the Obligations
after the sale and disposition of all Collateral exceed thirty-five percent
(35%) of the original principal balance of the Promissory Note.
6.4 REASONABLE NOTICE. If any applicable provision of any law
-----------------
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Pledgor hereby agrees that five days' prior written notice shall
constitute reasonable notice thereof. Such notice, in the case of
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<PAGE>
public sale, shall state the time and place fixed for such sale and, in the case
of private sale, the time after which such sale is to be made.
6.5 PLEDGED SECURITIES. Upon the occurrence and during the
------------------
continuance of an Event of Default:
(a) All rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain pursuant
to Section 4.2 shall be suspended, and the same shall thereupon become payable
to Secured Party who shall thereupon have the sole right to receive and hold as
Collateral such dividends and interest payments, but Secured Party shall have no
duty to receive and hold such dividends and interest payments and shall not be
responsible for any failure to do so or delay in so doing.
(b) All dividends and interest payments which are received by Pledgor
contrary to the provisions of this Section 6.5 shall be received in trust for
the benefit of Secured Party, shall be segregated from other funds of Pledgor
and shall be forthwith paid over to Secured Party as Collateral in the same form
as so received (with any necessary indorsement).
(c) Secured Party may exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Securities as if it were the absolute owner thereof,
including without limitation, the right to exchange at its discretion, any and
all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of any issuer of such Pledged Securities
or upon the exercise by any such issuer or Secured Party of any right, privilege
or option pertaining to any of the Pledged Securities, and in connection
therewith, to deposit and deliver any and all of the Pledged Securities with any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it, but Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
(d) All rights of Pledgor to exercise the voting and other consensual
rights which Pledgor would otherwise be entitled to exercise pursuant to Section
4.9 with respect to the Pledged Securities issued by such issuer shall thereupon
become exercisable by Secured Party who shall thereupon have the sole right to
exercise such voting and other consensual rights, but Secured Party shall have
no duty to exercise any such voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
7.1 AMENDMENT; WAIVERS. Secured Party's acceptance of partial or
------------------
delinquent payments or any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any obligation of Pledgor or any Obligor, or of any right, power or remedy of
Secured Party; and no partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof. Secured Party may remedy any
Event of Default
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<PAGE>
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Pledgor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor or other person or entity,
any such action shall not constitute a waiver of any of Secured Party's other
rights or of Pledgor's obligations hereunder. This Agreement may be amended
only by an instrument in writing executed jointly by Pledgor and Secured Party
and may be supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
7.2 NOTICES. Any and all notices, designations, consents, offers,
-------
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by personal delivery, overnight courier, telegram, or
telecopy which shall be addressed, or sent, to the respective addresses or
telecopy numbers as follows (or such other address or telecopy number as any
party hereto may specify for itself by Notice given in accordance with this
Section 7.2):
Secured Party: c/o Enron Corp.
1400 Smith
Houston, Texas 77002
Attention: Keith Power/Brenda McGee, Specialist - 28th Floor
Telecopy No. 713-646-3602
Telephone No. 713-853-5259
With a copy to: Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Chief Financial Officer
Telecopy No. 214-265-4777
Telephone No. 214-265-4751
Pledgor: To the address or telecopy number set forth in Schedule I hereto.
----------
All Notices shall be deemed effective, delivered and received (i) if given by
personal delivery, when such Notice is personally delivered at the address
specified above; (ii) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified above and receipt thereof is confirmed; (iii)
if given by overnight courier, on the business day immediately following the day
on which such Notice is delivered to a reputable overnight courier service; or
(iv) if given by telegram, when such Notice is delivered at the address
specified above.
7.3 COPY AS FINANCING STATEMENT. A photocopy or other reproduction
---------------------------
of this Agreement may be delivered by Pledgor or Secured Party to any financial
intermediary or other third party for the purpose of transferring or perfecting
any or all of the Pledged Securities to Secured Party or its designee or
assignee.
7.4 POSSESSION OF COLLATERAL. Secured Party shall be deemed to have
------------------------
possession of any Collateral in transit to it or set apart for it (or, in either
case, any of its agents, affiliates or correspondents).
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<PAGE>
7.5 REDELIVERY OF COLLATERAL. If any sale or transfer of Collateral
------------------------
by Secured Party results in full satisfaction of the Obligations, and after such
sale or transfer and discharge there remains a surplus of proceeds, Secured
Party will deliver to Pledgor such excess proceeds within five business days
after the Secured Party's receipt of such surplus proceeds; provided, however,
that Secured Party shall not be liable for any interest, cost or expense in
connection with any delay in delivering such proceeds to Pledgor.
7.6 INTEREST. It is the intention of the parties hereto to conform
--------
strictly to usury laws applicable to Secured Party. Accordingly, if the
transactions contemplated hereby would be usurious under applicable state or
federal law, then, notwithstanding anything to the contrary in this Agreement or
in any other agreement entered into in connection with or as security for the
Obligations, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to Secured Party that is
contracted for, taken, reserved, charged or received under the Obligations, this
Agreement or under any of such other agreements or otherwise in connection with
the Obligations shall under no circumstances exceed the maximum amount allowed
by such applicable law, (ii) in the event that the maturity of the Obligations
is accelerated for any reason, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to Secured Party may never include more than such maximum amount, and
(iii) excess interest, if any, provided for in this Agreement or otherwise shall
be canceled automatically and, if theretofore paid, shall be credited by Secured
Party on the principal amount of the Obligations (or, to the extent that the
principal amount of the Obligations shall have been or would thereby be paid in
full, refunded by Secured Party to Pledgor). The right to accelerate the
maturity of the Obligations does not include the right to accelerate any
interest which has not otherwise accrued on the date of such acceleration, and
Secured Party does not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to Secured Party for the use,
forbearance or detention of sums included in the initial Obligations shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Obligations until payment in full so that
the rate or amount of interest on account of the initial Obligations does not
exceed the applicable usury ceiling, if any. To the extent that Article 5069-
1.04 of the Texas Revised Civil Statutes is relevant to Secured Party for the
purpose of determining the Highest Lawful Rate, Secured Party hereby elects to
determine the applicable rate ceiling under such Article by the indicated
(weekly) rate ceiling from time to time in effect, subject to Secured Party's
right subsequently to change such method in accordance with applicable law.
7.7 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which counterparts shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
7.8 HEADINGS. Headings contained in this Agreement are inserted only
--------
as a matter of convenience and in no way define, limit, or extend the scope or
intent of this Agreement or any provisions hereof.
7.9 CHOICE OF LAW. This Agreement and the security interest granted
-------------
hereby shall be governed by the internal laws of the State of Texas without
regard to the principles of conflicts of laws thereof (except to the extent that
the laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
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<PAGE>
7.10 CONTINUING SECURITY AGREEMENT.
-----------------------------
(a) Except as may be expressly applicable pursuant to Section 9.505
of the Code, no action taken or omission to act by Secured Party hereunder,
including, without limitation, any exercise of voting or consensual rights
pursuant to Section 4.9 or any other action taken or inaction pursuant to
Section 6.2, shall be deemed to constitute a retention of the Collateral in
satisfaction of the Obligations or otherwise to be in full satisfaction of the
Obligations, and, subject to Section 6.3, the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments (including,
without limitation, collections from Collateral) towards the Obligations in the
full amount then outstanding or until such subsequent time as is hereinafter
provided in subsection (c) below.
(b) To the extent that any payments on the Obligations or proceeds of
the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other person or entity under any bankruptcy law, common
law or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been received by
Secured Party, and Secured Party's security interests, rights, powers and
remedies hereunder shall continue in full force and effect. In such event, this
Agreement shall be automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.11.
7.11 TERMINATION. The grant of a security interest hereunder and all
-----------
of Secured Party's rights, powers and remedies in connection therewith shall
remain in full force and effect until the complete payment of the Obligations
whereupon Secured Party will release, reassign and transfer the Collateral to
Pledgor and declare this Agreement to be of no further force or effect.
Notwithstanding the foregoing, the reimbursement and indemnification provisions
of Section 4.6 and the provisions of subsection 7.10(b) shall survive the
termination of this Agreement.
7.12 NUMBER; GENDER; WITHOUT LIMITATION. Pronouns, wherever used in
----------------------------------
this Agreement, and of whatever gender, shall include persons of every kind and
character, and the singular shall include the plural whenever and as often as
may be appropriate. Any reference herein to "including" and words of similar
import refer to "including without limitation."
7.13 SEVERABILITY. In the event any one or more of the provisions
------------
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which approximates as nearly as possible that of the
invalid, illegal or unenforceable provisions.
7.14 THIRD PERSON. Nothing herein expressed or implied is intended
------------
or shall be construed to confer upon or to give any Person not a party hereto
any rights or remedies under or by reason of this Agreement.
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<PAGE>
7.15 EFFECTIVENESS. This Agreement becomes effective upon the
-------------
execution hereof by Pledgor and delivery of the same to Secured Party, and it is
not necessary for Secured Party to execute any acceptance hereof or otherwise
signify or express its acceptance hereof.
7.16 ARBITRATION. Any and all claims, demands, causes of action,
-----------
disputes, controversies and other matters in question arising out of or relating
to this Agreement, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement ("Claims"), even though some or all of such
Claims allegedly are extracontractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
shall be resolved and decided exclusively by binding arbitration pursuant to the
Federal Arbitration Act in accordance with the Commercial Arbitration Rules then
in effect with the American Arbitration Association. The arbitration proceeding
shall be conducted in Dallas, Texas. The arbitration shall be before a panel of
three arbitrators. Each party to such dispute shall select one arbitrator, with
all Management Investors (as defined in the Stockholders Agreement) party to the
dispute considered to be one party, and the two arbitrators selected by the
parties shall select the third arbitrator. The arbitrators are authorized to
issue subpoenas for depositions and other discovery mechanisms, as well as trial
subpoenas, in accordance with the Federal Rules of Civil Procedure. Either
party may initiate a proceeding in the appropriate United States District Court
to enforce this provision. This agreement to arbitrate shall be enforceable in
either federal or state court. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction. The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including the construction and
interpretation of this agreement to arbitrate, the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act. The arbitrators shall have no
authority to award punitive (including, without limitation, any exemplary
damages, treble damages or any other penalty or punitive type of damages),
consequential, incidental or indirect damages (in tort, contract or otherwise)
under any circumstances that exceed, with respect to any Claim (regardless of
the number of Persons asserting such Claim or the number of Persons against whom
such Claim is asserted) the lesser of (i) the amount equal to the amount of
actual damages awarded, if any and (ii) $500,000, regardless of whether such
damages in excess of such amount may be available under applicable law or
otherwise, the parties hereto hereby waiving their right, if any, to recover
such damages in excess of such amount in connection with any Claims. The
arbitrators shall be entitled to award costs of the arbitration and attorney's
fees as they deem appropriate.
PLEDGOR:
_______________________________________________
[Management Investor]
A:\SECURITY.
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<PAGE>
EXHIBIT D
Draft Summary of Terms
October 30, 1995
Page 1
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP ("JEDI")
SUMMARY OF TERMS
SENIOR SUBORDINATED LOAN
Borrower Coda Energy, Inc. (the "Company")
Lender JEDI or its affiliates or designees
Structure Senior Subordinated Loan (the "Loan")
Amount $100,000,000
Term 7 years
Security Unsecured, general corporate obligation
Interest Rate Borrower may elect to borrow at the Floating Rate for an initial
period of not more than six months; anytime during the floating
rate period, Borrower may elect to lock-in the Fixed Rate for
the remaining term of the Loan. Interest payable semi-annually
in arrears.
Floating Rate Monthly LIBOR + 425 bps per annum
Fixed Rate Comparable treasuries + 625 bps
Debt Service Interest only until maturity
Voluntary
Prepayment Prepayable without penalty until the Fixed Rate is locked in;
prepayable thereafter subject to breakage costs on any interest
rate swaps entered into by Lender to hedge the Fixed Rate; any
prepayment to be applied first to interest then to principal
Mandatory
Payment Entire principal due at maturity
Fee 200 bp payable to ECT Securities Corp. at closing. ECT
Securities Corp. will pay or reimburse the Borrower for any fees
for the subsequent placement of the Senior Subordinated Notes
(other than normal legal and transaction expenses) issued to
refinance the Loan.
<PAGE>
Draft Summary of Terms
October 30, 1995
Page 2
Lender may change the fee structure so long as there is no
adverse economic or financial impact to the Borrower from the
change in fee structure.
Convenants Standard and customary affirmative and negative covenants to
include:
Limitation on Indebtedness
Other than Permitted Indebtedness the Company will not incur any
additional debt or issue redeemable stock (other than common stock or
common stock equivalents provided for in the Shareholders Agreement)
unless pro forma Adjusted Consolidated Net Tangible Assets (Adjusted
CNTA) (greater than or equal to) 125% of pro forma Indebtedness, and pro
forma Fixed Charge Coverage Ratio (greater than or equal to) 2.0 to 1.0.
Adjusted CNTA means the sum of (1) pretax SEC PV 10 of proved reserves
(excluding reserves required to be delivered under volumetric or dollar
denominated production payments); (2) costs of any oil and gas
properties not included in (1); (3) net working capital; (4) greater of
book or appraised value of other tangible assets; less (1) minority
----
interests: (2) gas balancing liabilities; and (3) tangible assets of
non-recourse subsidiaries. Fixed Charge Coverage Ratio means the ratio
of (a) the sum of (1) net income; (2) net interest expense; (3) net
income tax expense; and (4) non-cash charges deducted in computing net
income; less any deferred revenues attributable to volumetric production
----
payments, to (b) interest expense (to exclude any interest expense
attributable to dollar denominated production payments), all in
accordance with GAAP. Indebtedness will exclude any volumetric or dollar
denominated production payments, any non-recourse debt, and any deferred
compensation expense accrued as a result of the Special Management
Rights, stock options or stock repurchase rights.
Permitted Indebtedness to include:
The Loan
The senior bank credit facility in place as of the closing of the
Loan (as amended from time to time)
Inter-company debt
Non-recourse debt
Commodity hedging arrangements
Interest rate hedging arrangements
Refinancing indebtedness
Letters of credit in the ordinary course of business not to exceed
10% of Adjusted CNTA
Other Indebtedness not to exceed $15 million
<PAGE>
Draft Summary of Terms
October 30, 1995
Page 3
Maintenance of Adjusted Consolidated Net Tangible Assets
On and after the first anniversary of the closing of the Loan, a
requirement for the Company to maintain the ratio of Adjusted CNTA to
Indebtedness at (greater than or equal to) 1.1 to 1.0. Indebtedness to
exclude any volumetric or dollar denominated production payments, any
non-recourse debt, and any deferred compensation expense accrued as a
result of the Special Management Rights, stock options or stock
repurchase rights. Test to be conducted quarterly. If requirement is not
met for four consecutive tests, Borrower is obligated to prepay enough
of the Indebtedness to cause the ratio to equal or exceed 1.1 to 1.0.
Limitation on Disposition of Proceeds from Asset Sales
Consideration at least equal to fair market value and in cash and cash
equivalents or oil and gas properties if such properties do not
represent consideration of more than $15 million unless Lender consents
in writing. Within 1 year, proceeds not required to pay down Senior
Indebtedness may be reinvested in oil and gas assets. Proceeds not used
to repay Senior Indebtedness nor reinvested in oil and gas assets
("Excess Proceeds") within 1 year will be used to prepay the Loan if the
aggregate amount of the Excess Proceeds is greater than or equal to $5
million.
Limitation on Merger, Consolidation and Asset Sales
Permitted as long as (i) the Company is the surviving entity, or the
surviving entity is a corporation organized under the laws of the U.S.
and assumes the obligation of the Loan under a supplemental loan
agreement; (ii) no default has occurred or is continuing; (iii) the
Company can incur $1 of Indebtedness pursuant to "Limitation on
Additional Indebtedness" above or the surviving entity has a net worth
equal to or greater than the net worth of the Company immediately prior
to the transaction. Provided, however, in the event the Company is not
the surviving entity, Lender must consent, in its sole discretion, to
the transaction.
Sale/Leaseback Transaction
Allowed if attributable debt could be incurred under "Limitation on
Indebtedness".
Restricted Payments
Other than as provided for in the Stockholder's Agreement, no Restricted
Payments will be permitted.
<PAGE>
Draft Summary of Terms
October 30, 1995
Page 4
Limitation on Liens
Only senior debt liens, purchase money liens, and margin related liens
allowed.
Other Standard Affirmative and Negative Covenants, to include:
Limitation on issuance and sales of subsidiary stock
Limitation on transactions with affiliates
Subsidiary guarantees
Change of control
Limitation on guarantees of indebtedness by subsidiaries
Limitation on dividends and other payment restrictions affecting
restricted subsidiaries
Limitation on conduct of business
Limitation on investments
Reports
Events of
Default Standard Events of Default, to include:
Failure to pay principal or interest when due
Breach of any of the representations, warranties, covenants or
other provisions of the definitive agreements
Bankruptcy, insolvency, material judgments, etc.
Cross default to other material documents, and
Other defaults as warranted
Representations
and Warranties Standard Representations and Warranties, to include:
Corporate existence and qualification
Corporate and governmental authorization
Financial statements and condition
Environmental, ERISA, and other regulatory matters
Compliance with laws
Labor matters
No material litigation
Taxes
Ownership and control
Title to property generally
No material misstatements or omissions
<PAGE>
Draft Summary of Terms
October 30, 1995
Page 5
EXPENSES: All reasonable legal fees and expenses, professional fees and
other transaction costs shall be borne by Borrower whether or
not contemplated transaction closes.
THIS SUMMARY OF TERMS IS NOT COMPLETE, IS FOR DISCUSSION PURPOSES ONLY AND DOES
NOT CREATE, AND IS NOT INTENDED TO CREATE, A BINDING OR ENFORCEABLE CONTRACT
AMONG ANY OF THE PARTIES OR ANY DUTY ON ANY PERSON TO NEGOTIATE TOWARD A BINDING
CONTRACT. THIS SUMMARY MAY NOT BE RELIED UPON BY ANY PERSON AS A BASIS FOR A
CONTRACT BY ESTOPPEL OR OTHERWISE.
<PAGE>
EXHIBIT 99.4
BUSINESS OPPORTUNITY AGREEMENT
THIS BUSINESS OPPORTUNITY AGREEMENT (this "Agreement"), dated as of October
30, 1995, is by and among Enron Capital & Trade Resources Corp., a Delaware
corporation ("ECT"), Coda Acquisition, Inc., a Delaware corporation ("Sub"),
Joint Energy Development Investments Limited Partnership, a Delaware limited
partnership ("JEDI"), and each of the individuals listed on the signature page
hereto (the "Management Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Coda Energy, Inc., a Delaware corporation ("Coda"), and ECT are
parties to a letter of understanding dated August 23, 1995 relating to a
proposed merger of Sub into Coda (the "Merger") pursuant to which Coda will be
the surviving corporation, the holders of all outstanding shares of Common Stock
of Coda immediately prior to the Merger will receive cash for such shares, and
ECT or its designee will own a controlling interest in Coda following the
Merger; and
WHEREAS, JEDI is an Affiliate (as defined below) of ECT, and ECT has agreed
with JEDI that it will make certain investments ("Qualified Investments")
through JEDI, but ECT has no obligation to make other investments ("Excluded
Investments") through JEDI; and
WHEREAS, although it has no obligation to do so, ECT has offered to JEDI
the opportunity to be its designee that will own a controlling interest in Coda
following the Merger, and JEDI has accepted such offer and, in connection
therewith, has designated such interest as a Qualified Investment rather than an
Excluded Investment; and
WHEREAS, JEDI expects to derive significant benefits from its ownership
interest in Coda following the Merger; and
WHEREAS, in contemplation of and in connection with the Merger, Sub
proposes to enter into subscription agreements with each Management Investor,
employment agreements with certain Management Investors, a Stockholders
Agreement (as defined below) with JEDI and each Management Investor and other
arrangements that the parties hereto believe to be beneficial to Coda, the
Management Investors and JEDI following the Merger, such agreements and
arrangements to be executed simultaneously with the execution of this Agreement
and effective upon consummation of the Merger; and
WHEREAS, the Management Investors expect to derive significant benefits
from the Merger and from their employment relationship with, and ownership
interests in, Coda following the Merger; and
WHEREAS, ECT is a wholly-owned subsidiary of Enron Corp., a Delaware
corporation ("Enron"), and Enron owns controlling interests in a number of other
entities (Enron, ECT and any other Affiliate of Enron other than Coda being
referred to herein individually as an "Enron Entity" and collectively as "Enron
Entities"); and
<PAGE>
WHEREAS, in order for the Merger to occur, ECT and other Enron Entities
will be required to take certain actions, including the execution of definitive
agreements relating to the Merger, the approval of the terms of the subscription
agreements, employment agreements, Stockholders Agreement and other arrangements
between Coda and the Management Investors following the Merger and the
furnishing of cash necessary to permit the Merger consideration to be paid to
the holders of outstanding Common Stock of Coda; and
WHEREAS, Enron Entities own interests in a number of corporations,
partnerships and other entities engaged in energy-related businesses and intend
to acquire from time to time additional interests in such Persons (as
hereinafter defined) or in other Persons; and
WHEREAS, Enron Entities may owe fiduciary or contractual duties to other
Enron Entities and to owners of interests in other Enron Entities or to other
Persons; and
WHEREAS, upon consummation of the Merger, Enron Entities may owe fiduciary
or contractual duties to Coda, its stockholders and other Persons, and Coda may
owe fiduciary or contractual duties to its stockholders and other Persons; and
WHEREAS, in the event an Enron Entity or Coda were to breach any such duty,
it could be held liable for damages in a legal action brought either directly on
behalf of the Person to whom such duty is owed or derivatively on behalf of such
Person by its stockholders, partners or other owners; and
WHEREAS, duties that an Enron Entity or Coda may owe to another Person may
include, under certain circumstances, the duty not to take advantage of a
Business Opportunity (as hereinafter defined) without first offering to such
other Person the opportunity to take advantage of such Business Opportunity; and
WHEREAS, under the laws applicable to fiduciary duties, in the absence of
this Agreement there could arise circumstances in which an Enron Entity has, or
may be alleged to have, conflicting duties to offer a Business Opportunity to
more than one Person; and
WHEREAS, Enron Entities from time to time purchase properties or entities
and engage in lending or other activities that may result in the acquisition of
interests in properties or entities, including the acquisition of production
payments, royalty interests and other interests in energy properties, and among
the Enron Entities is ECT Securities Corp., which is a registered broker-dealer
that arranges transactions in securities for others and may in the future engage
in securities underwriting activities; and
WHEREAS, ECT is unwilling to take the actions required of it in order for
the Merger to occur without assurances from the Management Investors and JEDI
that Enron Entities will be permitted to continue to conduct their business
following the Merger without undue risk of liability or damage to business
relationships with customers; and but for this Agreement ECT would be unwilling
to take such actions because of the unacceptable risk of liability to ECT and
other Enron Entities resulting from uncertainties regarding the duties owed by
them and conflicts between duties owed to Coda and duties owed to other Persons;
and
-2-
<PAGE>
WHEREAS, the parties hereto desire to provide for more certainty regarding
the circumstances in which an Enron Entity has a duty to offer a Business
Opportunity to Coda, to provide for other agreements intended to permit Enron
Entities to continue to conduct their business activities without undue risk of
liability to Coda or its stockholders, including the Management Investors,
following the Merger or undue risk of damage to the Enron Entities' business
relationships and to enter into other agreements aimed at providing, to the
extent practicable, more certainty regarding the duties of Enron Entities and
Coda; and
WHEREAS, ECT, in offering to JEDI the opportunity to be its designee that
will own a controlling interest in Coda following the Merger and in taking other
actions it is required to take or cause to be taken in order for the Merger to
occur, has relied on the fact that this Agreement would be executed and in the
future will rely on this Agreement and the commitments herein made by Coda, the
Management Investors and JEDI; and ECT and other Enron Entities that are
beneficiaries of this Agreement will, in taking the steps required of them to
cause or permit the Merger to occur and in continuing to conduct their business
following the Merger, rely on this Agreement and the commitments herein made by
Coda, the Management Investors and JEDI; and
WHEREAS, in order to induce ECT and other Enron Entities to enter into, or
to cause other Enron Entities to enter into, definitive agreements relating to
the Merger (including subscription agreements, the Stockholders Agreement and,
in the case of certain Management Investors, employment agreements), to enable
ECT and other Enron Entities to take the other actions required to be taken by
them in order for the Merger to be consummated, to provide more certainty
regarding the duties of the parties to this Agreement to each other following
the Merger, to permit the Enron Entities to comply with their fiduciary and
contractual duties and to avoid undue risk of litigation, the parties hereto
desire to enter into this Agreement; and each party agrees that this Agreement
is a material inducement to the other parties hereto to enter into the
agreements relating to the Merger and to consummate the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and obligations hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. When used herein the following terms
-------------------
shall have the meanings indicated:
"AFFILIATE" of a Person means any Person controlling, controlled by, or
under common control with such Person, with "control" and its correlative terms
meaning the possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of securities
or any partnership or other ownership interest, by contract or otherwise) of a
Person. For the purposes of this Agreement, control shall include the
possession, directly or indirectly, through one or more intermediaries, of (A)
in the case of a corporation, 50% or more of the outstanding voting securities
thereof; (B) in the case of a limited liability company, partnership, limited
partnership or venture, the right to 50% or more of the distributions therefrom
(including liquidating distributions); and (C) in the case of any other Person,
50% or more of the economic or beneficial interest therein. For the purposes of
this
-3-
<PAGE>
Agreement, control shall also include serving as manager or general partner of a
Person or performing similar functions for a Person.
"BUSINESS OPPORTUNITY" means any opportunity for a Person (a) to enter into
any transaction pursuant to which such Person would acquire (whether by
purchase, lease, or other transaction), own, invest in, finance, lend funds to,
contribute capital to, manage, operate or otherwise participate in any Person,
assets or transaction or (b) to act as a broker, finder, financial adviser or
investment banker with respect to any such transaction by any other Person. In
no event, however, will the opportunity to market oil or gas produced by Coda or
other Persons from properties in which Coda has an interest constitute a
Business Opportunity, and such term shall exclude the acquisition of equipment
and supplies in the ordinary course of Coda's oil and gas exploration,
development and production business.
"CODA" means Coda and all Affiliates of Coda in which Coda owns an
interest, directly or indirectly, unless the context otherwise requires.
"PERSON" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of even date
herewith among Sub, JEDI and the Management Investors.
SECTION 2. OPTION RELATING TO ENRON PROJECTS. (a) Sub hereby grants to
---------------------------------
ECT an option (the "Enron Project Option") on those Business Opportunities that
Coda desires to pursue, but with respect to which, at the time Coda first
notifies ECT that Coda desires to pursue such Business Opportunity, an Enron
Entity has already taken and plans to continue to take Significant Steps (as
defined in Section 2(c)) to pursue a Business Opportunity involving the same
entity or the same or substantially the same properties (an "Enron Project");
provided, however, that the Enron Project Option is exercisable only if the
pursuit of such Business Opportunity by Coda would (in ECT's reasonable judgment
made in good faith) conflict with or make significantly more difficult the
efforts by an Enron Entity to pursue such Enron Project.
(b) If ECT is entitled to exercise the Enron Project Option and does so,
then an Enron Entity may pursue the Business Opportunity to the exclusion of
Coda or may otherwise pursue the Enron Project, in which case Coda will refrain
from pursuing such Business Opportunity, unless and until ECT informs Coda that
the Enron Entity has ceased its efforts to pursue such Business Opportunity.
Upon exercise of the Enron Project Option, an Enron Entity that elects to pursue
an Enron Project is not required to do so on terms that are identical to the
terms of the Business Opportunity that Coda proposed to pursue.
(c) "Significant Steps" means the commitment of significant human or
financial resources in pursuit of a Business Opportunity including, but not be
limited to, the commitment of significant engineering, financial, legal,
accounting or other resources (including in-house resources) to the process of
evaluating the property or entity that is the subject of the Business
Opportunity, the signing of a letter of intent or memorandum of understanding,
or the exchange
-4-
<PAGE>
of proposals or negotiations with management of an entity that is the subject of
the Business Opportunity or that owns the property that is the subject of the
Business Opportunity. An Enron Entity shall not be deemed to have taken
Significant Steps if its commitment has been limited to the review and
preliminary evaluation of periodic reports filed with the Securities and
Exchange Commission or other publicly available information and/or a review and
preliminary evaluation of an offering circular, private placement memorandum or
similar offering materials prepared for use by multiple parties that may
consider such Business Opportunity.
(d) The parties hereby stipulate that ECT has taken Significant Steps with
respect to Enron Projects involving entities listed in the document entitled
"Enron Projects List" dated the date hereof and delivered by ECT to the
Representatives and to the General Counsel of Coda. The parties agree that ECT
is not required to disclose the Enron Projects List to Management Investors
other than the Representatives and the General Counsel of Coda.
SECTION 3. ECT CONSENT REQUIRED IN CERTAIN EVENTS. Sub agrees that Coda
--------------------------------------
will not pursue a Business Opportunity without the prior consent of ECT if:
(a) An Enron Entity (other than Enron Oil & Gas Company) has a lending
relationship or a significant ownership or similar relationship with any
property or entity (including Affiliates of such entity) that is the subject of
the Business Opportunity or an investment banking relationship with any such
entity; or
(b) An entity (including Affiliates of such entity) that is the subject of
the Business Opportunity or whose properties are so subject is listed in the
document entitled "ECT Business Opportunity Restricted List" dated the date
hereof and delivered by ECT to Coda and the Management Investors; or
(c) An entity (including Affiliates of such entity) that is the subject of
the Business Opportunity or whose properties are so subject is a party to a
contract with an Enron Entity that is material to Enron and its subsidiaries
considered as a whole.
Relationships of the type referred to in Section 3(a) include the ownership of a
production payment burdening such property or any property owned by such entity,
a royalty or overriding royalty interest burdening such property or any property
owned by such entity, a loan secured by such property to such entity or
guaranteed by such entity, a joint ownership interest in such property or an
equity interest in such entity (other than a less than 5% interest in a class of
publicly traded securities). No lending relationship of the type referred to in
Section 3(a) will be deemed to exist unless there is an outstanding unpaid
balance on a loan or an outstanding loan commitment. An investment banking
relationship of the type referred to in Section 3(a) will include an arrangement
pursuant to which ECT Securities Corp. is performing underwriting or brokerage
services for such entity. ECT may from time to time amend the ECT Business
Opportunity Restricted List, provided that no entity may be added to the list
unless an Enron Entity has a relationship with it of the type described in
Section 3(a).
SECTION 4. AGREEMENT THAT ENRON ENTITIES DO NOT HAVE TO OFFER CERTAIN
----------------------------------------------------------
BUSINESS OPPORTUNITIES TO CODA. (a) Sub, the Management Investors and JEDI
- ------------------------------
agree that any Business
-5-
<PAGE>
Opportunity developed by an Enron Entity is not required to be offered to Coda
and may be pursued by such Enron Entity or another Enron Entity (and hereby
waive the right to claim that any such Business Opportunity should be offered to
Coda) if such Business Opportunity has any one or more of the following
characteristics:
(i) less than 35% of the aggregate estimated investment in the
Business Opportunity is attributable, directly or indirectly, to mineral
interests in oil and gas properties located within five miles of any oil or
gas field that includes properties that are owned by Coda and that account
for more than 5% of the book value of total assets of Coda and its
subsidiaries on a consolidated basis; and
(ii) the Business Opportunity consists of the acquisition of
publicly traded securities constituting less than 10% of a class of
outstanding securities, provided that the acquisition thereof is effected
for the purpose of investment or for trading purposes and not for the
purpose of obtaining control of the issuer or of any of its assets; and
(iii) the Business Opportunity is developed by Enron Oil & Gas
Company ("EOG"); and
(iv) the Business Opportunity is developed by an Enron Entity other
than EOG, unless more than 50% by value of the assets that are the subject
of, or owned by the entity that is the subject of, the Business Opportunity
are devoted to the businesses of exploring for oil and gas, developing oil
and gas reserves upon discovery thereof, operating oil and gas properties,
producing oil and gas from such properties and realizing value from the
sale of production from such properties (the "E&P Business").
(b) for purposes of the foregoing, the E&P Business does not include the
following businesses, and assets employed in the following activities shall not
be considered to be part of the E&P Business for purposes of determining whether
the 50% test in Section 4(a)(iv) is met:
(i) acquisition or development of coal bed methane projects;
(ii) acquiring or developing mineral prospects other than those
involving the production of hydrocarbons or involving the production of
sulphur or other minerals produced in association with hydrocarbons;
(iii) acquisition or development of geothermal projects or prospects;
(iv) acquisition or development of integrated projects in which a
significant portion of the projects' capital expenditures must be spent on
infrastructure, such as transportation facilities, or in which the economic
success of the exploration, development and production activities depends
on the development of a large cogeneration facility, liquefied natural gas
facility, processing facility, manufacturing plant or other facility
requiring significant capital investment by the party conducting the
business (as opposed to third parties);
-6-
<PAGE>
(v) manufacturing or drilling and production services for third
parties, including, without limitation, manufacturing of oilfield
equipment, production of drilling fluids, contract landman services,
contract drilling services, oilfield rental tool services, fishing
services, mud services, well evaluation services, workover services,
contract operator services, supply or crew transportation services or any
other services of the type typically contracted for by oil and gas
exploration, development and production companies;
(vi) oil or gas transportation or storage business, including the
ownership or operation of gathering systems, transmission pipelines,
compressor stations, barges, storage facilities or related facilities (but
excluding the acquisition and ownership of equipment and supplies of the
type normally acquired by exploration, development and production companies
in connection with their activities on oil and gas leases);
(vii) gas processing, fractionation of natural gas liquids, chemical
manufacturing or similar businesses (but excluding field separation
operations);
(viii) the business of trading in energy price swaps, options, futures
contracts or other derivative products (except to hedge its own price
risk), the business of making unsecured loans or loans secured by oil and
gas or other properties, the business of acquiring production payments or
conducting other activities that may enable oil and gas companies or other
companies to obtain funds for financing their businesses, or the business
of conducting other activities designed to assist oil and gas companies in
making acquisitions; or
(ix) the business of marketing oil and gas produced by third parties
or otherwise purchasing and reselling or exchanging oil and gas for a
profit.
Nothing in this Section 4 shall be deemed to constitute an agreement by Sub that
Coda will not acquire any business that conducts non-E&P Business activities.
SECTION 5. PURSUIT OF BUSINESS OPPORTUNITIES BY ENRON ENTITIES IN CERTAIN
--------------------------------------------------------------
EVENTS. Sub agrees that Enron Entities may continue to conduct their business
- ------
in the ordinary course, even if doing so may have a competitive impact on Coda.
In that connection, Sub recognizes that ECT and other Enron Entities will
continue to engage in oil and gas marketing activities, that ECT may continue to
engage in financing of other entities or in furnishing services in connection
therewith (including financing of or services in connection with Business
Opportunities pursued by others in competition with Coda) and that ECT may
acquire other Persons engaged in oil and gas exploration and production. Sub,
JEDI and the Management Investors hereby consent to such activities, even if
they have competitive impact on Coda.
SECTION 6. CONSENTS BY STOCKHOLDERS OF CODA. At any time, ECT or Coda
--------------------------------
may request that any stockholder of Coda furnish to ECT or Coda a consent in
writing to any action or inaction by any Enron Entity or Coda that ECT or Coda
believes such Enron Entity or Coda is entitled under Section 2, 3, 4 or 5 of
this Agreement to take or refrain from taking. In the event a stockholder of
Coda fails or refuses to furnish the consent, ECT or Coda, as the case may be,
-7-
<PAGE>
shall have the right to submit the matter to arbitration. If a stockholder of
Coda furnishes such consent, such consent will also contain an agreement by such
stockholder that, in the absence of a material misstatement or omission by ECT
or Coda in connection with its request for such consent, he or she will not
thereafter claim that the action or inaction covered by such consent is a breach
of this Agreement or any fiduciary or other duty owed by ECT or any other Enron
Entity to Coda or to such stockholder or by Coda or its Board of Directors to
such stockholder. Nothing herein shall be deemed to require ECT or Coda to
submit any matter to arbitration.
SECTION 7. ARBITRATION.
-----------
(a) Agreement to Arbitrate. Any and all claims, demands, causes of
----------------------
action, disputes, controversies and other matters in question arising out of or
relating to any provision of Sections 2, 3, 4, 5, 6, 8(c), 8(e) or 8(m) of this
Agreement or the alleged breach thereof ("Claims"), even though some or all of
such Claims allegedly are extracontractual in nature, whether such Claims sound
in contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
shall be resolved and decided exclusively by binding arbitration pursuant to the
Federal Arbitration Act in accordance with the Commercial Arbitration Rules then
in effect with the American Arbitration Association. Any arbitration initiated
hereunder involving a matter with respect to which ECT or Coda has requested a
consent under Section 6 must be initiated within six months following ECT's or
Coda's first request for such consent.
(b) Procedural Matters. The arbitration proceeding shall be conducted in
------------------
Dallas, Texas. The arbitration shall be before a panel of three arbitrators.
Each party to such dispute shall select one arbitrator (with all Management
Investors party to the dispute considered to be one party) and the two
arbitrators selected by the parties shall select the third arbitrator. The
arbitrators are authorized to issue subpoenas for depositions and other
discovery mechanisms, as well as trial subpoenas, in accordance with the Federal
Rules of Civil Procedure. Any party may initiate a proceeding in the
appropriate United States District Court to enforce this provision. This
agreement to arbitrate shall be enforceable in either federal or state court.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction. The enforcement of
this agreement to arbitrate and all procedural aspects of this agreement to
arbitrate, including the construction and interpretation of this agreement to
arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or
defenses to arbitrability and the rules governing the conduct of the
arbitration, shall be governed by and construed pursuant to the Federal
Arbitration Act.
(c) Amounts Awarded. The arbitrators may award such damages as they deem
---------------
appropriate, except that the arbitrators shall have no authority under any
circumstances to award punitive (including, without limitation, any exemplary
damages, treble damages or any other penalty or punitive type of damages),
consequential, incidental or indirect damages (in tort, contract or otherwise)
that exceed, with respect to any Claim (regardless of the number of Persons
asserting such Claim or the number of Persons against whom such Claim is
asserted), the lesser of (i) the amount equal to the amount of actual damages
awarded, if any, and (ii) $500,000, regardless of whether such damages may be
available under applicable law or otherwise, the
-8-
<PAGE>
parties hereby waiving their right, if any, to recover such damages in excess of
such amount in connection with any such Claim.
(d) Costs. The arbitrators shall be entitled to award costs of the
-----
arbitration and attorney's fees as they deem appropriate, except that in the
event an arbitration is initiated regarding a Claim involving a matter with
respect to which ECT or Coda requested a consent pursuant to Section 6 and the
Claimant failed or refused to furnish such consent, the arbitrator shall award
costs of the arbitration and attorney's fees to the prevailing party in the
arbitration.
(e) Prior Notice. Prior to the institution of a Claim under this
------------
Agreement by any Person, such Person shall provide to Coda and all other Parties
to this Agreement a written notice specifying the nature and basis of the Claim.
The Persons who are the subject of any Claim shall be given thirty (30) days to
cure any breach before any Claim is filed.
SECTION 8. MISCELLANEOUS.
-------------
(a) Contracts and Agreements. Each of Sub and ECT agrees not to, and Sub
-------------------------
agrees that following the Merger Coda will not, enter into any contracts or
agreements that will prevent it from performing its duties and obligations
hereunder or prevent the other parties to this Agreement from realizing the
benefits hereof. Notwithstanding the foregoing provisions of this Section 8(a),
in the event that (x) Coda or ECT, as the case may be, has made reasonable
efforts to persuade a third party that proposes to make a Business Opportunity
available to agree to contract terms that will permit Coda or ECT to perform in
full its obligations hereunder, (y) such third party is unwilling to agree to
contract terms that will permit Coda or ECT to perform in full its obligations
hereunder, and (z) such third party will not make such Business Opportunity
available unless ECT, another Enron Entity or Coda, as the case may be, enters
into a contract with terms that will not or may not permit Coda or ECT, as the
case may be, to perform in full its obligations hereunder, then ECT, such other
Enron Entity or Coda, as the case may be, may enter into such contract (and the
entering into such contract shall not be a breach hereof). In such case, the
obligations of the parties to this Agreement shall be subject to the terms of
such contract.
(b) Third Party Beneficiaries This Agreement is also intended for the
-------------------------
benefit of each member of the Board of Directors of Coda and each Enron Entity,
each of which will be considered a third party beneficiary of this Agreement.
(c) Confidentiality. The provisions of this Agreement and all information
---------------
regarding Business Opportunities, Enron Projects and entities listed on the ECT
Business Opportunity Restricted List, and all other information exchanged by the
parties pursuant to this Agreement, shall not be disclosed by any party to this
Agreement unless otherwise publicly disclosed and except as otherwise required
by law. The Representatives and the General Counsel of Coda will keep
confidential any information supplied to them by ECT under this Agreement and
will not disclose it to other Persons, including other Management Investors,
except that (i) they may disclose it to any employee of Coda if in their
reasonable judgment such employee has the need to know such information in order
to discharge his or her duties as an employee and (ii) they may disclose it to
any Management Investor if in their reasonable judgment such Management Investor
has a need to know such information in connection with a decision to grant or
withhold
-9-
<PAGE>
a consent pursuant to Section 6. Except as provided in the preceding sentence,
the Representatives will keep confidential the Enron Projects List and the ECT
Business Opportunity Restricted List, and in that connection they will not,
without the prior written consent of ECT, disclose the contents of either list
to any other Management Investor. The confidentiality obligations of any
Management Investor under this Agreement shall expire on the first anniversary
of the date on which such Management Investor ceases to be an employee of Coda,
except that in any event no Management Investor shall disclose any information
covered by a confidentiality agreement to which any Enron Entity or Coda is a
party if such disclosure would constitute a breach of such confidentiality
agreement.
(d) Amendment; Waivers. This Agreement may only be altered, supplemented,
------------------
amended or waived by the written consent of each party hereto; provided that a
majority of Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl Johnson (the
"Representatives") may take any action on behalf of all Management Investors
with respect to any matter with respect to which all Management Investors are
similarly situated. Notwithstanding the foregoing, the Representatives will not
have any authority to grant, on behalf of any other Management Investor, any
consent and waiver requested by ECT or Coda pursuant to Section 6 or an
arbitration with respect thereto. All Management Investors will be deemed to be
similarly situated with respect to the receipt of the Enron Projects List under
Section 2 and the receipt of the ECT Business Opportunity Restricted List under
Section 3.
(e) Assignment. The terms and conditions of this Agreement shall inure to
----------
the benefit of and be binding upon the parties hereto and their permitted
successors and assigns; provided, however, that no party hereto shall have the
right to assign this Agreement without the consent of the other parties hereto.
JEDI and each Management Investor agrees that it will not assign its shares of
capital stock of Coda or any portion thereof to any Person unless it obtains
from such Person an agreement to be bound by this Agreement. Sub agrees that
Coda will not issue any additional shares of capital stock of Coda to any Person
unless it obtains from such Person an agreement to be bound by this Agreement
and an agreement that such Person will not assign its shares of capital stock of
Coda or any portion thereof to any other Person unless it obtains from such
Person an agreement to be bound by this Agreement.
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<PAGE>
(f) Notices. Any and all notices, designations, consents, offers,
-------
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by personal delivery, overnight courier, telegram, or
telecopy which shall be addressed, or sent, to the respective addresses or
telecopy numbers as follows (or such other address or telecopy number as any
party hereto may specify for itself by Notice given in accordance with this
Section 8(f)):
ECT: Enron Capital & Trade Resources Corp.
1400 Smith
Houston, Texas 77002
Attention: Keith Power/Brenda McGee, Specialist - 28th
Floor
Telecopy No. 713-646-3602
Telephone No. 713-853-5259
Sub: Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Chief Financial Officer
Telecopy No. 214-265-4777
Telephone No. 214-265-4751
The Representatives: Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl
Johnson
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Management Investors: c/o Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl
Johnson
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
All Notices shall be deemed effective, delivered and received (a) if given by
personal delivery, when such Notice is personally delivered at the address
specified above; (b) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified above and receipt thereof is confirmed; (c) if
given by overnight courier, on the business day immediately following the day on
which such Notice is delivered to a reputable overnight courier service; or (d)
if given by telegram, when such Notice is delivered at the address specified
above.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which counterparts shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
(h) Choice of Law. This Agreement shall be governed by the internal laws
-------------
of the State of Texas without regard to the principles of conflicts of laws
thereof.
-11-
<PAGE>
(i) Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties hereto respecting the subject matter hereof and supersedes all prior
agreements, discussions and understandings with respect thereto.
(j) No Partnership. No term or provision of this Agreement shall be
--------------
construed to establish any relationship of partnership, agency or joint venture
among the parties hereto.
(k) Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement is, for any reason, held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provision of this Agreement.
(l) Contractual Obligations. Nothing herein shall require any Enron Entity
-----------------------
or Coda to fail to perform any contractual obligation to which it is subject,
including any obligation under any standstill agreement or confidentiality
agreement with any entity that may be the subject of a Business Opportunity.
(m) Effectiveness of this Agreement. This Agreement is effective upon
-------------------------------
consummation of the Merger, except that the obligations in Sections 8(a) and
8(c) shall be effective immediately. This Agreement will terminate upon the
occurrence of a Trigger Event (as defined in the Stockholders Agreement). Sub
agrees that Coda will not effect a public offering of its common stock or engage
in any other transaction that will result in public ownership of its common
stock unless subsequent to the offering Enron Entities will own less than 50% of
the outstanding common stock of Coda or unless the parties reach agreement on
the terms and conditions of a business opportunity agreement that is appropriate
for a company with publicly traded common stock, that is satisfactory to the
underwriters, if any, and that permits ECT and other Enron Entities to continue
to operate their businesses without undue risk of liability.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ENRON CAPITAL & TRADE RESOURCES CORP.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
CODA ACQUISITION, INC.
By:___________________________________________
Name: C.John Thompson
Title: Vice President
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<PAGE>
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: ENRON CAPITAL MANAGEMENT
LIMITED PARTNERSHIP, as General Partner
By: ENRON CAPITAL CORP., as General Partner
By:________________________________________
Name: C. John Thompson
Title: Agent and Attorney-in-Fact
MANAGEMENT INVESTORS:
___________________________________________
Randell A. Bodenhamer
___________________________________________
Joe I. Callaway
___________________________________________
J. David Choisser
___________________________________________
J. W. Freeman
___________________________________________
Roy G. Harney
___________________________________________
Grant W. Henderson
___________________________________________
Jarvis A. Hensley
___________________________________________
Chris A. Jackson
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<PAGE>
___________________________________________
Jarl P. Johnson
___________________________________________
Douglas H. Miller
___________________________________________
Gary M. Nelson
___________________________________________
Gary R. Scoggins
___________________________________________
Claude A. Seaman
___________________________________________
Jay W. Spencer, III
___________________________________________
Scott E. Studdard
<PAGE>
EXHIBIT 99.5
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and Randell A.
Bodenhamer an individual currently residing at 3320 Bermuda Drive, Sand Springs,
Oklahoma 74063 ("Employee"), to be effective as of the Effective Date (as
hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2. Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4. In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of Employer as is appropriate for Employee's
employment responsibilities. Employer also shall endeavor
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<PAGE>
to provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7. Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2. Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3. While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
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<PAGE>
of Directors of Employer, none of the benefits or arrangements described in this
Article 2 shall be secured or funded in any way, and each shall instead
constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Employer.
2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to the management
committee (or, if there is no management committee, the highest
applicable level of management) of Employer for determination. If
Employee disagrees with the decision reached by Employer, the
dispute will be limited to whether the management committee (or, if
there is no management committee, the highest applicable level of
management) of Employer reached its decision in good faith;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
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<PAGE>
3.3. Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3. Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled to
pro rata salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4. If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant, Employer
shall be entitled to recover from Employee all sums expended by Employer
(including costs and attorneys fees) in connection with such suit, claim, demand
or cause of action.
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<PAGE>
3.6. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.), but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement.
3.8. Termination of the employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1. Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evalua tions, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
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5.2. Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3. All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4. If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Em ployer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is neither prepared by the Employee within the scope of
his or her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these presents
does assign, to Employer all of Employee's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
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5.5. Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or indirectly, in any
business competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until six (6) months after the date of termination of the
employment relationship. These non-competition obligations shall not be
applicable in the event of an Involuntary Termination.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his
or her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer shall be entitled to enforce the
provisions of this Article 6 by terminating any payments then owing to Employee
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article 6, but shall be in
addition to all remedies available at law or in equity to Employer, including,
without limitation, the recovery of damages from Employee and his or her agents
involved in such breach.
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6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5. If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action shall be entitled to recover its, his, or her
expenses incurred in connection with such legal action, including, without
limitation, costs of Court and attorneys fees.
7.6. It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as
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<PAGE>
to permit its enforceability under the applicable law to the fullest extent
permitted by law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances other
than those to which they have been held invalid or unenforceable, shall remain
in full force and effect.
7.7. This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or involuntarily assigned, alienated, or transferred, whether
by operation of law or otherwise, without the prior written consent of Employer.
7.8. This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Employer and the term and
termination of such relationship. However, nothing herein precludes Employee
from participating in any severance program or policy instituted by the Employer
under which Employee is otherwise eligible. This Agreement constitutes the
entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to such
subject matters, which is not embodied herein, and that no agreement, statement,
or promise relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby, provided that any such modification
must be authorized or approved by the Board of Directors of Employer.
7.9. Termination. If the Merger Agreement is terminated in accordance
with its terms, this Agreement shall terminate and the parties hereto shall have
no further obligations to any other party hereunder.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
RANDELL A. BODENHAMER
___________________________________
This 30th day of October, 1995
-Page 9-
<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND RANDELL A. BODENHAMER
--------------------------------------------------------
Employee Name: Randell A. Bodenhamer
Term: Five (5) Years after the Effective Time
Position: Vice President - Land
Location: Dallas, Texas
Reporting Relationship: Chief Operating Officer
Monthly Base Salary: $12,083.33
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
RANDELL A. BODENHAMER
___________________________________
This 30th day of October, 1995
-Page 10-
<PAGE>
EXHIBIT 99.6
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and J. William
Freeman an individual currently residing at 1639 Handley, Dallas, Texas 75208
("Employee"), to be effective as of the Effective Date (as hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2. Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4. In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of Employer as is appropriate for Employee's
employment responsibilities. Employer also shall endeavor
<PAGE>
to provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7. Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2. Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3. While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
-Page 2-
<PAGE>
of Directors of Employer, none of the benefits or arrangements described in this
Article 2 shall be secured or funded in any way, and each shall instead
constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Employer.
2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to the management
committee (or, if there is no management committee, the highest
applicable level of management) of Employer for determination. If
Employee disagrees with the decision reached by Employer, the
dispute will be limited to whether the management committee (or, if
there is no management committee, the highest applicable level of
management) of Employer reached its decision in good faith;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
-Page 3-
<PAGE>
3.2 Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3 Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled
to pro rata salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4 If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5 Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employ ment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant, Employer
shall be entitled to recover from Employee all sums expended by Employer
(including costs and attorneys fees) in connection with such suit, claim, demand
or cause of action.
-Page 4-
<PAGE>
3.6 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7 Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.), but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement.
3.8 Termination of the employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1 Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpreta tions,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
-Page 5-
<PAGE>
5.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4 If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Em ployer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is neither prepared by the Employee within the scope of
his or her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these presents
does assign, to Employer all of Employee's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
-Page 6-
<PAGE>
5.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until six (6) months after the date of termination of the
employment relationship. These non-competition obligations shall not be
applicable in the event of an Involuntary Termination.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his
or her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer shall be entitled to enforce the
provisions of this Article 6 by terminating any payments then owing to Employee
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article 6, but shall be in
addition to all remedies available at law or in equity to Employer, including,
without limitation, the recovery of damages from Employee and his or her agents
involved in such breach.
-Page 7-
<PAGE>
6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5. If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action shall be entitled to recover its, his, or her
expenses incurred in connection with such legal action, including, without
limitation, costs of Court and attorneys fees.
7.6. It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person,
-Page 8-
<PAGE>
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person, association, or entity or circumstances other than those
to which they have been held invalid or unenforceable, shall remain in full
force and effect.
7.7. This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or involuntarily assigned, alienated, or transferred, whether
by operation of law or otherwise, without the prior written consent of Employer.
7.8. This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Employer and the term and
termination of such relationship. However, nothing herein precludes Employee
from participating in any severance program or policy instituted by the Employer
under which Employee is otherwise eligible. This Agreement constitutes the
entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to such
subject matters, which is not embodied herein, and that no agreement, statement,
or promise relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby, provided that any such modification
must be authorized or approved by the Board of Directors of Employer.
7.9. Termination. If the Merger Agreement is terminated in accordance
with its terms, this Agreement shall terminate and the parties hereto shall have
no further obligations to any other party hereunder.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
J. WILLIAM FREEMAN
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND J. WILLIAM FREEMAN
-----------------------------------------------------
Employee Name: J. William Freeman
Term: Five (5) Years after the Effective Time
Position: Vice President - Engineering
Location: Dallas, Texas
Reporting Relationship: Chief Operating Officer
Monthly Base Salary: $14,166.67
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
J. WILLIAM FREEMAN
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT 99.7
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and Grant W.
Henderson, an individual currently residing at 9802 Windy Terrace, Dallas, Texas
75231 ("Employee"), to be effective as of the Effective Date (as hereinafter
defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2. Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4. In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of Employer as is appropriate for Employee's
employment responsibilities. Employer also shall endeavor
<PAGE>
to provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7. Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2. Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3. While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees
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<PAGE>
generally. Moreover, unless specifically provided for in a written plan document
adopted by the Board of Directors of Employer, none of the benefits or
arrangements described in this Article 2 shall be secured or funded in any way,
and each shall instead constitute an unfunded and unsecured promise to pay money
in the future exclusively from the general assets of Employer.
2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
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<PAGE>
3.2. Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3. Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled
to pro rata salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4. If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant, Employer
shall be entitled to recover from Employee all sums expended by Employer
(including costs and attorneys fees) in connection with such suit, claim, demand
or cause of action.
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<PAGE>
3.6. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.),, but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement..
3.8. Termination of the employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1. Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evalua tions, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
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<PAGE>
5.2. Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3. All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4. If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Em ployer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is neither prepared by the Employee within the scope of
his or her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these presents
does assign, to Employer all of Employee's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
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<PAGE>
5.5. Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until six (6) months after the date of termination of the
employment relationship. These non-competition obligations shall not be
applicable in the event of an Involuntary Termination.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his
or her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer shall be entitled to enforce the
provisions of this Article 6 by terminating any payments then owing to Employee
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article 6, but shall be in
addition to all remedies available at law or in equity to
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<PAGE>
Employer, including, without limitation, the recovery of damages from Employee
and his or her agents involved in such breach.
6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5. If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action shall be entitled to recover its, his, or her
expenses incurred in connection with such legal action, including, without
limitation, costs of Court and attorneys fees.
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EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND GRANT W. HENDERSON
-----------------------------------------------------
Employee Name: Grant W. Henderson
Term: Five (5) years after the Effective Time
Position: President and Chief Financial Officer, with the powers
and duties for such offices set forth in Article V of
the Bylaws of the Employer as in effect immediately
after the Effective Time
Location: Dallas, Texas
Reporting Relationship: Board of Directors
Monthly Base Salary: $18,750.00
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
GRANT W. HENDERSON
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT 99.8
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and Jarl P.
Johnson, an individual currently residing at 9627 S. Indianapolis, Tulsa,
Oklahoma 74137 ("Employee"), to be effective as of the Effective Date (as
hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2. Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4. In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of
<PAGE>
Employer as is appropriate for Employee's employment responsibilities. Employer
also shall endeavor to provide to Employee the opportunity to develop business
relationships with those of Employer's clients and potential clients that are
appropriate for Employee's employment responsibilities.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7. Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2. Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3. While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
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2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
of Directors of Employer, none of the benefits or arrangements described in this
Article 2 shall be secured or funded in any way, and each shall instead
constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Employer.
2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
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<PAGE>
3.2. Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3. Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled to
pro rata salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4. If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant,
-Page 4-
<PAGE>
Employer shall be entitled to recover from Employee all sums expended by
Employer (including costs and attorneys fees) in connection with such suit,
claim, demand or cause of action.
3.6. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.), but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement.
3.8. Termination of the employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1. Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evalua tions, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps
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<PAGE>
and all other writings or materials of any type embodying any of such
information, ideas, concepts, improvements, discoveries, and inventions are and
shall be the sole and exclusive property of Employer.
5.2. Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3. All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4. If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Employer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is
-Page 6-
<PAGE>
neither prepared by the Employee within the scope of his or her employment nor a
work specially ordered and then not deemed to be a work made for hire, then
Employee hereby agrees to assign, and by these presents does assign, to Employer
all of Employee's worldwide right, title, and interest in and to such work and
all rights of copyright therein.
5.5. Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until six (6) months after the date of termination of the
employment relationship. These non-competition obligations shall not be
applicable in the event of an Involuntary Termination.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his
or her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer
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<PAGE>
shall be entitled to enforce the provisions of this Article 6 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 6, but shall be in addition to all remedies available at law or in
equity to Employer, including, without limitation, the recovery of damages from
Employee and his or her agents involved in such breach.
6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5. If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement,
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<PAGE>
the party who prevails in such legal action, whether plaintiff or defendant, in
addition to the remedy or relief obtained in such legal action shall be entitled
to recover its, his, or her expenses incurred in connection with such legal
action, including, without limitation, costs of Court and attorneys fees.
7.6. It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as to permit its enforceability under
the applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.
7.7. This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or involuntarily assigned, alienated, or transferred, whether
by operation of law or otherwise, without the prior written consent of Employer.
7.8. This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Employer and the term and
termination of such relationship. However, nothing herein precludes Employee
from participating in any severance program or policy instituted by the Employer
under which Employee is otherwise eligible. This Agreement constitutes the
entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to such
subject matters, which is not embodied herein, and that no agreement, statement,
or promise relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby, provided that any such modification
must be authorized or approved by the Board of Directors of Employer.
7.9. Termination. If the Merger Agreement is terminated in accordance
with its terms, this Agreement shall terminate and the parties hereto shall have
no further obligations to any other party hereunder.
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IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
JARL P. JOHNSON
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND JARL P. JOHNSON
--------------------------------------------------
Employee Name: Jarl P. Johnson
Term: Three (3) years after the Effective Time
Position: Vice Chairman of the Board and Chief Operating
Officer, with the powers and duties for such offices
set forth in Article V of the Bylaws of the Employer
as in effect immediately after the Effective Time
Location: Dallas, Texas
Reporting Relationship: Board of Directors
Monthly Base Salary: $20,833.33
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
JARL P. JOHNSON
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT 99.9
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and Douglas H.
Miller, an individual currently residing at 7147 Joyce Way, Dallas, Texas 75225
("Employee"), to be effective as of the Effective Date (as hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2. Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4. In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of
<PAGE>
Employer as is appropriate for Employee's employment responsibilities. Employer
also shall endeavor to provide to Employee the opportunity to develop business
relationships with those of Employer's clients and potential clients that are
appropriate for Employee's employment responsibilities.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7. Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2. Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3. While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee
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<PAGE>
benefit program or plan, so long as such actions are similarly applicable to
covered employees generally. Moreover, unless specifically provided for in a
written plan document adopted by the Board of Directors of Employer, none of the
benefits or arrangements described in this Article 2 shall be secured or funded
in any way, and each shall instead constitute an unfunded and unsecured promise
to pay money in the future exclusively from the general assets of Employer.
2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
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3.2. Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3. Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled
to pro rata salary through the date of such termination plus any other payments
generally available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4. If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant, Employer
shall be entitled to recover from Employee all sums expended by Employer
(including costs and attorneys fees) in connection with such suit, claim, demand
or cause of action.
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<PAGE>
3.6. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.), but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement.
3.8. Termination of the employment relationship does not terminate
those obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1. Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evalua tions, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
-Page 5-
<PAGE>
5.2. Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3. All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4. If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Em ployer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is neither prepared by the Employee within the scope of
his or her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these presents
does assign, to Employer all of Employee's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
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<PAGE>
5.5. Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until two (2) years after the date of termination of the employment
relationship. If the employment relationship is terminated under Section
3.1(iv), or by Employer under Section 3.1(ii), or by Employee under
circumstances that constitute an Involuntary Termination of the employment
relationship, these non-competition obligations shall extend until one (1) year
after the date of termination of the employment relationship.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his or
her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer shall be entitled to enforce the
provisions of this Article 6 by terminating any payments then owing to Employee
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be
deemed the exclusive remedies for a
-Page 7-
<PAGE>
breach of this Article 6, but shall be in addition to all remedies available at
law or in equity to Employer, including, without limitation, the recovery of
damages from Employee and his or her agents involved in such breach.
6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5. If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action shall be entitled to recover its, his, or her
expenses incurred in connection with such legal action, including, without
limitation, costs of Court and attorneys fees.
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<PAGE>
7.6. It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as to permit its enforceability under
the applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.
7.7. This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or involuntarily assigned, alienated, or transferred, whether
by operation of law or otherwise, without the prior written consent of Employer.
7.8. This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Employer and the term and
termination of such relationship. However, nothing herein precludes Employee
from participating in any severance program or policy instituted by the Employer
under which Employee is otherwise eligible. This Agreement constitutes the
entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to such
subject matters, which is not embodied herein, and that no agreement, statement,
or promise relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby, provided that any such modification
must be authorized or approved by the Board of Directors of Employer.
7.9. Termination. If the Merger Agreement is terminated in accordance
with its terms, this Agreement shall terminate and the parties hereto shall have
no further obligations to any other party hereunder.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
DOUGLAS H. MILLER
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND DOUGLAS H. MILLER
----------------------------------------------------
Employee Name: Douglas H. Miller
Term: Five (5) years after the Effective Time
Position: Chairman of the Board and Chief Executive Officer,
with the powers and duties for such offices set
forth in Article V of the Bylaws of the Employer as
in effect immediately after the Effective Time.
Location: Dallas, Texas
Reporting Relationship: Board of Directors
Monthly Base Salary: $29,166.67
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
DOUGLAS H. MILLER
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT 99.10
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including the attached Exhibit
"A," is entered into between Coda Acquisition, Inc. ("Employer"), and J. W.
Spencer, III an individual currently residing at 7727 Lone Moor Circle, Dallas,
Texas 75248 ("Employee"), to be effective as of the Effective Date (as
hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership, are
entering into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the merger of Employer with and into Coda (the "Merger").
WHEREAS, Employer is desirous of having Coda, as the surviving corporation
of the Merger, continue to employ Employee, effective as of the date on which
the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective
Date"), pursuant to the terms and conditions and for the consideration set forth
in this Agreement, and Employee is desirous of entering into such employment
relationship pursuant to such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1 Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth on Exhibit "A" (the "Term"), subject to the terms and
conditions of this Agreement.
1.2 Employee initially shall be employed in the position set forth on
Exhibit A. Employer may not assign Employee to a new position or relocate
Employee, without Employee's prior consent. Employer may not materially modify
Employee's duties and responsibilities without Employee's prior consent, which
shall not be unreasonably withheld, provided that notwithstanding the foregoing,
Employer may assign such additional or different duties and services appropriate
to Employee's position which Employee from time to time may be reasonably
directed to perform by Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position. Employee shall at all times
comply with and be subject to such policies and procedures as Employer may
establish from time to time.
1.3 Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that requires any
significant portion of Employee's business time.
1.4 In connection with Employee's employment by Employer, Employer shall
endeavor to provide Employee access to such confidential information pertaining
to the business and services of Employer as is appropriate for Employee's
employment responsibilities. Employer also shall endeavor to provide to Employee
the opportunity to develop business relationships with those of Employer's
clients and potential clients that are appropriate for Employee's employment
responsibilities.
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<PAGE>
1.5 Employee acknowledges and agrees that Employee owes a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of
the Employer and to do no act which would injure Employer's business, its
interests, or its reputation. It is agreed that any direct or indirect interest
in, connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect Employer
or any of its affiliates, involves a possible conflict of interest. In keeping
with Employee's fiduciary duties to Employer, Employee agrees that Employee
shall not knowingly become involved in a conflict of interest with Employer or
its affiliates, or upon discovery there of, allow such a conflict to continue.
Moreover, Employee agrees that Employee shall disclose to Employer's General
Counsel any facts that might involve such a conflict of interest that has not
been approved by Employer's Board of Directors.
1.6 Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests that constitute a "conflict of
interest." Moreover, Employer and Employee recognize there are many borderline
situa tions. In some instances, full disclosure of facts by the Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for Employer to terminate the employment
relationship. Employer reserves the right to take such action as, in its
judgment, will end the conflict.
1.7 Any potential conflict of interest existing prior to the execution
of this Agreement shall be disclosed to Employer prior to execution. Employer
agrees that such disclosed potential conflicts of interest are not conflicts of
interest pursuant to Section 1.5 or 1.6 absent a material change in such action
or interest.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1 Employee's base salary during the Term shall be not less than the
amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such
salary amount may be increased from time to time (the "Base Salary")), which
shall be paid in semimonthly installments in accordance with Employer's standard
payroll practice.
2.2 Employee shall be eligible to participate in any incentive
compensation program of Employer.
2.3 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the effective date
or thereafter are made available by Employer to all or substantially all of
Employer's employees. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and pension plans. Nothing in this Agreement is to be construed or
interpreted to provide greater rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit plans and
programs.
2.4 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
of Directors of Employer, none of the benefits or arrangements described in this
Article 2 shall be
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<PAGE>
secured or funded in any way, and each shall instead constitute an unfunded and
unsecured promise to pay money in the future exclusively from the general assets
of Employer.
2.5 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH
TERMINATION:
3.1. Notwithstanding any other provisions of this Agreement, Employer
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) For "cause" upon the good faith determination by the Employer's
management committee (or, if there is no management committee, the
highest applicable level of management) of Employer that "cause"
exists for the termination of the employment relationship. As used
in this Section 3.1(i), the term "cause" shall mean [a] Employee's
gross negligence or willful misconduct in the performance of the
duties and services required of Employee under his or her employment
agreement with the Employer [b] Employee's final conviction of a
felony or of a misdemeanor involving moral turpitude; [c] Employee's
involvement in a conflict of interest as referenced in Sections 1.5-
1.6 for which Employer makes a determination to terminate the
employment of Employee; or [d] Employee's material breach of any
material provision of this Agreement which remains uncorrected for
thirty (30) days following written notice to Employee by Employer of
such breach. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to the management
committee (or, if there is no management committee, the highest
applicable level of management) of Employer for determination. If
Employee disagrees with the decision reached by Employer, the
dispute will be limited to whether the management committee (or, if
there is no management committee, the highest applicable level of
management) of Employer reached its decision in good faith;
(ii) for any other reason whatsoever, with or without cause, in the sole
discretion of the management committee (or, if there is no
management committee, the highest applicable level of management) of
Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness, or
other circumstance which renders him or her mentally or physically
incapable of performing the duties and services required of
Employee.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Employer prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death is specified in Section 3.6. The effect of the
employment relationship being terminated pursuant to Section 3.1(iv) as a result
of the Employee becoming incapacitated is specified in Section 3.7.
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3.2 Notwithstanding any other provisions of this Agreement except
Section 7.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any of the following reasons:
(i) a material breach by Employer of any material provision of this
Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer (a breach of Section
1.2 shall be conclusively deemed a material breach of this
Agreement); or
(ii) for any other reason whatsoever, in the sole discretion of Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Sectin 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3. Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement dated October 30, 1995 among Coda
Acquisition, Inc. and the persons listed on the signature pages thereto,
including Employee (the "Stockholders Agreement"). Employee shall be entitled to
pro rata salary through the date of such termination plus any other payments
generallly available to other departing employees of Employer (e.g., unused
vacation, personal days, etc.), but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet paid at the date
of such termination.
3.4 If Employee's employment hereunder shall be terminated by Employer
for Cause prior to expiration of the Term, all future compensation to whcih
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination, except as may otherwise
be provided in the Stockholders Agreement. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
paid at the date of such termination.
3.5 Upon an Involuntary Termination of the employment relationship by
either Employer or Employee prior to expiration of the Term, Employee shall be
entitled, in consideration of Employee's continuing obligations hereunder after
such termination (including, without limitation, Employee's non-competition
obligations), to receive the Base Salary as if Employee's employment (which
shall cease on the date of such Involuntary Termination) had continued for the
full Term of this Agreement, and Employee shall continue to have his rights
under the Stockholders Agreement in accordance with the terms and provisions
thereof. Employee shall not be under any duty or obligation to seek or accept
other employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its affiliates, and Employer's sole and
exclusive liability to Employee under this Agreement, in contract, tort, or
otherwise, for any Involuntary Termination of the employment relationship.
Employee covenants not to sue or lodge any claim, demand or cause of action
against Employer for any sums for Involuntary Termination other than those sums
specified in this Section 3.5. If Employee breaches this covenant, Employer
shall be entitled to recover from Employee all sums expended by Employer
(including costs and attorneys fees) in connection with such suit, claim, demand
or cause of action.
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3.6 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata Base Salary through the date of such termination
plus any other payments generally available to other departing employees of
Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs,
administrators, or legatees shall not be entitled to any individual bonuses or
individual incentive compensation not yet paid to Employee at the date of such
termination, except as may otherwise be provided in the Stockholders Agreement.
3.7 Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his or her pro rata Base
Salary through the date of such termination plus any other payments generally
available to other departing employees of Employer (e.g., unused vacation,
personal days, etc.), but Employee shall not be entitled to any individual
bonuses or individual incentive compensation not yet paid to Employee at the
date of such termination, except as may otherwise be provided in the
Stockholders Agreement.
3.8 Termination of employment relationship does not terminate those
obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 5 and 6.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF
TERMINATION:
4.1 Should Employee remain employed by Employer beyond the expiration of
the Term specified on Exhibit "A," such employment shall convert to a month-to-
month relationship terminable at any time by either Employer or Employee for any
reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Employer or Employee for any reason
whatsoever, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate. Employee
shall be entitled to pro rata salary through the date of such termina tion, but
Employee shall not be entitled to any individual bonuses or individual incentive
compensation not yet paid at the date of such termination. Nothing herein
precludes Employee from participating in any severance program or policy
instituted by the Employer under which Employee is otherwise eligible.
ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) and that relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpreta tions,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and are
and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
-Page 5-
<PAGE>
5.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer or its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its affiliates. Employee also agrees to preserve and protect the confidentiality
of such third party confidential information and trade secrets to the same
extent, and on the same basis, as Employer's confidential business information
and trade secrets. Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating any
payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Employer, including the recovery of damages from Employee and his or
her agents involved in such breach.
5.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon termination
of Employee's employment by Employer, for any reason, Employee promptly shall
deliver the same, and all copies thereof, to Employer.
5.4 If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to Em ployer's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
Employer's premises or otherwise), Employee shall disclose such work to
Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his or her employment; or, if the work is
not prepared by Employee within the scope of his or her employment but is
specially ordered by Employer as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Employer shall be the author of
the work. If such work is neither prepared by the Employee within the scope of
his or her employment nor a work specially ordered and then not deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these presents
does assign, to Employer all of Employee's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
-Page 6-
<PAGE>
5.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1 As part of the consideration for the compensation and benefits to be
paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and
in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-competition
provisions of this Article 6. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Employer or any of its affiliated companies are conducting any business as of
the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with the business conducted by
Employer; or
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Employer.
If the employment relationship is terminated by Employer for cause under Section
3.1(i) or upon a Voluntary Termination of the employment relationship by
Employee prior to the expiration of the Term, these non-competition obligations
shall extend until six (6) months after the date of termination of the
employment relationship. These non-competition obligations shall not be
applicable in the event of an Involuntary Termination.
6.2 Until five (5) years after termination of the employment
relationship, Employee shall not induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or its affiliates,
or hire or assist in the hiring of any such employee by person, association, or
entity not affiliated with Employer.
6.3 Employee understands that the foregoing restrictions may limit his
or her ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.5 for the remainder of the Term upon Involuntary
Termination) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer shall be entitled to enforce the
provisions of this Article 6 by terminating any payments then owing to Employee
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article 6, but shall be in
addition to all remedies available at law or in equity to Employer, including,
without limitation, the recovery of damages from Employee and his or her agents
involved in such breach.
-Page 7-
<PAGE>
6.4 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 6 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 7: MISCELLANEOUS:
7.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, is controlled by Employer.
7.2 For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer, to:
Coda Energy, Inc.
5735 Pineland Drive, Suite 300
Dallas, Texas 75231
Attention: Corporate Secretary
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.3 This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of this Agreement to the laws of another State or country.
7.4 No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.5 If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Sections 5.2, Article 5, or
Section 6.1, and if the dispute cannot be settled through direct discussions,
then Employer and Employee agree first to endeavor to settle the dispute in an
amicable manner by mediation, before having recourse to any other pro ceeding or
forum. Thereafter, if either party to this Agreement brings legal action to
enforce the terms of this Agreement, the party who prevails in such legal
action, whether plaintiff or defendant, in addition to the remedy or relief
obtained in such legal action shall be entitled to recover its, his, or her
expenses incurred in connection with such legal action, including, without
limitation, costs of Court and attorneys fees.
7.6 It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as
-Page 8-
<PAGE>
to permit its enforceability under the applicable law to the fullest extent
permitted by law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances other
than those to which they have been held invalid or unenforceable, shall remain
in full force and effect.
7.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or involuntarily assigned, alienated, or transferred, whether
by operation of law or otherwise, without the prior written consent of Employer.
7.8 This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Employer and the term and
termination of such relationship. However, nothing herein precludes Employee
from participating in any severance program or policy instituted by the Employer
under which Employee is otherwise eligible. This Agreement constitutes the
entire agreement of the parties with regard to such subject matters, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect such subject matters. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to such
subject matters, which is not embodied herein, and that no agreement, statement,
or promise relating to the employment of Employee by Employer that is not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby, provided that any such modification
must be authorized or approved by the Board of Directors of Employer.
7.9 Termination. If the Merger Agreement is terminated in accordance
with its terms, this Agreement shall terminate and the parties hereto shall have
no further obligations to any other party hereunder.
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
J.W. SPENCER, III
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT "A" TO
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN CODA ACQUISITION, INC. AND J. W. SPENCER, III
-----------------------------------------------------
Employee Name: J.W. Spencer, III
Term: Three (3) Years after the Effective Time
Position: Vice President - Operations
Location: Dallas, Texas
Reporting Relationship: Chief Operating Officer
Monthly Base Salary: $14,166.67
CODA ACQUISITION, INC.
By:_________________________________
C. John Thompson
Vice President
This 30th day of October, 1995
J.W. SPENCER, III
___________________________________
This 30th day of October, 1995
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<PAGE>
EXHIBIT 99.11
Coda Energy, Inc. hereby agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.
