<PAGE>
Form 10-K/A No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-10955
CODA ENERGY, INC.
(Name of Registrant)
State of Delaware 75-1842480
(State of Incorporation) (IRS Employer Identification Number)
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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
As the Company's Common Stock is not traded on a public market, the market
value held by non-affiliates is undeterminable.
As of March 1, 1997, the Registrant had outstanding 913,611 shares of
Common Stock.
<PAGE>
All capitalized terms used herein shall have the meaning assigned thereto in the
Company's Form 10-K for the fiscal year ended December 31, 1996.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The executive officers and directors of the Company are listed below,
together with a description of their experience and certain other information.
Each of the directors serves for a one year term. Executive officers are
appointed by the Board of Directors. The Company's Bylaws provide that the
Chairman of the Board and the Vice Chairman of the Board (or the President if
there is no Vice Chairman) shall be directors of the Company.
<TABLE>
<CAPTION>
Held
Office
Name Age Since Position with the Registrant
-------- --- ------ ----------------------------
<S> <C> <C> <C>
Douglas H. Miller 49 1989 Chief Executive Officer, Chairman of the Board
Jarl P. Johnson 67 1994 Chief Operating Officer, Vice Chairman of the
Board
Grant W. Henderson 38 1993 President, Chief Financial Officer, Director
J. William Freeman 56 1990 Vice President - Engineering
J. W. Spencer, III 46 1991 Vice President - Operations
Randell A. Bodenhamer 42 1995 Vice President - Land
Richard B. Buy 45 1997 Director
Timothy J. Detmering 37 1997 Director
James V. Derrick, Jr. 52 1996 Director
C. John Thompson 43 1996 Director
</TABLE>
Douglas H. Miller was elected Chairman of the Board and Chief Executive Officer
- -----------------
in October 1989 and has served as a director since 1987. Mr. Miller also served
as president of a securities broker-dealer which Mr. Miller sold in 1993.
Jarl P. Johnson has been active in the oil and gas industry since 1953. Mr.
- ---------------
Johnson worked for Phillips Petroleum from 1953 to 1955, and for Kewanee Oil Co.
from 1955 to 1978 where he served as Manager of Engineering for 14 years. He
worked for Hamilton Brothers Oil company from 1978 to 1980 and was Vice
President of Engineering. From 1980 to 1986 he was Vice President of Operations
for Ensource Inc. Mr. Johnson formed his own company, PetroJarl, Inc., in 1986
to own non-operated oil and gas interests. He became President and a director
of Diamond in October 1989.
1
<PAGE>
Mr. Johnson joined the Company as Vice Chairman in 1994 in connection with the
acquisition of Diamond and became Chief Operating Officer upon consummation of
the Merger.
Grant W. Henderson joined the Company in October 1993 as Executive Vice
- ------------------
President and Chief Financial Officer. He was elected a director of Coda in
1995 and became President of Coda upon consummation of the Merger. Mr.
Henderson was previously employed by NationsBank, since 1981, last serving as a
Senior Vice President in its Energy Banking Group.
J. William Freeman is a registered Professional Engineer in the State of Texas
- ------------------
and joined the Company in 1990 as its senior reservoir and economics engineer.
Mr. Freeman has worked in the oil and gas industry for 29 years principally in
the area of acquisitions of oil and gas properties. Prior to 1985 Mr. Freeman
was employed by Gulf Oil Corporation. From 1985 to November 1989, Mr. Freeman
worked as an independent oil and gas engineer.
J. W. Spencer III has been involved in production and reservoir engineering
- -----------------
since 1973. From 1985 until March 1991, when he joined the Company as Vice
President - Operations, he was Manager of Production for Conquest Exploration.
Prior to 1985, Mr. Spencer was employed as an engineer by Gulf Oil Corporation.
Randell A. Bodenhamer joined the Company in 1994 as Executive Vice President of
- ---------------------
Diamond in conjunction with the Company's acquisition of Diamond. Mr.
Bodenhamer was appointed Vice President--Land of the Company in August 1995.
Prior to joining Diamond as an employee, Mr. Bodenhamer was owner of R.A.
Bodenhamer & Associates, Inc., a Tulsa-based land service company. From 1986
through 1994, Mr. Bodenhamer worked primarily for Diamond acquiring and
unitizing waterflood projects on its behalf.
Richard B. Buy is a Vice President in Enron Capital Management. Mr. Buy is also
- --------------
President and Principal at ECT's broker/dealer firm ECT Securities, Inc. Prior
to joining Enron in April 1994, Mr. Buy was a Vice President at Bankers Trust.
Mr. Buy is also a director of Mariner Energy, Inc.
Timothy J. Detmering is Vice President of ECT and has been with ECT since 1994.
- --------------------
Previously he was with ARCO Oil and Gas Company and Wasserstein Perella &
Company, Incorporated.
James V. Derrick, Jr. is a Senior Vice President and General Counsel of Enron.
- ---------------------
He serves on the Management Committee of Enron and is a director of Enron Global
Power & Pipelines LLC, a New York Stock Exchange-listed entity that owns
interests in certain international pipeline and power projects. He has been
associated with Enron since 1991. Mr. Derrick is also a director of Mariner
Energy, Inc.
C. John Thompson has been employed by ECT since its inception in 1990, serving
- ----------------
as Vice President of the Domestic Corporate Finance Group. Previously, he was a
Partner with James C. Cooper, Inc., an investment banking firm based in Houston,
Texas.
2
<PAGE>
EMPLOYMENT AGREEMENTS
Messrs. Douglas H. Miller, Jarl P. Johnson, Grant W. Henderson,
Randell A. Bodenhamer, J. William Freeman and J. W. Spencer, III, have entered
into employment agreements (the "Employment Agreements") with the Company which
became effective on February 16, 1996. The Employment Agreements are for a
period of five years from February 16, 1996 (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 Company, and positions
with the Company as set forth below:
<TABLE>
<CAPTION>
Name Position with the Company 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 $350,000
Executive Officer
J. W. Spencer, III...... Vice President - Operations $170,000
</TABLE>
Each of these persons would receive his salary for the remaining term of
his Employment Agreement if the Company were to terminate his Employment
Agreement other than for cause. The Employment Agreements provide that the
employees agree not to compete with the Company for a period of six months after
their voluntary termination or termination for cause; in the case of Mr. Miller,
the covenant not to compete is for a period of two years, except that the
noncompetition period is one year in the event of incapacity, involuntary
termination other than for cause or his resignation due to a breach by the
Company of Mr. Miller's Employment Agreement.
3
<PAGE>
Item 11. EXECUTIVE COMPENSATION
----------------------
Summary Compensation Table. The following table sets forth the annual and
--------------------------
long-term compensation for the Company's Chief Executive Officer and the four
highest paid executive officers, as well as the total compensation paid to each
individual during the Company's last three fiscal years. Such individuals are
sometimes referred to as the "named executive officers."
<TABLE>
<CAPTION>
Long-term
Compensation
----------------
Annual Compensation Awards
--------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Compensation Options/SARs Compen-
Position Year Salary($) Bonus($) ($)[3] (#) sation($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Douglas H. Miller 1996 332,718 105,760 2,000 [4] 23,750[7] 7,160[9]
Chief Executive 1995 218,968 16,826 13,500 [4] --- 7,340[10]
Officer; 1994 201,469 15,938 12,000 [4] 28,865 7,131[11]
Chairman of the
Board
Grant W. Henderson 1996 215,781 73,490 2,000 [4] 2,375[7] 5,391[12]
President; 1995 156,406 12,338 9,750 [4][5] 100,000[8] 5,335[13]
Chief Financial 1994 143,906 10,919 --- 20,620 4,958[14]
Officer
Jarl P. Johnson[1] 1996 240,625 75,725 2,000 [4] 1,185[7] 7,733[15]
Chief Operating 1995 175,000 9,165 13,500 [4] --- 7,627[16]
Officer; Vice 1994 45,854 31,104[2] 1,500 [4][6] 108,750[8] 2,100[17]
Chairman of the
Board
J. William Freeman 1996 165,195 43,034 --- 1,188[7] 7,160[18]
Vice President - 1995 136,304 10,759 --- --- 7,021[19]
Engineering 1994 132,394 9,840 --- 18,980 2,100[20]
J. W. Spencer, III 1996 165,195 34,960 --- 1,070[7] 7,160[21]
Vice President - 1995 136,304 11,034 --- --- 7,033[22]
Operations 1994 132,394 10,755 --- 18,980 6,507[23]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
[1] Mr. Johnson's employment did not commence until September 30, 1994 when the
Company acquired Diamond Energy Operating Company. Mr. Johnson's
compensation is therefore reported from October 1, 1994 through December
31, 1996.
[2] Includes $27,936 paid to Mr. Johnson as compensation pursuant to the terms
of the acquisition of Diamond Energy Operating Company.
[3] For each of the named executive officers, the aggregate amount of
perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of the officer's total annual salary and bonus.
[4] Director's fees paid by the Company of $12,000 per year (during 1994 as
$6,000 in cash and $6,000 in Common Stock, calculated quarterly at the
average market price per quarter, during 1995 as $9,000 in cash and $3,000
in Common Stock, calculated quarterly at the average market price per
quarter and during 1996 as $2,000 cash). The cash portion of the director's
fees is paid in the quarter earned while the stock portion of the
director's fees is paid after the end of such quarter.
[5] Director's fees paid to Mr. Henderson were prorated to reflect his becoming
a director on March 15, 1995.
[6] Director's fees paid to Mr. Johnson were prorated to reflect his becoming a
director on September 30, 1994. Although Mr. Johnson accrued $3,000 in
director's fees, only $1,500 of those fees were paid in fiscal year 1994.
See Note [4].
[7] Represents options to purchase shares of Coda common stock (the
"Replacement Options") issued pursuant to a subscription agreement among
CAI and the Management Group (the "Subscription Agreement") which provided
that certain options to purchase common stock of Coda prior to the Merger
held by certain members of the Management Group (the "Specified Options")
and certain warrants to purchase common stock of Coda prior to the Merger
held by certain members of the Management Group (the "Specified Warrants")
would not be exercised prior to the effective time of the Merger and would,
as of the effective time, be canceled without exercise and without payment
of consideration. The Nonstatutory Stock Option Agreements ("NSOA")
governing the Replacement Options provide for the right for a period of 10
years from and after the effective time of the Merger to purchase shares of
Coda common stock for $0.01 per share. However, the Replacement Options may
only be exercised while the holder remains an employee and for a limited
period of time thereafter. The number of shares of Coda common stock
underlying the Replacement Options each member of the Management Group
received 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 common stock were converted, divided by the $100 per share
purchase price paid by JEDI and the other Management Group members
5
<PAGE>
for their shares of CAI common stock. Thus, if the Replacement Options are
exercised, the holders will have effectively paid the same purchase price
per share as JEDI and the Management Group paid for their shares of common
stock of Coda.
<TABLE>
<CAPTION>
Specified Specified Replacement
Options Warrants Options
# of Shares # of Shares # of Shares
----------- ----------- -----------
<S> <C> <C> <C>
Douglas H. Miller --- 500,000 23,750
Grant W. Henderson 28,924 100,000 2,375
Jarl P. Johnson 8,706 100,000 1,185
J. William Freeman 40,950 --- 1,188
J. W. Spencer III 19,458 --- 1,070
</TABLE>
[8] Includes a warrant for the purchase of up to 100,000 shares which is
awarded to each director of the Company on the date of his election or
selection and vests 25,000 shares per year beginning on the first
anniversary of the grant.
[9] Includes $6,750 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[10] Includes $6,930 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[11] Includes $6,742 attributable to the Company's matching contribution to its
401(k) Plan; and, $389 paid by the Company for term life insurance premium.
[12] Includes $4,981 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[13] Includes $4,925 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[14] Includes $4,569 attributable to the Company's matching contribution to its
401(k) Plan; and, $389 paid by the Company for term life insurance premium.
[15] Includes $7,323 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
6
<PAGE>
[16] Includes $7,217 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[17] Constitutes $2,100 paid by the Company for term life insurance premium.
[18] Includes $6,750 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[19] Includes $6,611 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[20] Includes $6,401 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[21] Includes $6,750 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[22] Includes $6,623 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
[23] Includes $6,097 attributable to the Company's matching contribution to its
401(k) Plan; and, $410 paid by the Company for term life insurance premium.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Number of % of Total Appreciation for
Securities Options/SARs Exercise Option Term
Underlying Granted to or Base Market Price (in thousands)
Options/SARs Employees Price on Date of Expiration ---------------------
Name Granted (#) In Fiscal Year ($/Sh) Grant ($) Date 0%($) 5%($) 10%($)
---- ------------ -------------- -------- ------------ ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas H. Miller 23,750 74 .01 100 2/16/2006 2,375 3,869 6,160
Grant W. 2,375 7 .01 100 2/16/2006 238 387 616
Henderson
Jarl P. Johnson 1,185 4 .01 100 2/16/2006 119 193 307
J. William Freeman 1,188 4 .01 100 2/16/2006 119 194 308
J. W. Spencer, III 1,070 3 .01 100 2/16/2006 107 174 278
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
The above represents Replacement Options issued pursuant to the
Subscription Agreement which provided that the Specified Options and Specified
Warrants would not be exercised prior to the effective time of the Merger and
would, as of the effective time, be canceled without exercise and without
payment of consideration. The NSOA governing the Replacement Options provide for
the right for a period of 10 years from and after the effective time of the
Merger to purchase shares of CEI common stock for $0.01 per share. However, the
Replacement Options may only be exercised while the holder remains an employee
and for a limited period of time thereafter. The number of shares of Coda common
stock underlying the Replacement Options each member of the Management Group
received 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
common stock were converted, divided by the $100 per share purchase price paid
by JEDI and the other Management Group members for their shares of CAI common
stock. Thus, if the Replacement Options are exercised, the holders will have
effectively paid the same purchase price per share as JEDI and the Management
Group paid for their shares of common stock of Coda.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------
Number of securities Value of unexercised
underlying unexercised in-the-money
Shares Value options/SARs at FY- options/SARs at
acquired on realized end (#)exercisable/ FY-end ($) exercisable/
Name exercise(#)[1] ($) [1] unexercisable unexercisable[2]
- -------------------- -------------- ------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
Douglas H. Miller 77,615 264,223 23,750 / -- n/a
Grant W. Henderson 16,696 29,361 2,375 / -- n/a
Jarl P. Johnson 44 94 1,185 / -- n/a
J. William Freeman 4,530 12,239 1,188 / -- n/a
J. W. Spencer, III 51,022 161,539 1,070 / -- n/a
- ------------------------------------------------------------------------------------------------
</TABLE>
[1] As a result of the Merger, all outstanding options and warrants were fully
vested and the holders thereof were entitled to receive the difference
between $7.75 per share and the exercise price for each share represented
by the options and warrants. The share and value numbers reflect the shares
represented by options and warrants that were converted into the right to
receive cash and the net cash paid, respectively, and do not reflect the
Specified Options and Specified Warrants that were converted into the
Replacement Options.
[2] Coda's common stock is not currently traded on any market. Therefore fair
market value is not available.
8
<PAGE>
DIRECTORS' COMPENSATION
Following completion of the Merger, members of the Company's Board of
Directors do not receive compensation for any services provided in their
capacities as directors, other than the reimbursement of expenses directly
incurred in connection with their service as directors.
Prior to completion of the Merger, the directors were compensated pursuant
to the terms of the Compensation Plan for Directors adopted during 1990 (the
"Plan"), which applied equally to non-employee directors and directors who were
also employees of the Company. The Plan provided a quarterly Director's fee of
$3,000, half in cash and half in Common Stock (at the average market price for
the quarter), plus the one-time grant to each Director of a warrant to purchase
up to 100,000 shares of Common Stock, at an exercise price equal to the greater
of $3.00 per share or the closing trade price on the date of the grant. Pursuant
to the Merger, each of the outstanding warrants (irrespective of whether or not
such warrant was currently exercisable) was canceled in exchange for either (i)
the cash payment of the "in-the-money" position of the warrant or (ii) equity
positions with the Company following the Merger.
Pursuant to the Plan, the cash portion of the director's compensation was
paid monthly in the month earned. The stock portion of the director's
compensation was paid quarterly, at the beginning of the quarter immediately
following the quarter in which the compensation was earned. The Plan was amended
on September 27, 1995, to provide that, effective July 1, 1995 all of the
compensation was to be paid in cash. During 1996, each Director was paid $2,000
in cash under the Plan. Additionally, Messrs. Earl Ellis, David Keener and
Worthy Warnack received $20,000, $15,000 and $15,000, respectively, for their
service on the Board of Directors' Special Committee which was formed in April
1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has not appointed a compensation
committee. The base compensation for all executive officers is determined
pursuant to their employment agreements. Douglas H. Miller, Grant W. Henderson
and Jarl P. Johnson participated in deliberations concerning executive officer
bonuses during the year ended December 31, 1996.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth the name and address of each stockholder of
the Company who is known by the Company to beneficially own more than five
percent of the Company's outstanding common stock, the number of shares
beneficially owned by each, and the percentage of outstanding common stock so
owned, as of February 28, 1997. As of February 28, 1997, there were 913,611
shares of common stock outstanding.
9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Amount of Percent
Name and Address of Beneficial Beneficial of
Title of Class Owner Ownership[1] Class
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Joint Energy Development 900,000 98.5
Investments Limited Partnership
1400 Smith Street
Houston, Texas 77002
- -----------------------------------------------------------------------------
</TABLE>
[1] All shares are owned directly by the named person and he has sole voting
and investment power with respect to such shares.
The table appearing below sets forth information as of February 28, 1997,
with respect to shares of common stock beneficially owned by each of the
Company's directors, the Company's Chief Executive Officer and the four other
most highly compensated executive officers, and all directors and executive
officers as a group, and the percent of the outstanding common stock so owned by
each.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Directors and Names Beneficial of
Title of Class Executive Officers Ownership [1] Class
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Douglas H. Miller 23,750[2] 2.53
Common Stock Jarl P. Johnson 3,800[3] [8]
Common Stock Grant W. Henderson 4,750[4] [8]
Common Stock J. William Freeman 2,375[5] [8]
Common Stock J. W. Spencer, III 2,375[6] [8]
Common Stock Richard B. Buy 0 0
Common Stock Timothy J. Detmering 0 0
Common Stock James V. Derrick, Jr. 0 0
Common Stock C. John Thompson 0 0
- -----------------------------------------------------------------------------
Common Stock All directors and executive 39,425[7] 4.2
officers as a group (10 persons)
- -----------------------------------------------------------------------------
</TABLE>
[1] Unless otherwise indicated, all shares are owned directly by the named
person and he has sole voting and investment power with respect to such
shares.
[2] Includes options to purchase 23,750 shares exercisable within 60 days.
[3] Includes options to purchase 1,185 shares exercisable within 60 days.
10
<PAGE>
[4] Includes options to purchase 2,375 shares exercisable within 60 days.
[5] Includes options to purchase 1,188 shares exercisable within 60 days.
[6] Includes options to purchase 1,070 shares exercisable within 60 days.
[7] Includes all options referenced in notes [2] through [6] above; 2,216
shares held directly by other executive officers of the Company and options
to purchase 159 shares exercisable within 60 days held by other executive
officers of the Company.
[8] Less than one percent.
Item 13. CERTAIN TRANSACTIONS
--------------------
CERTAIN INDEBTEDNESS
Douglas H. Miller, Chairman of the Board and Chief Executive Officer of the
Company, was indebted to the Company in an aggregate amount of $90,105 as of
February 19, 1996 represented the highest outstanding balance owned by Mr.
Miller to the Company in 1996. The indebtedness consisted of three promissory
notes, dated as of May 31, 1992, October 1, 1994, and May 31, 1995, in the
original principal amounts of $19,022, $19,250 and $69,526, respectively. The
October 1, 1994 note bears interest at 3.75%, and the remaining two notes bore
interest at the prime rate charged by NationsBank plus one percent. Except for
the October 1, 1994 promissory note, the proceeds from which were used to
purchase Common Stock under the Company's 1994 Employee Stock Purchase Plan, all
indebtedness represented Mr. Miller's miscellaneous personal expenses. On
February 20, 1996, Mr. Miller repaid the Company an aggregate amount of $90,105
representing all indebtedness owed by Mr. Miller to the Company.
During August 1996, Mr. Miller received $738,000 pursuant to a Limited
Recourse Promissory Note in the original principal amount of $1,188,000 (the
"Miller Note"). The Miller Note bears interest at 6.74% per annum with final
maturity on February 16, 2001, and provides that in no event will Mr. Miller's
liability thereunder (after the sale and disposition of all collateral securing
same) exceed 35% of the original principal balance of the Miller Note. In
connection with the execution of the Miller Note, the Company and Mr. Miller
entered into an amendment of Mr. Miller's NSOA which prohibits the exercise of
the option until all amounts due under the Miller Note have been paid in full.
SUBSCRIPTION AGREEMENT
CAI entered into a Subscription Agreement with members of the Management
Group which provided for the acquisition by such person of CAI common stock and
the grant to them of the Replacement Options. Under the Subscription Agreement,
each member of the Management Group
11
<PAGE>
who acquired CAI common stock paid $100 per share for shares thereof, which is
the same price per share paid by JEDI for the remaining shares of CAI common
stock. Under the Subscription Agreement, the Management Group acquired CAI
common stock immediately prior to the effective time of the Merger in exchange
for varying combinations of (i) proceeds from limited recourse promissory notes
payable to CAI in the aggregate principal amount of $917,000 (the "Promissory
Notes"), (ii) Common Stock, which was valued for this purpose at $7.75 per
share, and (iii) cash. The CAI common stock so acquired was not registered
under the Securities Act or any state securities laws and did not have the
benefit of any registration rights, but is subject to the Stockholders Agreement
described below. See "-Stockholders Agreement." By virtue of the Merger, each
share of CAI common stock was converted into one share of Coda common stock.
The Subscription Agreement provided that the Specified Options and
Specified Warrants would not be exercised prior to the effective time of the
Merger and would, as of the effective time, be canceled without exercise and
without payment of consideration. Concurrently, the Management Group entered
into NSOA governing the Replacement Options that provided for the right for a
period of 10 years from and after the effective time of the Merger to purchase
shares of Coda common stock for $0.01 per share. However, the Replacement
Options may only be exercised while the holder remains an employee and for a
limited period of time thereafter. The number of shares of Coda common stock
underlying the Replacement Options each member of the Management Group received
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 common stock
were converted, divided by the $100 per share purchase price paid by JEDI and
the other Management Group members for their shares of CAI common stock. Thus,
if the Replacement Options are exercised, the holders will have effectively paid
the same purchase price per share as JEDI and the Management Group paid for
their shares of common stock of Coda.
The Promissory Notes will be due on February 16, 2001, bear interest at
5.61%, are secured by the Company common stock purchased with the proceeds
thereof and certain rights of the maker under the Stockholders Agreement
described below, and provide that in no event will an individual maker's
liability thereunder for any deficiency on his respective Promissory Note (after
the sale or disposition of all collateral securing same) exceed 35% of the
original principal balance of the Promissory Note. Messrs. Randell A.
Bodenhamer, J. William Freeman, Grant W. Henderson and J. W. Spencer, III were
indebted to the Company pursuant to these promissory notes in the principal
amounts of $118,700, $118,700, $237,500 and $118,700, respectively.
STOCKHOLDERS AGREEMENT
CAI, JEDI and the Management Group entered into a Stockholders Agreement
dated as of October 30, 1995, as amended by Amendment No.1 to Stockholders
Agreement dated as of January 10, 1996 (as amended, 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 common stock of Coda that may be issued by Coda and (ii) are restricted from
transferring their
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Coda common stock. Coda has a right to match any third party offer to purchase
shares of Coda common stock from any stockholder, and, in the event that Coda
does not purchase those shares, the other stockholders may have a right to
include a pro rata portion of their Coda 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
that his voluntary termination (except upon retirement at age 65 or older or the
expiration of the term of any employment agreement he has with Coda) or his
termination by Coda for cause, then Coda shall have a right to purchase such
member's shares of Coda common stock at a purchase price to be determined from
time to time by Coda 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 Company 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 cause, then such member shall have the right to require Coda to purchase
such member's shares of Coda common stock based on the previously described
formula. The purchase price under the formula will vary depending on the
financial performance of the Company 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 Coda) (each, a "Trigger
Event"), an amount, which is payable in cash or additional shares of Coda 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 Coda 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 Coda. The Stockholders Agreement also provides
that if the employment of a member of the Management Group terminated, his
Special Management Right shall terminate and , if the termination is other that
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 of the Merger, Coda 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 1,900 shares of Coda common stock. Furthermore,
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 it terms, (ii)
October 30, 2005, (iii) the date on which an initial public offering of Coda
common stock or any business transaction involving Coda whereby Coda common
stock becomes a publicly traded security is consummated, (iv) the date of the
dissolution, liquidations or winding-up of Coda and (v) the date of the delivery
to Coda of a written termination notice executed by certain parties to the
Stockholders Agreement.
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<PAGE>
ENRON
Enron is the parent of ECT and accordingly may be deemed to control
indirectly both JEDI and the Company. Enron and certain of its subsidiaries and
other affiliates collectively participate in nearly all phases of the oil and
natural gas industry and are, therefore, competitors of the Company. In
addition, ECT and JEDI have provided, and may in the future provide, and ECT
Securities Corp. has assisted, and may in the future assist, in arranging
financing to non-affiliated participants in the oil and natural gas industry who
are or may become competitors of the Company. Because of these various
conflicting interests, ECT, the Company, JEDI and the Management Group have
entered into the Business Opportunity Agreement which is intended to make it
clear that Enron and its affiliates have no duty to make business opportunities
available to the Company in most circumstances. The Business Opportunity
Agreement also provides that ECT and its affiliates may pursue certain business
opportunities to the exclusion of the Company. The Business Opportunity
Agreement may limit the business opportunities available to the Company. In
addition, pursuant to the Business Opportunity Agreement there may be
circumstances in which the Company will offer business opportunities to certain
affiliates of Enron. If an Enron affiliate is offered such an opportunity and
decides to pursue it, the Company may be unable to pursue it.
Certain of Enron's affiliates purchase oil and gas from the Company.
Management of the Company has determined that the contracts for sale of oil and
gas to Enron affiliates have been entered into on terms no less favorable that
those available from third parties after receiving competitive bids from third
parties. Enron affiliates paid the Company approximately $24.1 million under
such contracts for the 319 day period from February 17, 1996 to December 31,
1996.
The Company has entered into two fixed price oil swaps with ECT. One swap
covers the period from January 1, 1995 through June 30, 1997 at a strike price
of $19.05 covering 15,000 barrels per month. The other covers the period from
January 1, 1997 through December 31, 1997 at a strike price of $19.55 covering
10,000 barrels per month. Management of the Company had determined that both
swaps were entered into on terms no less favorable than those available from
third parties after receiving competitive bids from third partes. The Company
paid ECT approximately $539,000 under such contracts for the 319 day period from
February 17, 1996 to December 31, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CODA ENERGY, INC.
(Registrant)
By: /s/ Douglas H. Miller
---------------------------------------------------
Douglas H. Miller
Chief Executive Officer
DATE: March 27, 1997
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
Name Capacities
- ------------------------------ ----------------------------------
/s/ Douglas H. Miller Chairman of the Board and Chief
- ------------------------------ Executive Officer
Douglas H. Miller
President, Chief Financial Officer
/s/ Grant W. Henderson* (Principal Financial and Accounting
- ------------------------------ Officer) and Director
Grant W. Henderson
/s/ Jarl P. Johnson* Vice Chairman of the Board and
- ------------------------------ Chief Operating Officer
Jarl P. Johnson
/s/ Richard B. Buy*
- ------------------------------ Director
Richard B. Buy
/s/ Timothy J. Detmering*
- ------------------------------ Director
Timothy J. Detmering
/s/ James V. Derrick, Jr.*
- ------------------------------ Director
James V. Derrick, Jr.
/s/ C. John Thompson*
- ------------------------------ Director
C. John Thompson
* Executed on behalf of the indicated person by Douglas H. Miller, duly
appointed attorney-in-fact.
By: /s/ Douglas H. Miller
-----------------------------------
Douglas H. Miller
Attorney-in-fact
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