<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM 10-Q
<TABLE>
<S> <C> <C>
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
.
Commission File No.: 0-22576
</TABLE>
COHO ENERGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-2488635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14785 PRESTON ROAD, SUITE 860
DALLAS, TX 75240
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (972) 774-8300
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MAY 5, 1997
----- --------------------------
<C> <C>
Common Stock, $.01 Par Value 20,385,793
</TABLE>
================================================================================
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- December 31, 1996
and March 31, 1997........................................ 1
Condensed Consolidated Statements of Earnings -- three
months ended March 31, 1996 and 1997...................... 2
Condensed Consolidated Statements of Cash Flows -- three
months ended March 31, 1996 and 1997...................... 3
Notes to Condensed Consolidated Financial Statements........ 4-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6-8
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 8
PART II. OTHER INFORMATION.................................................... 9
Item 1. Legal Proceedings........................................... 9
Item 2. Changes in Securities....................................... 9
Item 3. Defaults Upon Senior Securities............................. 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
Item 5. Other Information........................................... 9
Item 6. Exhibits and Reports on Form 8-K............................ 9
Signatures........................................................... 10
Index to Exhibits.................................................... 11
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 1,864 $ 1,185
Accounts receivable, principally trade.................... 11,884 8,366
Deferred income taxes..................................... 913 913
Investment in marketable securities....................... 1,962 1,983
Other current assets...................................... 995 745
17,618 13,192
PROPERTY AND EQUIPMENT, at cost net of accumulated depletion
and depreciation, based on full cost accounting method
(note 2).................................................. 210,212 217,397
OTHER ASSETS................................................ 2,211 2,121
-------- --------
$230,041 $232,710
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, principally trade....................... $ 5,752 $ 4,786
Accrued liabilities and other payables.................... 5,043 5,557
Current portion of long term debt......................... 161 95
-------- --------
10,956 10,438
LONG TERM DEBT excluding current portion.................... 122,777 122,314
DEFERRED INCOME TAXES....................................... 14,842 16,220
-------- --------
148,575 148,972
-------- --------
COMMITMENTS AND CONTINGENCIES (note 4)
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01 per share Authorized
10,000,000 shares, none issued......................... -- --
Common stock, par value $0.01 per share Authorized
50,000,000 shares Issued 20,375,126 shares............. 203 204
Additional paid-in capital................................ 83,516 83,683
Retained earnings (deficit)............................... (2,253) (149)
-------- --------
Total shareholders' equity................................ 81,466 83,738
-------- --------
$230,041 $232,710
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
1
<PAGE> 4
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1996 1997
------- -------
<S> <C> <C>
OPERATING REVENUES
Net crude oil and natural gas
production............................ $12,367 $15,536
OPERATING EXPENSES
Crude oil and natural gas
production......................... 2,830 3,080
Taxes on crude oil and natural gas
production......................... 597 540
General and administrative............ 1,459 1,776
Depletion and depreciation............ 3,905 4,536
------- -------
Total operating expenses...... 8,791 9,932
------- -------
OPERATING INCOME........................ 3,576 5,604
------- -------
OTHER INCOME AND EXPENSES
Interest and other income............. 477 193
Interest expense...................... (2,312) (2,291)
------- -------
(1,835) (2,098)
------- -------
EARNINGS (LOSS) FROM OPERATIONS BEFORE
INCOME TAXES.......................... 1,741 3,506
INCOME TAXES EXPENSE.................... 706 1,402
------- -------
NET EARNINGS (LOSS) APPLICABLE TO COMMON
STOCK................................. $ 1,035 $ 2,104
======= =======
EARNINGS (LOSS) PER COMMON SHARE (note
3).................................... $ .05 $ .10
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
2
<PAGE> 5
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
1996 1997
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.............................................. $ 1,035 $ 2,104
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depletion and depreciation............................. 3,905 4,536
Deferred income taxes.................................. 658 1,378
Amortization of debt issue costs and other items....... 236 137
Changes in operating assets and liabilities:
Accounts receivable and other assets................... (2,598) 3,769
Accounts payable and accrued liabilities............... 2,348 (3,729)
Investment in marketable securities.................... -- (21)
------- --------
Net cash provided by operating activities................... 5,584 8,174
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment.................................... (7,240) (11,721)
Changes in accounts payable and accrued liabilities
related to exploration and development................. (622) 3,277
------- --------
Net cash used in investing activities....................... (7,862) (8,444)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long term debt................................ 5,500 3,500
Repayment of long term debt............................... (3,566) (4,077)
Proceeds from exercised stock options..................... -- 168
------- --------
Net cash provided by (used in) financing activities......... 1,934 (409)
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (344) (679)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,430 1,864
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,086 $ 1,185
======= ========
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest.................................................. $ 2,812 $ 2,213
Income taxes.............................................. $ 83 $ 639
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE> 6
COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED)
(UNAUDITED)
1. BASIS OF PRESENTATION
General
The accompanying condensed consolidated financial statements of Coho
Energy, Inc. (the "Company") have been prepared without audit, in accordance
with the rules and regulations of the Securities and Exchange Commission and do
not include all disclosures normally required by generally accepted accounting
principles or those normally made in annual reports on Form 10-K. All material
adjustments, consisting only of normal recurring accruals, which, in the opinion
of management, were necessary for a fair presentation of the results for the
interim periods, have been made. The results of operations for the three month
period ended March 31, 1997 are not necessarily indicative of the results to be
expected for the full year. The condensed consolidated financial statements
should be read in conjunction with the notes to the financial statements, that
are included as part of the Company's annual report on Form 10-K for the year
ended December 31, 1996.
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Crude oil and natural gas leases and rights including
exploration, development and equipment thereon, at cost... $ 328,836 $ 340,557
Accumulated depletion and depreciation...................... (118,624) (123,160)
--------- ---------
$ 210,212 $ 217,397
========= =========
</TABLE>
Overhead expenditures directly associated with exploration and development
of crude oil and natural gas reserves have been capitalized in accordance with
the accounting policies of the Company. Such charges totalled $583,000 and
$830,000 for the three months ended March 31, 1996 and 1997, respectively.
During the three months ended March 31, 1996 and 1997, the Company did not
capitalize any interest or other financing charges on funds borrowed to finance
unproved properties or major development projects.
At December 31, 1996 and March 31, 1997, unproved crude oil and natural gas
properties totalling $8,284,000 and $8,635,000, respectively, were excluded from
costs subject to depletion. These costs are anticipated to be included in costs
subject to depletion during the next three to five years.
3. EARNINGS PER SHARE
Earnings per share have been calculated based on the weighted average
number of shares outstanding (including common stock plus, when their effect is
dilutive, common stock equivalents consisting of stock options) for the three
months ended March 31, 1996 and 1997 of 20,230,915 and 20,917,219, respectively.
4. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal proceedings and claims which
arise in the normal course of business. Based on discussions with legal counsel,
the Company does not believe that the ultimate resolution of such actions will
have a significant effect on the Company's financial position; however, an
unfavorable outcome could have a material adverse effect on the current year
results.
Like other crude oil and natural gas producers, the Company's operations
are subject to extensive and rapidly changing federal and state environmental
regulations governing emissions into the atmosphere, waste
4
<PAGE> 7
COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
water discharges, solid and hazardous waste management activities and site
restoration and abandonment activities. The Company does not believe that any
potential liability, in excess of amounts already provided for, would have a
significant effect on the Company's financial position.
The Company has entered into certain financial arrangements which act as a
hedge against price fluctuations in future crude oil production. Gains and
losses on these transactions are recorded in earnings when the future production
sale occurs. The Company has hedged 4,000 barrels of crude oil production per
day through June 30, 1997 which fixes a minimum West Texas Intermediate ("WTI")
price per barrel of $18.00 and a maximum WTI price per barrel of $21.30.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and notes thereto included elsewhere
herein.
General
The Company seeks to acquire controlling interests in underdeveloped oil
and gas properties and attempts to maximize reserves and production from such
properties through relatively low-risk activities such as
development/delineation drilling, including high-angle and horizontal drilling,
multi-zone completions, recompletions, enhancement of production facilities and
secondary recovery projects. During the three months ended March 31, 1997, 71%
of production revenues were attributable to the sale of crude oil and the
remaining 29% were derived from natural gas. These percentages are consistent
with the quarter ended March 31, 1996.
The Company increased its crude oil and natural gas production in the first
three months of 1997 as a result of ongoing development activities on its
existing properties in Mississippi. Average net daily barrel of oil equivalent
("BOE") production was 9,974 BOE for the three months ended March 31, 1997 as
compared to 9,590 BOE for the same period in 1996. For purposes of determining
BOE herein, natural gas is converted to barrels ("Bbl") on a 6 thousand cubic
feet ("Mcf") to 1 Bbl basis.
Crude oil and natural gas prices are subject to significant seasonal,
political and other variables which are beyond the Company's control. In an
effort to reduce the effect on the Company of the volatility of the prices
received for crude oil and natural gas, the Company has entered, and expects to
continue to enter, into crude oil and natural gas hedging transactions. The
Company's hedging program is intended to stabilize cash flow and thus allow the
Company to plan its capital expenditure program with greater certainty. Because
all hedging transactions are tied directly to the Company's crude oil and
natural gas production, the Company does not believe that such transactions are
of a speculative nature.
Liquidity and Capital Resources
Capital Sources. For the three months ended March 31, 1997, cash flow
generated from operating activities was $8.2 million compared with $5.8 million
for the same period in 1996. A price increase of 21% for crude oil and 27% for
natural gas and a 4% BOE production increase for the three months ended March
31, 1997, compared to the same period in 1996, are the major factors
contributing to this increase. See "Results of Operations" for a discussion of
improved operating results.
At March 31, 1997, the Company had working capital of $2.8 million,
primarily due to investments in marketable securities.
As of March 31, 1997, the amount available to the Company ("Borrowing
Base") under its revolving credit facility (the "Restated Credit Agreement") is
$150 million, with an additional $20 million immediately available to the
Company to provide bridge financing for acquisitions. Outstanding advances under
the Restated Credit Agreement at March 31, 1997 were $120 million, all of which
are classified as long term. The Company also had letters of credit aggregating
$2.3 million outstanding under the Restated Credit Agreement as of March 31,
1997, to secure promissory notes issued in August 1995 relating to the
acquisition of the Brookhaven field in Mississippi, leaving $27.7 million
available under the facility at March 31, 1997. The Restated Credit Agreement
permits advances and repayments until January 1, 2000, at which time the loan
converts to a non-revolver term facility that requires quarterly principal
repayments until the loan is fully repaid in 2003.
The Restated Credit Agreement contains certain financial and other
covenants including (i) the maintenance of minimum amounts of shareholders'
equity ($65 million plus 50% of consolidated net income beginning in 1994), (ii)
maintenance of minimum ratios of cash flow to interest expense (2.5 to 1) as
well as current assets (including unused Borrowing Base) to current liabilities
(1 to 1), (iii) limitations on the Company's ability to incur additional debt
and (iv) restrictions on the payment of dividends.
6
<PAGE> 9
Capital Expenditures. During the first three months of 1997, the Company
incurred capital expenditures of $11.7 million compared with $7.2 million for
the first three months of 1996. The capital expenditures incurred during the
first three months of 1997 were largely in connection with the continuing
development efforts on existing wells in the Company's Laurel, Martinville, Soso
and Brookhaven fields. In addition during the first three months of 1997, the
Company was in various stages of drilling eight wells, one in the Laurel field,
one in the Martinville field, one in the Soso field, two in the Brookhaven field
and three in the Monroe field. General and administrative costs directly
associated with the Company's exploration and development activities were
$830,000 for the first three months of 1997, compared with $583,000 for the
first three months of 1996, and are included in total capital expenditures.
The Company has no material capital commitments and is consequently able to
adjust the level of its expenditures as circumstances warrant.
Results of Operations
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------------
1996 1997
----------- -----------
(IN THOUSANDS, EXCEPT PER DAY,
PER BBL AND PER MCF DATA)
<S> <C> <C>
SELECTED OPERATING DATA
Production
Crude Oil (Bbl/day)....................................... 6,609 6,724
Natural Gas (Mcf/day)..................................... 17,884 19,499
BOE (Bbl/day)............................................. 9,590 9,974
Average Sales Prices
Crude Oil................................................. $ 15.16 $ 18.35
Natural Gas............................................... $ 1.99 $ 2.53
Other
Production costs per BOE(1)............................... $ 3.93 $ 4.03
Depletion per BOE......................................... $ 4.47 $ 5.05
Revenues
Production revenues
Crude Oil.............................................. $ 9,121 $11,101
Natural Gas............................................ 3,246 4,435
------- -------
$12,367 $15,536
======= =======
</TABLE>
- ---------------
(1) Includes lease operating expenses and production taxes.
Operating Revenues. During the first three months of 1997, production
revenues increased 26% to $15.5 million as compared to $12.4 million for the
same period in 1996 (including hedging gains and losses discussed below). This
increase was principally due to an 8% increase in natural gas production, a 21%
increase in crude oil prices received and a 27% increase in natural gas prices
received.
The 8% increase in natural gas production is primarily a result of the
continued positive response from the Company's development efforts in the
Martinville field. Crude oil production increased slightly during the first
quarter of 1997 compared to the same quarter in 1996. Significant production
increases were made in the Martinville, Soso and Brookhaven fields, with
production increasing by 135%, 61% and 52%, respectively. These production
increases were offset by production decreases in the Summerland and Laurel
fields due to the unusually high frequency of weather related power outages and
mechanical problems during the first quarter of 1997. In addition, the
Summerland field is experiencing normal production declines due to the maturity
of the field.
Crude oil prices increased during the first quarter of 1997 compared to the
same period in 1996 due to the strong demand for crude oil. The posted price for
the Company's crude oil averaged $20.98 for the three
7
<PAGE> 10
months ended March 31, 1997, a 16% increase over the average posted price of
$18.04 experienced in the first quarter of 1996. The price per barrel received
by the Company is adjusted for the quality of the crude oil and is generally
lower than the posted price.
The price for the Company's natural gas, including hedging gains and
losses, increased 27% from $1.99 in the first three months of 1996 to $2.53 in
the first three months of 1997, due to increased heating needs during the winter
season and an overall tightening of supply and demand in the market.
Production revenues for the three months ended March 31, 1997 included
crude oil hedging losses of $396,000 ($0.65 per Bbl) compared to hedging losses
of $380,000 ($0.63 per Bbl) for the same period in 1996. Production revenues for
the 1997 period also included hedging gains on natural gas of $87,000 ($0.05 per
Mcf) compared with natural gas losses of $708,000 ($0.44 per Mcf) during the
same period in 1996. Additionally, the Company has entered into certain
arrangements which fix a minimum WTI price per barrel of $18.00 and a maximum
WTI price per barrel of $21.30 for 4,000 barrels of production per day through
June 30, 1997. Any gain or loss on the Company's crude oil hedging transactions
is determined as the difference between the contract price and the average
closing price for WTI on the New York Mercantile Exchange for the contract
period. Any gain or loss on the Company's natural gas hedging transactions is
generally determined as the difference between the contract price and the
average settlement price for the last three days during the month in which the
hedge is in place. Consequently, hedging activities do not affect the actual
sales price received for the Company's crude oil and natural gas.
Interest and other income decreased to $193,000 in 1997 from $477,000 in
1996 primarily due to $457,000 of interest earned during the first quarter of
1996 on the receivable from the sale of the marketing and pipeline segment of
operations, partially offset by $137,000 of interest received during the first
quarter of 1997 on a federal tax refund.
Expenses. Production expenses (including production taxes) were $3.6
million for the first three months of 1997 compared to $3.4 million for the
first three months of 1996. On a BOE basis, production costs increased slightly
to $4.03 per Bbl in 1997 compared to $3.93 per Bbl in 1996. This increase is due
to additional production volumes and a 6% increase per BOE in operating expenses
reduced by a 12% decrease per BOE in production taxes.
General and administrative costs increased to $1.8 million in 1997 from
$1.5 million in 1996. This increase is primarily due to increased personnel
costs due to staff additions in the Dallas office made throughout 1996 to handle
the increased capital spending activities in Mississippi.
Depletion and depreciation increased 16% to $4.5 million for the three
months ended March 31, 1997 from $3.9 million in the same period in 1996. This
increase primarily is a result of increased production volumes and an increased
rate per BOE, which increased to $5.05 versus $4.47 for the comparable period in
1996.
The Company's net earnings for the first three months of 1997 were
$2,104,000 as compared to $1,035,000 for the same period in 1996 for the reasons
discussed above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
None
8
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<C> <S>
10.1 -- First Amendment to Employment Agreement dated as of March
17, 1997, by and between Anne Marie O'Gorman and Coho
Energy, Inc.
10.2 -- Second Amendment to Employment Agreement dated as of
March 17, 1997, by and among Jeffrey Clarke and Coho
Energy, Inc.
10.3 -- Second Amendment to Employment Agreement dated as of
March 17, 1997, by and among R. M. Pearce and Coho
Energy, Inc.
10.4 -- Second Amendment to Employment Agreement dated as of
March 17, 1997, by and among Eddie M. LeBlanc and Coho
Energy, Inc.
27 -- Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K
None
9
<PAGE> 12
COHO ENERGY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COHO ENERGY, INC.
(Registrant)
Date: May 15, 1997
By: /s/ Jeffrey Clarke
----------------------------------
Jeffrey Clarke
(Chairman, President, and
Chief Executive Officer)
By: /s/ Eddie M. LeBlanc,
III
----------------------------------
Eddie M. LeBlanc, III
(Sr. Vice President and
Chief Financial Officer)
10
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NO.:
---------
<S> <C>
10.1 First Amendment to Employment Agreement dated as of March 17, 1997, 12
by and between Anne Marie O'Gorman and Coho Energy, Inc.
10.2 Second Amendment to Employment Agreement dated as of March 17, 18
1997, by and among Jeffrey Clarke and Coho Energy, Inc.
10.3 Second Amendment to Employment Agreement dated as of March 17, 24
1997, by and among R. M. Pearce and Coho Energy, Inc.
10.4 Second Amendment to Employment Agreement dated as of March 17, 30
1997, by and among Eddie M. LeBlanc and Coho Energy, Inc.
27 Financial Data Schedule 36
</TABLE>
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated
as of March 17, 1997 by and between Coho Energy, Inc., a Texas corporation
(the "Company"), and Anne Marie O'Gorman (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated as of August 19, 1996 (the "Agreement"); and
WHEREAS, the Company and Executive hereby desire to amend the
Agreement as set forth in this First Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby stipulate and agree as follows:
1. Section 7(c) of the Agreement is hereby amended to read as
follows in its entirety:
"(c) Termination by Company Without Cause or by the
Executive with Good Reason. If either the Company terminates the
Executive's employment without Cause or the Executive terminates her
employment for Good Reason (as hereinafter defined), the Company
shall:
(i) pay to the Executive, within 30 days after the date
of such termination, a lump sum cash payment equal to two times the
Executive's then current annual rate of total compensation;
(ii) pay the Executive any accrued but unpaid compensation
as of the date of the termination of employment; and
(iii) continue until the first anniversary of the
termination of the Executive's employment, or such longer period as
any plan, program or policy or ERISA or other laws may provide,
benefits to the Executive as set forth in Section 7(f) below.
As used in this Agreement, "Good Reason" shall mean: (A) the failure
by the Company to elect or re-elect or to appoint or re-appoint the
Executive to the office of Senior Vice President of the Company
without Cause; (B) a material change by the Company of the Executive's
function, duties or responsibilities that would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance or scope from the position and attributes thereof described
in Section 2 above; (C) the Company requires the Executive to re-
locate her primary office to a location that is greater than 50 miles
from the location of the Company as of the date hereof, or (D) any
other material breach of this Agreement by the Company."
2. The beginning of the first sentence, through subclause (i), of
Section 7(d) of the Agreement is hereby amended to read as follows in its
entirety:
"(d) Termination Following a Change of Control. If,
within three years of a Change of Control, either the Company
terminates the Executive's employment without Cause or the
<PAGE> 2
Executive terminates her employment for Good Reason, then, in addition
to any amounts to which the Executive may otherwise be entitled
hereunder, the Company shall:
(i) pay to the Executive, within 30 days after the
date of such termination, a lump sum cash payment equal to an
additional .99 times the Executive's then current annual rate of total
compensation;"
3. Section 7(g) of the Agreement shall be deleted and a new
Section 8 shall be added to read as follows in its entirety:
"8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or any of its affiliates (as that term is defined in the regulations
promulgated under the Securities Exchange Act of 1934, as amended) under this
Agreement to or for the benefit of Executive (any such payments or
distributions being individually referred to herein as a "Payment," and any two
or more of such payments or distributions being referred to herein as
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code (such excise tax, together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect to such excise tax, and
any interest in respect of such penalties, additions to tax or additional
amounts, being collectively referred herein to as the "Excise Tax"), then
Executive shall be entitled to receive an additional payment or payments
(individually referred to herein as a "Gross-Up Payment" and any two or more of
such additional payments being referred to herein as "Gross-Up Payments") in an
amount such that after payment by Executive of all taxes (as defined in Section
8(k)) imposed upon the Gross-Up Payment, Executive retains an amount of such
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
The Gross-Up Payments required by this Section 8(a) are
limited to the Excise Tax due on Payments under this Agreement; provided that
when calculating the amount of Payments under this Agreement which are subject
to an excise tax under Sections 4999 and 280G of the Code, the base amount
described in Section 280G(b)(3) of the Code shall be allocated (i) first to all
payments and distributions by the Company to the Executive subject to such
excise tax other than Payments under this Agreement, and (ii) then, to the
extent any of such base amount is unallocated, to Payments under this
Agreement.
(b) Subject to the provisions of Section 8(c) through (i), any
determination (individually, a "Determination") required to be made under this
Section 8(b), including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall initially be made, at the Company's expense, by
nationally recognized tax counsel mutually acceptable to the Company and
Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting legal
authorities, calculations, and documentation both to the Company and Executive
within 15 business days of the termination of Executive's employment, if
applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion reasonably acceptable to Executive that
no Excise Tax will be imposed with respect to any such Payment or Payments.
Executive shall have the right to dispute any Determination (a "Dispute")
within 15 business days after delivery of Tax Counsel's opinion with respect to
such Determination. The Gross-Up Payment, if any, as determined pursuant to
such Determination shall, at the Company's expense, be paid by the Company to
Executive within five business days of Executive's receipt of such
Determination. The existence of a Dispute shall not in any way affect
Executive's right to receive the Gross-Up Payment in accordance with such
Determination. If
-2-
<PAGE> 3
there is no Dispute, such Determination shall be binding, final and conclusive
upon the Company and Executive, subject in all respects, however, to the
provisions of Section 8(c) through (i) below. As a result of the uncertainty
in the application of Sections 4999 and 280G of the Code, it is possible that
Gross-Up Payments (or portions thereof) which will not have been made by the
Company should have been made ("Underpayment"), and if upon any reasonable
written request from Executive or the Company to Tax Counsel, or upon Tax
Counsel's own initiative, Tax Counsel, at the Company's expense, thereafter
determines that Executive is required to make a payment of any Excise Tax or
any additional Excise Tax, as the case may be, Tax Counsel shall, at the
Company's expense, determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined
in Section 8(j)) that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give rise to a claim by
Executive against the Company under this Section 8 ("Claim"), including, but
not limited to, a claim for indemnification of Executive by the Company under
Section 8(c), then such party shall promptly notify the other party hereto in
writing of such Claim ("Tax Claim Notice").
(e) If a Claim is asserted against Executive ("Executive Claim"),
Executive shall take or cause to be taken such action in connection with
contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as
are reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide
that the Company shall be solely responsible for the payment of any and all
fees and disbursements of such counsel and any experts) and the execution of
powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations) under this
Agreement and that the Company elects to contest, and to control the
defense or prosecution of, such Executive Claim at the Company's sole
risk and sole cost and expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order for
Executive, at the Company's request, to pay or cause to be paid the
tax claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of Section 8(g), sue for a refund of
such tax if such claim for refund is disallowed by the appropriate
taxing authority (it being understood and agreed by the parties hereto
that the Company shall only be entitled to sue for a refund and the
Company shall not be entitled to initiate any proceeding in, for
example, United States
-3-
<PAGE> 4
Tax Court) and shall indemnify and hold Executive harmless, on a fully
grossed-up after tax basis, from any tax imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and
(iii) the Company shall reimburse Executive for any and all
costs and expenses resulting from any such request by the Company and
shall indemnify and hold Executive harmless, on fully grossed-up
after-tax basis, from any tax imposed as a result of such
reimbursement.
(f) Subject to the provisions of Section 8(e) hereof, the Company
shall have the right to defend or prosecute, at the sole cost, expense and risk
of the Company, such Executive Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted diligently by the Company to a
Final Determination; provided, however, that (i) the Company shall not, without
Executive's prior written consent, enter into any compromise or settlement of
such Executive Claim that would adversely affect Executive, (ii) any request
from the Company to Executive regarding any extension of the statute of
limitations relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues involved
in, and amount of, the Executive Claim relate is limited solely to such
contested issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Executive Claim and
Executive shall be entitled to settle or contest, in his sole and absolute
discretion, any other issue raised by the Internal Revenue Service or any other
taxing authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to be
provided to the Company any information reasonably requested by the Company
that relates to such Executive Claim, and shall otherwise cooperate with the
Company and its representatives in good faith in order to contest effectively
such Executive Claim. The Company shall keep Executive informed of all
developments and events relating to any such Executive Claim (including,
without limitation, providing to Executive copies of all written materials
pertaining to any such Executive Claim), and Executive or his authorized
representatives shall be entitled, at Executive's expense, to participate in
all conferences, meetings and proceedings relating to any such Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Section 8(e)(ii) hereof, the extent of the liability of the Company
hereunder with respect to such tax claimed has been established by a Final
Determination, Executive shall promptly pay or cause to be paid to the Company
any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and
payable by the Company to Executive, whether under the provisions of this
Agreement or otherwise. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 8(e)(ii), a determination is made
by the Internal Revenue Service or other appropriate taxing authority that
Executive shall not be entitled to any refund with respect to such tax claimed
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of any Gross-Up Payments and other payments required to be paid
hereunder.
(h) With respect to any Executive Claim, if the Company fails to
deliver an Election Notice to Executive within the period provided in Section
8(e)(i) hereof or, after delivery of such Election Notice, the Company fails to
comply with the provisions of Section 8(e)(ii) and (iii) and (f) hereof, then
Executive shall at any time thereafter have the right (but not the obligation),
at his election and in his sole and absolute discretion, to defend or
prosecute, at the sole cost, expense and risk of the Company, such
-4-
<PAGE> 5
Executive Claim. Executive shall have full control of such defense or
prosecution and such proceedings, including any settlement or compromise
thereof. If requested by Executive, the Company shall cooperate, and shall
cause its Affiliates to cooperate, in good faith with Executive and his
authorized representatives in order to contest effectively such Executive
Claim. The Company may attend, but not participate in or control, any defense,
prosecution, settlement or compromise of any Executive Claim controlled by
Executive pursuant to this Section 8(h) and shall bear its own costs and
expenses with respect thereto. In the case of any Executive Claim that is
defended or prosecuted by Executive, Executive shall, from time to time, be
entitled to current payment, on a fully grossed-up after tax basis, from the
Company with respect to costs and expenses incurred by Executive in connection
with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Section 8(i),
the Company shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay,
on a fully grossed-up after tax basis, to Executive in immediately available
funds the full amount of any taxes arising or resulting from or incurred in
connection with such Executive Claim at least ten calendar days before the date
payment of such taxes is due from Executive, except where payment of such taxes
is sooner required under the provisions of this Section 8(i), in which case
payment of such taxes (and payment, on a fully grossed-up after tax basis, of
any costs and expenses required to be paid under this Section 8(i)) shall be
made within the time and in the manner otherwise provided in this Section 8(i).
(j) For purposes of this Agreement, the term "Final Determination"
shall mean (A) a decision, judgment, decree or other order by a court or other
tribunal with appropriate jurisdiction, which has become final and non-
appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts."
4. Sections 8, 9, 10, 11, 12, 13, 14, 15 and 16 of the Agreement,
as they existed prior to this Amendment, shall be renumbered as Sections 9, 10,
11, 12, 13, 14, 15, 16 and 17, respectively, and all references thereto within
the Agreement shall automatically be amended to refer to such Section as so
renumbered.
5. Except as expressly amended hereby, the Company and Executive
ratify and confirm all terms and conditions of the Agreement as continuing in
full force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the date first above written.
COHO ENERGY, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
----------------------------------------
ANNE MARIE O'GORMAN
-6-
<PAGE> 1
EXHIBIT 10.2
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT dated as of
March 17, 1997 (this "Second Amendment"), is by and among Coho Energy, Inc., a
Texas corporation (the "Company") and Jeffrey Clarke (the "Executive").
WITNESSETH:
WHEREAS, the parties hereto have entered into an Employment Agreement
dated as of November 11, 1994, as amended by the First Amendment thereto dated
August 19, 1996 (the "Agreement"); and
WHEREAS, the parties hereto wish to amend the Agreement as set forth
in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby stipulate and agree as follows:
1. Section 7(c) of the Agreement is hereby amended to read as
follows in its entirety:
"(c) Termination by Company Without Cause or by the
Executive with Good Reason. If either the Company terminates the
Executive's employment without Cause or the Executive terminates his
employment for Good Reason (as hereinafter defined), the Company
shall:
(i) pay to the Executive, within 30 days after the date
of such termination, a lump sum cash payment equal to two times the
Executive's then current annual rate of total compensation;
(ii) pay the Executive any accrued but unpaid compensation
as of the date of the termination of employment; and
(iii) continue until the first anniversary of the
termination of the Executive's employment, or such longer period as
any plan, program or policy or ERISA or other laws may provide,
benefits to the Executive as set forth in Section 7(f) below.
As used in this Agreement, "Good Reason" shall mean: (A) the failure
by the Company to elect or re-elect or to appoint or re-appoint the
Executive to the office of Senior Vice President of the Company
without Cause; (B) a material change by the Company of the Executive's
function, duties or responsibilities that would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance or scope from the position and attributes thereof described
in Section 2 above; (C) the Company requires the Executive to re-
locate his primary office to a location that is greater than 50 miles
from the location of the Company as of the date hereof, or (D) any
other material breach of this Agreement by the Company."
2. The beginning of the first sentence, through subclause (i), of
Section 7(d) of the Agreement is hereby amended to read as follows in its
entirety:
<PAGE> 2
"(d) Termination Following a Change of Control.
If, within three years of a Change of Control, either the Company
terminates the Executive's employment without Cause or the Executive
terminates his employment for Good Reason, then, in addition to any
amounts to which the Executive may otherwise be entitled hereunder,
the Company shall:
(i) pay to the Executive, within 30 days after the
date of such termination, a lump sum cash payment equal to an
additional .99 times the Executive's then current annual rate of total
compensation;"
3. Section 7(g) of the Agreement shall be deleted and a new
Section 8 shall be added to read as follows in its entirety:
"8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or any of its affiliates (as that term is defined in the regulations
promulgated under the Securities Exchange Act of 1934, as amended) under this
Agreement to or for the benefit of Executive (any such payments or
distributions being individually referred to herein as a "Payment," and any two
or more of such payments or distributions being referred to herein as
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code (such excise tax, together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect to such excise tax, and
any interest in respect of such penalties, additions to tax or additional
amounts, being collectively referred herein to as the "Excise Tax"), then
Executive shall be entitled to receive an additional payment or payments
(individually referred to herein as a "Gross-Up Payment" and any two or more of
such additional payments being referred to herein as "Gross-Up Payments") in an
amount such that after payment by Executive of all taxes (as defined in Section
8(k)) imposed upon the Gross-Up Payment, Executive retains an amount of such
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
The Gross-Up Payments required by this Section 8(a) are
limited to the Excise Tax due on Payments under this Agreement; provided that
when calculating the amount of Payments under this Agreement which are subject
to an excise tax under Sections 4999 and 280G of the Code, the base amount
described in Section 280G(b)(3) of the Code shall be allocated (i) first to all
payments and distributions by the Company to the Executive subject to such
excise tax other than Payments under this Agreement, and (ii) then, to the
extent any of such base amount is unallocated, to Payments under this
Agreement.
(b) Subject to the provisions of Section 8(c) through (i), any
determination (individually, a "Determination") required to be made under this
Section 8(b), including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall initially be made, at the Company's expense, by
nationally recognized tax counsel mutually acceptable to the Company and
Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting legal
authorities, calculations, and documentation both to the Company and Executive
within 15 business days of the termination of Executive's employment, if
applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion reasonably acceptable to Executive that
no Excise Tax will be imposed with respect to any such Payment or Payments.
Executive shall have the right to dispute any Determination (a "Dispute")
within 15 business days after delivery of Tax Counsel's opinion with respect to
such Determination. The Gross-Up Payment, if any, as determined pursuant to
such Determination shall, at the Company's expense, be paid by the Company to
Executive within five
-2-
<PAGE> 3
business days of Executive's receipt of such Determination. The existence of a
Dispute shall not in any way affect Executive's right to receive the Gross-Up
Payment in accordance with such Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive upon the Company and
Executive, subject in all respects, however, to the provisions of Section 8(c)
through (i) below. As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that Gross-Up Payments (or
portions thereof) which will not have been made by the Company should have been
made ("Underpayment"), and if upon any reasonable written request from
Executive or the Company to Tax Counsel, or upon Tax Counsel's own initiative,
Tax Counsel, at the Company's expense, thereafter determines that Executive is
required to make a payment of any Excise Tax or any additional Excise Tax, as
the case may be, Tax Counsel shall, at the Company's expense, determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined
in Section 8(j)) that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give rise to a claim by
Executive against the Company under this Section 8 ("Claim"), including, but
not limited to, a claim for indemnification of Executive by the Company under
Section 8(c), then such party shall promptly notify the other party hereto in
writing of such Claim ("Tax Claim Notice").
(e) If a Claim is asserted against Executive ("Executive Claim"),
Executive shall take or cause to be taken such action in connection with
contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as
are reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide
that the Company shall be solely responsible for the payment of any and all
fees and disbursements of such counsel and any experts) and the execution of
powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations) under this
Agreement and that the Company elects to contest, and to control the
defense or prosecution of, such Executive Claim at the Company's sole
risk and sole cost and expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order for
Executive, at the Company's request, to pay or cause to be paid the
tax claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of Section 8(g), sue for a refund of
such tax if such claim for refund is disallowed by the appropriate
taxing authority (it being understood and
-3-
<PAGE> 4
agreed by the parties hereto that the Company shall only be entitled
to sue for a refund and the Company shall not be entitled to initiate
any proceeding in, for example, United States Tax Court) and shall
indemnify and hold Executive harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
(iii) the Company shall reimburse Executive for any and all
costs and expenses resulting from any such request by the Company and
shall indemnify and hold Executive harmless, on fully grossed- up
after-tax basis, from any tax imposed as a result of such
reimbursement.
(f) Subject to the provisions of Section 8(e) hereof, the Company
shall have the right to defend or prosecute, at the sole cost, expense and risk
of the Company, such Executive Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted diligently by the Company to a
Final Determination; provided, however, that (i) the Company shall not, without
Executive's prior written consent, enter into any compromise or settlement of
such Executive Claim that would adversely affect Executive, (ii) any request
from the Company to Executive regarding any extension of the statute of
limitations relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues involved
in, and amount of, the Executive Claim relate is limited solely to such
contested issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Executive Claim and
Executive shall be entitled to settle or contest, in his sole and absolute
discretion, any other issue raised by the Internal Revenue Service or any other
taxing authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to be
provided to the Company any information reasonably requested by the Company
that relates to such Executive Claim, and shall otherwise cooperate with the
Company and its representatives in good faith in order to contest effectively
such Executive Claim. The Company shall keep Executive informed of all
developments and events relating to any such Executive Claim (including,
without limitation, providing to Executive copies of all written materials
pertaining to any such Executive Claim), and Executive or his authorized
representatives shall be entitled, at Executive's expense, to participate in
all conferences, meetings and proceedings relating to any such Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Section 8(e)(ii) hereof, the extent of the liability of the Company
hereunder with respect to such tax claimed has been established by a Final
Determination, Executive shall promptly pay or cause to be paid to the Company
any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and
payable by the Company to Executive, whether under the provisions of this
Agreement or otherwise. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 8(e)(ii), a determination is made
by the Internal Revenue Service or other appropriate taxing authority that
Executive shall not be entitled to any refund with respect to such tax claimed
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of any Gross-Up Payments and other payments required to be paid
hereunder.
(h) With respect to any Executive Claim, if the Company fails to
deliver an Election Notice to Executive within the period provided in Section
8(e)(i) hereof or, after delivery of such Election Notice, the Company fails to
comply with the provisions of Section 8(e)(ii) and (iii) and (f) hereof, then
Executive
-4-
<PAGE> 5
shall at any time thereafter have the right (but not the obligation), at his
election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of the Company, such Executive Claim.
Executive shall have full control of such defense or prosecution and such
proceedings, including any settlement or compromise thereof. If requested by
Executive, the Company shall cooperate, and shall cause its Affiliates to
cooperate, in good faith with Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend, but
not participate in or control, any defense, prosecution, settlement or
compromise of any Executive Claim controlled by Executive pursuant to this
Section 8(h) and shall bear its own costs and expenses with respect thereto.
In the case of any Executive Claim that is defended or prosecuted by Executive,
Executive shall, from time to time, be entitled to current payment, on a fully
grossed-up after tax basis, from the Company with respect to costs and expenses
incurred by Executive in connection with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Section 8(i),
the Company shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay,
on a fully grossed-up after tax basis, to Executive in immediately available
funds the full amount of any taxes arising or resulting from or incurred in
connection with such Executive Claim at least ten calendar days before the date
payment of such taxes is due from Executive, except where payment of such taxes
is sooner required under the provisions of this Section 8(i), in which case
payment of such taxes (and payment, on a fully grossed-up after tax basis, of
any costs and expenses required to be paid under this Section 8(i)) shall be
made within the time and in the manner otherwise provided in this Section 8(i).
(j) For purposes of this Agreement, the term "Final Determination"
shall mean (A) a decision, judgment, decree or other order by a court or other
tribunal with appropriate jurisdiction, which has become final and non-
appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts."
4. Sections 8, 9, 10, 11, 12, 13, 14, 15 and 16 of the Agreement,
as they existed prior to this Amendment, shall be renumbered as Sections 9, 10,
11, 12, 13, 14, 15, 16 and 17, respectively, and all references thereto within
the Agreement shall automatically be amended to refer to such Section as so
renumbered.
5. Except as expressly amended hereby, the Company and Executive
ratify and confirm all terms and conditions of the Agreement as continuing in
full force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Second
Amendment as of the date first set forth above.
COHO ENERGY, INC.
By:
-----------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
--------------------------------------------
JEFFREY CLARKE
-6-
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT dated as of
March 17, 1997 (this "Second Amendment"), is by and among Coho Energy, Inc.,
a Texas corporation (the "Company") and R. M. Pearce (the "Executive").
WITNESSETH:
WHEREAS, the parties hereto have entered into an Employment Agreement
dated as of November 11, 1994, as amended by the First Amendment thereto dated
August 19, 1996 (the "Agreement"); and
WHEREAS, the parties hereto wish to amend the Agreement as set forth
in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby stipulate and agree as follows:
1. Section 7(c) of the Agreement is hereby amended to read as
follows in its entirety:
"(c) Termination by Company Without Cause or by the
Executive with Good Reason. If either the Company terminates the
Executive's employment without Cause or the Executive terminates his
employment for Good Reason (as hereinafter defined), the Company
shall:
(i) pay to the Executive, within 30 days after the date
of such termination, a lump sum cash payment equal to two times the
Executive's then current annual rate of total compensation;
(ii) pay the Executive any accrued but unpaid compensation
as of the date of the termination of employment; and
(iii) continue until the first anniversary of the
termination of the Executive's employment, or such longer period as
any plan, program or policy or ERISA or other laws may provide,
benefits to the Executive as set forth in Section 7(f) below.
As used in this Agreement, "Good Reason" shall mean: (A) the failure
by the Company to elect or re-elect or to appoint or re-appoint the
Executive to the office of Senior Vice President of the Company
without Cause; (B) a material change by the Company of the Executive's
function, duties or responsibilities that would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance or scope from the position and attributes thereof described
in Section 2 above; (C) the Company requires the Executive to re-
locate his primary office to a location that is greater than 50 miles
from the location of the Company as of the date hereof, or (D) any
other material breach of this Agreement by the Company."
2. The beginning of the first sentence, through subclause (i), of
Section 7(d) of the Agreement is hereby amended to read as follows in its
entirety:
<PAGE> 2
"(d) Termination Following a Change of Control. If,
within three years of a Change of Control, either the Company
terminates the Executive's employment without Cause or the Executive
terminates his employment for Good Reason, then, in addition to any
amounts to which the Executive may otherwise be entitled hereunder,
the Company shall:
(i) pay to the Executive, within 30 days after the
date of such termination, a lump sum cash payment equal to an
additional .99 times the Executive's then current annual rate of total
compensation;"
3. Section 7(g) of the Agreement shall be deleted and a new
Section 8 shall be added to read as follows in its entirety:
"8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or any of its affiliates (as that term is defined in the regulations
promulgated under the Securities Exchange Act of 1934, as amended) under this
Agreement to or for the benefit of Executive (any such payments or
distributions being individually referred to herein as a "Payment," and any two
or more of such payments or distributions being referred to herein as
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code (such excise tax, together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect to such excise tax, and
any interest in respect of such penalties, additions to tax or additional
amounts, being collectively referred herein to as the "Excise Tax"), then
Executive shall be entitled to receive an additional payment or payments
(individually referred to herein as a "Gross-Up Payment" and any two or more of
such additional payments being referred to herein as "Gross-Up Payments") in an
amount such that after payment by Executive of all taxes (as defined in Section
8(k)) imposed upon the Gross-Up Payment, Executive retains an amount of such
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
The Gross-Up Payments required by this Section 8(a) are
limited to the Excise Tax due on Payments under this Agreement; provided that
when calculating the amount of Payments under this Agreement which are subject
to an excise tax under Sections 4999 and 280G of the Code, the base amount
described in Section 280G(b)(3) of the Code shall be allocated (i) first to all
payments and distributions by the Company to the Executive subject to such
excise tax other than Payments under this Agreement, and (ii) then, to the
extent any of such base amount is unallocated, to Payments under this
Agreement.
(b) Subject to the provisions of Section 8(c) through (i), any
determination (individually, a "Determination") required to be made under this
Section 8(b), including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall initially be made, at the Company's expense, by
nationally recognized tax counsel mutually acceptable to the Company and
Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting legal
authorities, calculations, and documentation both to the Company and Executive
within 15 business days of the termination of Executive's employment, if
applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion reasonably acceptable to Executive that
no Excise Tax will be imposed with respect to any such Payment or Payments.
Executive shall have the right to dispute any Determination (a "Dispute")
within 15 business days after delivery of Tax Counsel's opinion with respect to
such Determination. The Gross-Up Payment, if any, as determined pursuant to
such Determination shall, at the Company's expense, be paid by the Company to
Executive within five
-2-
<PAGE> 3
business days of Executive's receipt of such Determination. The existence of a
Dispute shall not in any way affect Executive's right to receive the Gross-Up
Payment in accordance with such Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive upon the Company and
Executive, subject in all respects, however, to the provisions of Section 8(c)
through (i) below. As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that Gross-Up Payments (or
portions thereof) which will not have been made by the Company should have been
made ("Underpayment"), and if upon any reasonable written request from
Executive or the Company to Tax Counsel, or upon Tax Counsel's own initiative,
Tax Counsel, at the Company's expense, thereafter determines that Executive is
required to make a payment of any Excise Tax or any additional Excise Tax, as
the case may be, Tax Counsel shall, at the Company's expense, determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined
in Section 8(j)) that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give rise to a claim by
Executive against the Company under this Section 8 ("Claim"), including, but
not limited to, a claim for indemnification of Executive by the Company under
Section 8(c), then such party shall promptly notify the other party hereto in
writing of such Claim ("Tax Claim Notice").
(e) If a Claim is asserted against Executive ("Executive Claim"),
Executive shall take or cause to be taken such action in connection with
contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as
are reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide
that the Company shall be solely responsible for the payment of any and all
fees and disbursements of such counsel and any experts) and the execution of
powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations) under this
Agreement and that the Company elects to contest, and to control the
defense or prosecution of, such Executive Claim at the Company's sole
risk and sole cost and expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order for
Executive, at the Company's request, to pay or cause to be paid the
tax claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of Section 8(g), sue for a refund of
such tax if such claim for refund is disallowed by the appropriate
taxing authority (it being understood and
-3-
<PAGE> 4
agreed by the parties hereto that the Company shall only be entitled
to sue for a refund and the Company shall not be entitled to initiate
any proceeding in, for example, United States Tax Court) and shall
indemnify and hold Executive harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
(iii) the Company shall reimburse Executive for any and all
costs and expenses resulting from any such request by the Company and
shall indemnify and hold Executive harmless, on fully grossed-up
after-tax basis, from any tax imposed as a result of such
reimbursement.
(f) Subject to the provisions of Section 8(e) hereof, the Company
shall have the right to defend or prosecute, at the sole cost, expense and risk
of the Company, such Executive Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted diligently by the Company to a
Final Determination; provided, however, that (i) the Company shall not, without
Executive's prior written consent, enter into any compromise or settlement of
such Executive Claim that would adversely affect Executive, (ii) any request
from the Company to Executive regarding any extension of the statute of
limitations relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues involved
in, and amount of, the Executive Claim relate is limited solely to such
contested issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Executive Claim and
Executive shall be entitled to settle or contest, in his sole and absolute
discretion, any other issue raised by the Internal Revenue Service or any other
taxing authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to be
provided to the Company any information reasonably requested by the Company
that relates to such Executive Claim, and shall otherwise cooperate with the
Company and its representatives in good faith in order to contest effectively
such Executive Claim. The Company shall keep Executive informed of all
developments and events relating to any such Executive Claim (including,
without limitation, providing to Executive copies of all written materials
pertaining to any such Executive Claim), and Executive or his authorized
representatives shall be entitled, at Executive's expense, to participate in
all conferences, meetings and proceedings relating to any such Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Section 8(e)(ii) hereof, the extent of the liability of the Company
hereunder with respect to such tax claimed has been established by a Final
Determination, Executive shall promptly pay or cause to be paid to the Company
any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and
payable by the Company to Executive, whether under the provisions of this
Agreement or otherwise. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 8(e)(ii), a determination is made
by the Internal Revenue Service or other appropriate taxing authority that
Executive shall not be entitled to any refund with respect to such tax claimed
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of any Gross-Up Payments and other payments required to be paid
hereunder.
(h) With respect to any Executive Claim, if the Company fails to
deliver an Election Notice to Executive within the period provided in Section
8(e)(i) hereof or, after delivery of such Election Notice, the Company fails to
comply with the provisions of Section 8(e)(ii) and (iii) and (f) hereof, then
Executive
-4-
<PAGE> 5
shall at any time thereafter have the right (but not the obligation), at his
election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of the Company, such Executive Claim.
Executive shall have full control of such defense or prosecution and such
proceedings, including any settlement or compromise thereof. If requested by
Executive, the Company shall cooperate, and shall cause its Affiliates to
cooperate, in good faith with Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend, but
not participate in or control, any defense, prosecution, settlement or
compromise of any Executive Claim controlled by Executive pursuant to this
Section 8(h) and shall bear its own costs and expenses with respect thereto.
In the case of any Executive Claim that is defended or prosecuted by Executive,
Executive shall, from time to time, be entitled to current payment, on a fully
grossed-up after tax basis, from the Company with respect to costs and expenses
incurred by Executive in connection with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Section 8(i),
the Company shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay,
on a fully grossed-up after tax basis, to Executive in immediately available
funds the full amount of any taxes arising or resulting from or incurred in
connection with such Executive Claim at least ten calendar days before the date
payment of such taxes is due from Executive, except where payment of such taxes
is sooner required under the provisions of this Section 8(i), in which case
payment of such taxes (and payment, on a fully grossed-up after tax basis, of
any costs and expenses required to be paid under this Section 8(i)) shall be
made within the time and in the manner otherwise provided in this Section 8(i).
(j) For purposes of this Agreement, the term "Final Determination"
shall mean (A) a decision, judgment, decree or other order by a court or other
tribunal with appropriate jurisdiction, which has become final and non-
appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts."
4. Sections 8, 9, 10, 11, 12, 13, 14, 15 and 16 of the Agreement,
as they existed prior to this Amendment, shall be renumbered as Sections 9, 10,
11, 12, 13, 14, 15, 16 and 17, respectively, and all references thereto within
the Agreement shall automatically be amended to refer to such Section as so
renumbered.
5. Except as expressly amended hereby, the Company and Executive
ratify and confirm all terms and conditions of the Agreement as continuing in
full force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Second
Amendment as of the date first set forth above.
COHO ENERGY, INC.
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
------------------------------------------
R. M. PEARCE
-6-
<PAGE> 1
EXHIBIT 10.4
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT dated as of
March 17, 1997 (this "Second Amendment"), is by and among Coho Energy,
Inc., a Texas corporation (the "Company") and Eddie M. LeBlanc, III (the
"Executive").
WITNESSETH:
WHEREAS, the parties hereto have entered into an Employment Agreement
dated as of June 25, 1995, as amended by the First Amendment thereto dated
August 19, 1996 (the "Agreement"); and
WHEREAS, the parties hereto wish to amend the Agreement as set forth
in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby stipulate and agree as follows:
1. Section 7(c) of the Agreement is hereby amended to read as
follows in its entirety:
"(c) Termination by Company Without Cause or by the
Executive with Good Reason. If either the Company terminates the
Executive's employment without Cause or the Executive terminates his
employment for Good Reason (as hereinafter defined), the Company
shall:
(i) pay to the Executive, within 30 days after the date
of such termination, a lump sum cash payment equal to two times the
Executive's then current annual rate of total compensation;
(ii) pay the Executive any accrued but unpaid compensation
as of the date of the termination of employment; and
(iii) continue until the first anniversary of the
termination of the Executive's employment, or such longer period as
any plan, program or policy or ERISA or other laws may provide,
benefits to the Executive as set forth in Section 7(f) below.
As used in this Agreement, "Good Reason" shall mean: (A) the failure
by the Company to elect or re-elect or to appoint or re-appoint the
Executive to the office of Senior Vice President of the Company
without Cause; (B) a material change by the Company of the Executive's
function, duties or responsibilities that would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance or scope from the position and attributes thereof described
in Section 2 above; (C) the Company requires the Executive to re-
locate his primary office to a location that is greater than 50 miles
from the location of the Company as of the date hereof, or (D) any
other material breach of this Agreement by the Company."
2. The beginning of the first sentence, through subclause (i), of
Section 7(d) of the Agreement is hereby amended to read as follows in its
entirety:
<PAGE> 2
"(d) Termination Following a Change of Control. If,
within three years of a Change of Control, either the Company
terminates the Executive's employment without Cause or the Executive
terminates his employment for Good Reason, then, in addition to any
amounts to which the Executive may otherwise be entitled hereunder,
the Company shall:
(i) pay to the Executive, within 30 days after the date of
such termination, a lump sum cash payment equal to an additional .99
times the Executive's then current annual rate of total compensation;"
3. Section 7(g) of the Agreement shall be deleted and a new
Section 8 shall be added to read as follows in its entirety:
"8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or any of its affiliates (as that term is defined in the regulations
promulgated under the Securities Exchange Act of 1934, as amended) under this
Agreement to or for the benefit of Executive (any such payments or
distributions being individually referred to herein as a "Payment," and any two
or more of such payments or distributions being referred to herein as
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code (such excise tax, together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect to such excise tax, and
any interest in respect of such penalties, additions to tax or additional
amounts, being collectively referred herein to as the "Excise Tax"), then
Executive shall be entitled to receive an additional payment or payments
(individually referred to herein as a "Gross-Up Payment" and any two or more of
such additional payments being referred to herein as "Gross-Up Payments") in an
amount such that after payment by Executive of all taxes (as defined in Section
8(k)) imposed upon the Gross-Up Payment, Executive retains an amount of such
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
The Gross-Up Payments required by this Section 8(a) are
limited to the Excise Tax due on Payments under this Agreement; provided that
when calculating the amount of Payments under this Agreement which are subject
to an excise tax under Sections 4999 and 280G of the Code, the base amount
described in Section 280G(b)(3) of the Code shall be allocated (i) first to all
payments and distributions by the Company to the Executive subject to such
excise tax other than Payments under this Agreement, and (ii) then, to the
extent any of such base amount is unallocated, to Payments under this
Agreement.
(b) Subject to the provisions of Section 8(c) through (i), any
determination (individually, a "Determination") required to be made under this
Section 8(b), including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall initially be made, at the Company's expense, by
nationally recognized tax counsel mutually acceptable to the Company and
Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting legal
authorities, calculations, and documentation both to the Company and Executive
within 15 business days of the termination of Executive's employment, if
applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion reasonably acceptable to Executive that
no Excise Tax will be imposed with respect to any such Payment or Payments.
Executive shall have the right to dispute any Determination (a "Dispute")
within 15 business days after delivery of Tax Counsel's opinion with respect to
such Determination. The Gross-Up Payment, if any, as determined pursuant to
such Determination shall, at the Company's expense, be paid by the Company to
Executive within five
-2-
<PAGE> 3
business days of Executive's receipt of such Determination. The existence of a
Dispute shall not in any way affect Executive's right to receive the Gross-Up
Payment in accordance with such Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive upon the Company and
Executive, subject in all respects, however, to the provisions of Section 8(c)
through (i) below. As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that Gross-Up Payments (or
portions thereof) which will not have been made by the Company should have been
made ("Underpayment"), and if upon any reasonable written request from
Executive or the Company to Tax Counsel, or upon Tax Counsel's own initiative,
Tax Counsel, at the Company's expense, thereafter determines that Executive is
required to make a payment of any Excise Tax or any additional Excise Tax, as
the case may be, Tax Counsel shall, at the Company's expense, determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined
in Section 8(j)) that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give rise to a claim by
Executive against the Company under this Section 8 ("Claim"), including, but
not limited to, a claim for indemnification of Executive by the Company under
Section 8(c), then such party shall promptly notify the other party hereto in
writing of such Claim ("Tax Claim Notice").
(e) If a Claim is asserted against Executive ("Executive Claim"),
Executive shall take or cause to be taken such action in connection with
contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as
are reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide
that the Company shall be solely responsible for the payment of any and all
fees and disbursements of such counsel and any experts) and the execution of
powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations) under this
Agreement and that the Company elects to contest, and to control the
defense or prosecution of, such Executive Claim at the Company's sole
risk and sole cost and expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order for
Executive, at the Company's request, to pay or cause to be paid the
tax claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of Section 8(g), sue for a refund of
such tax if such claim for refund is disallowed by the appropriate
taxing authority (it being understood and
-3-
<PAGE> 4
agreed by the parties hereto that the Company shall only be entitled
to sue for a refund and the Company shall not be entitled to initiate
any proceeding in, for example, United States Tax Court) and shall
indemnify and hold Executive harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
(iii) the Company shall reimburse Executive for any and all
costs and expenses resulting from any such request by the Company and
shall indemnify and hold Executive harmless, on fully grossed- up
after-tax basis, from any tax imposed as a result of such
reimbursement.
(f) Subject to the provisions of Section 8(e) hereof, the Company
shall have the right to defend or prosecute, at the sole cost, expense and risk
of the Company, such Executive Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted diligently by the Company to a
Final Determination; provided, however, that (i) the Company shall not, without
Executive's prior written consent, enter into any compromise or settlement of
such Executive Claim that would adversely affect Executive, (ii) any request
from the Company to Executive regarding any extension of the statute of
limitations relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues involved
in, and amount of, the Executive Claim relate is limited solely to such
contested issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Executive Claim and
Executive shall be entitled to settle or contest, in his sole and absolute
discretion, any other issue raised by the Internal Revenue Service or any other
taxing authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to be
provided to the Company any information reasonably requested by the Company
that relates to such Executive Claim, and shall otherwise cooperate with the
Company and its representatives in good faith in order to contest effectively
such Executive Claim. The Company shall keep Executive informed of all
developments and events relating to any such Executive Claim (including,
without limitation, providing to Executive copies of all written materials
pertaining to any such Executive Claim), and Executive or his authorized
representatives shall be entitled, at Executive's expense, to participate in
all conferences, meetings and proceedings relating to any such Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Section 8(e)(ii) hereof, the extent of the liability of the Company
hereunder with respect to such tax claimed has been established by a Final
Determination, Executive shall promptly pay or cause to be paid to the Company
any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and
payable by the Company to Executive, whether under the provisions of this
Agreement or otherwise. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 8(e)(ii), a determination is made
by the Internal Revenue Service or other appropriate taxing authority that
Executive shall not be entitled to any refund with respect to such tax claimed
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of any Gross-Up Payments and other payments required to be paid
hereunder.
(h) With respect to any Executive Claim, if the Company fails to
deliver an Election Notice to Executive within the period provided in Section
8(e)(i) hereof or, after delivery of such Election Notice, the Company fails to
comply with the provisions of Section 8(e)(ii) and (iii) and (f) hereof, then
Executive
-4-
<PAGE> 5
shall at any time thereafter have the right (but not the obligation), at his
election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of the Company, such Executive Claim.
Executive shall have full control of such defense or prosecution and such
proceedings, including any settlement or compromise thereof. If requested by
Executive, the Company shall cooperate, and shall cause its Affiliates to
cooperate, in good faith with Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend, but
not participate in or control, any defense, prosecution, settlement or
compromise of any Executive Claim controlled by Executive pursuant to this
Section 8(h) and shall bear its own costs and expenses with respect thereto.
In the case of any Executive Claim that is defended or prosecuted by Executive,
Executive shall, from time to time, be entitled to current payment, on a fully
grossed-up after tax basis, from the Company with respect to costs and expenses
incurred by Executive in connection with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Section 8(i),
the Company shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay,
on a fully grossed-up after tax basis, to Executive in immediately available
funds the full amount of any taxes arising or resulting from or incurred in
connection with such Executive Claim at least ten calendar days before the date
payment of such taxes is due from Executive, except where payment of such taxes
is sooner required under the provisions of this Section 8(i), in which case
payment of such taxes (and payment, on a fully grossed-up after tax basis, of
any costs and expenses required to be paid under this Section 8(i)) shall be
made within the time and in the manner otherwise provided in this Section 8(i).
(j) For purposes of this Agreement, the term "Final Determination"
shall mean (A) a decision, judgment, decree or other order by a court or other
tribunal with appropriate jurisdiction, which has become final and non-
appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts."
4. Sections 8, 9, 10, 11, 12, 13, 14, 15 and 16 of the Agreement,
as they existed prior to this Amendment, shall be renumbered as Sections 9, 10,
11, 12, 13, 14, 15, 16 and 17, respectively, and all references thereto within
the Agreement shall automatically be amended to refer to such Section as so
renumbered.
5. Except as expressly amended hereby, the Company and Executive
ratify and confirm all terms and conditions of the Agreement as continuing in
full force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Second
Amendment as of the date first set forth above.
COHO ENERGY, INC.
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
-----------------------------------------
EDDIE M. LeBLANC, III
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,185
<SECURITIES> 1,983
<RECEIVABLES> 8,366
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,192
<PP&E> 340,557
<DEPRECIATION> 123,160
<TOTAL-ASSETS> 232,710
<CURRENT-LIABILITIES> 10,438
<BONDS> 122,314
0
0
<COMMON> 204
<OTHER-SE> 83,534
<TOTAL-LIABILITY-AND-EQUITY> 232,710
<SALES> 15,536
<TOTAL-REVENUES> 15,536
<CGS> 3,620
<TOTAL-COSTS> 9,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,291
<INCOME-PRETAX> 3,506
<INCOME-TAX> 1,402
<INCOME-CONTINUING> 2,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,104
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>