-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U3ggczo671V+kLlC/jh9fvLF3JngXzMBS1JR5zDULByh/CHOmBnooQpn5mqhRAZl ICGBdexuwqNruhhBiefBPg== 0000930661-95-000406.txt : 19951118 0000930661-95-000406.hdr.sgml : 19951118 ACCESSION NUMBER: 0000930661-95-000406 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19951030 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CODA ENERGY INC CENTRAL INDEX KEY: 0000356799 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751842480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10955 FILM NUMBER: 95589078 BUSINESS ADDRESS: STREET 1: 5735 PINELAND DR STREET 2: STE 300 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2146921800 MAIL ADDRESS: STREET 1: 5735 PINELAND DRIVE STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75231 FORMER COMPANY: FORMER CONFORMED NAME: CHAPMAN ENERGY INC DATE OF NAME CHANGE: 19891012 FORMER COMPANY: FORMER CONFORMED NAME: DALLAS SUNBELT ENERGY INC DATE OF NAME CHANGE: 19821116 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 30, 1995 CODA ENERGY, INC. (Exact Name of Registrant as Specified in its Charter) State of Delaware 0-10955 75-1842480 (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 5735 Pineland Drive Suite 300 Dallas, Texas 75231 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 692-1800 =============================================================================== Item 5. Other Events ------------ ANNOUNCEMENT OF EXECUTION OF DEFINITIVE MERGER AGREEMENT On October 31, 1995, Coda Energy, Inc. ("Coda") announced that it had entered into a definitive merger agreement dated as of October 30, 1995 (the "Merger Agreement") by and among Coda, Joint Energy Development Investments Limited Partnership ("JEDI"), an affiliate of Enron Capital & Trade Resources Corp. ("ECT"), and Coda Acquisition, Inc. ("Purchaser"), a newly formed corporation and a subsidiary of JEDI, whereby JEDI will acquire in the merger (the "Merger") shares of common stock, par value $.02 per share, of Coda (the "Coda Common Stock") at a price of $8.00 per share in cash. The Merger Agreement has been approved by Coda's Board of Directors and its Special Committee of outside directors. Concurrently with the execution of the Merger Agreement, JEDI and Purchaser have entered into certain agreements with members of management of Coda providing for a continuing role of management in Coda after the acquisition. Coda expects to hold a special meeting of the stockholders, for the purpose of voting on the Merger, as soon as practical after the Securities and Exchange Commission has cleared the related proxy statement material for mailing. Coda anticipates that this special meeting will occur in late 1995 or early 1996. PARTIES TO THE MERGER Coda. Coda is an independent energy company which, together with its subsidiaries, is principally engaged in the acquisition and exploitation of (i) producing oil and natural gas properties, (ii) natural gas processing and liquids extraction facilities and (iii) natural gas gathering systems. Coda's producing oil and natural gas properties are concentrated in the mid-continent region of the United States. Coda's exploitation efforts include, where appropriate, the drilling of low-risk development wells, the initiation of secondary recovery projects, the renegotiation of product marketing agreements and the reduction of drilling, completion and lifting costs. JEDI and Purchaser. JEDI is a Delaware limited partnership whose general partner is a subsidiary of ECT, which is a wholly-owned subsidiary of Enron Corp. The limited partner of JEDI is the California Public Employees' Retirement System. JEDI was created primarily to invest in a portfolio of diversified natural gas related assets. Purchaser is a Delaware corporation formed solely for the purpose of effecting the Merger and has not carried on any activities other than in connection with the Merger. Purchaser is a subsidiary of JEDI. CERTAIN TERMS OF THE MERGER Principal Effects of the Merger. Purchaser will be merged with and into Coda, with Coda surviving the Merger (the "Surviving Corporation"). Pursuant to and subject to the terms and Page - 2 conditions of the Merger Agreement, at the Effective Time (as defined below), (i) all then-outstanding shares of Coda Common Stock (other than (A) shares of Coda Common Stock held by Purchaser, Coda or any Coda subsidiary, all of which will be canceled without payment of any consideration, and (B) shares of Coda Common Stock held by stockholders who perfect their appraisal rights under Section 262 of the Delaware General Corporation Law ("DGCL")) will be converted into the right to receive, in cash, $8.00 per share of Coda Common Stock, without interest, and (ii) all shares of Coda Common Stock underlying then- outstanding but unexercised options and warrants to purchase Coda Common Stock (other than the "Specified Options" and "Specified Warrants" held by certain members of the Management Group (as defined below)) will, at the election of the holder, be converted into the right to receive, in cash, either (A) the difference between (x) $8.00 per share of Coda Common Stock and (y) the exercise or strike price of the option or warrant, without interest or (B) $8.00 per share of Coda Common Stock, without interest, upon such holder's exercise (including payment of the applicable exercise or strike price) of his or her options. Effective Time. The effective time of the Merger will be the date and time when a properly executed certificate of merger, in such form as is required by and executed in accordance with the DGCL, is duly filed with the Secretary of State of the State of Delaware, or at such later time as the parties to the Merger Agreement designate in such filing as the effective time (the "Effective Time"). It is anticipated that, subject to the satisfaction or waiver, if permissible, of the conditions to consummation of the Merger set forth in the Merger Agreement, such filing will be made promptly after the Merger Agreement has been approved by Coda's stockholders. Conditions to the Merger. The respective obligations of Coda, JEDI and Purchaser to effect the Merger are subject to the satisfaction, or waiver if applicable, at or prior to the Effective Time, of various conditions, including, among other things, (i) the approval and adoption of the Merger Agreement and the Merger by the requisite vote of the holders of Coda Common Stock; (ii) the expiration or termination of the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act"); (iii) the absence of any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the Merger illegal or otherwise preventing or prohibiting consummation of the Merger; (iv) the confirmation by Coda at the time of the special meeting of Coda stockholders called for the purpose of approving and adopting the Merger Agreement that the written opinion of Coda's financial advisor to the effect that the Merger is fair, from a financial point of view, to the stockholders of Coda (except that such advice will not be provided to the members of Coda's management, consisting of Douglas H. Miller, Chairman of the Board and Chief Executive Officer of Coda, Jarl P. Johnson, Vice Chairman of the Board and President of Diamond Energy Operating Company, a subsidiary of Coda ("Diamond"), Grant W. Henderson, Executive Vice President, Chief Financial Officer and a director of Coda, and twelve other officers and employees of Coda and Diamond (collectively, the "Management Group"), who have agreed to participate in the equity ownership of the Surviving Corporation), has not been withdrawn; and (v) the absence of any pending action, proceeding or investigation brought by any person or entity before any governmental entity challenging, affecting or seeking material Page - 3 damages in connection with, the transactions contemplated by the Merger Agreement. Furthermore, each of Coda, on the one hand, and JEDI and Purchaser, on the other hand, have additional conditions to their respective obligations to consummate the Merger. Among the conditions to JEDI and Purchaser consummating the Merger are that (i) the sale of Taurus Energy Corp., a wholly owned subsidiary of Coda ("Taurus") shall have been completed upon terms satisfactory to JEDI; (ii) certain members of Coda's management shall have not breached or anticipatorily breached certain employment and other agreements with Purchaser that are to become effective in conjunction with the consummation of the Merger and certain specified senior executives of Coda shall not have died or become disabled; and (iii) assuming the representations and warranties of Coda in the Merger Agreement were made without regard to any "materiality qualifications," the amount that would be required to be contributed to the Surviving Corporation at the Effective Time, so that the owners of the Surviving Corporation would be in the same economic position as they would have been if the representations and warranties, without regard to any materiality qualifications, had been true and correct in all respects, in the aggregate does not exceed $7.5 million. Regulatory Clearances. The Merger is subject to review by the Antitrust Division of the Department of Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC") pursuant to the Hart-Scott-Rodino Act. Termination; Expenses and Termination Fees. Under certain conditions, the Merger Agreement may be terminated at any time prior to the Effective Time, whether prior to or after approval of the Merger Agreement by the stockholders of Coda. In the event of the termination of the Merger Agreement, there will be no obligation or liability on the part of any party thereto, except for the payment of certain expenses and/or the Break-up Fee (as defined below) or as otherwise expressly provided for in the Merger Agreement; provided, however, that no termination pursuant to the termination provisions will relieve any party from liability for any breach of the Merger Agreement. Pursuant to the Merger Agreement, if the Merger Agreement is terminated by Purchaser for certain reasons, then Coda would be obligated to reimburse Purchaser for certain out-of- pocket expenses not to exceed $750,000. Additionally, if the Merger Agreement is terminated for certain reasons and if Coda were to consummate another acquisition transaction prior to October 30, 1996, that provides better value to Coda's stockholders than the Merger would have provided, then Coda would be obligated to pay Purchaser a fee (the "Break-up Fee") of $3.5 million. If the Merger Agreement is terminated by Coda due to a breach on the part of JEDI or Purchaser, JEDI is obligated to reimburse Coda for certain expenses not to exceed $750,000. Business of Coda. Coda has agreed that, during the period from the date of the Merger Agreement to the Effective Time, except as otherwise contemplated by the Merger Agreement or unless Purchaser otherwise consents in writing, Coda will conduct its operations in the ordinary course of business, consistent with past practices. In addition, unless Purchaser consents in writing or except as otherwise permitted pursuant to the Merger Agreement, prior to the Effective Time Coda is not permitted to engage in certain actions specified in the Merger Agreement. Obligations of JEDI and Purchaser. Each of JEDI and Purchaser has agreed to use its Page - 4 reasonable best efforts to refrain from taking any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in the Merger Agreement being or becoming untrue in any material respect as of the Effective Time, or in any of the conditions to the Merger not being satisfied, or (unless such action is required by applicable law) that would adversely affect the ability of JEDI or Purchaser to obtain any of the regulatory approvals required to consummate the Merger. OPINION OF FINANCIAL ADVISOR The Special Committee engaged Bear, Stearns & Co. Inc. ("Bear Stearns") to act as its financial advisor in connection with the Merger and related matters. On September 27, 1995, Bear Stearns orally advised the Special Committee that the Merger is fair, from a financial point of view, to Coda's stockholders (except that no advice was given as to the Management Group). NO SOLICITATION OF OTHER BIDS Prior to the Effective Time, Coda has agreed not to, nor to permit any of its subsidiaries to, nor to authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries to, directly or indirectly, initiate, solicit, negotiate or encourage (including by way of furnishing information), or take any other action to facilitate or entertain, any inquiries or the making of any proposal that constitutes, or may be reasonably expected to lead to, any proposal or offer to acquire all or substantially all of the business of Coda and its subsidiaries, or all or substantially all of the capital stock of Coda; provided, however, that Coda may negotiate with a potential acquiror if (i) the potential acquiror has made a tender or exchange offer, or a proposal to Coda's Board of Directors to acquire Coda, (ii) Coda's Board of Directors believes, based in part upon advice of its financial advisor and after having an opportunity to discuss any such proposal with a potential acquiror, that such potential acquiror has the financial wherewithal to consummate such offer or transaction and such offer or transaction would yield a better value to Coda's stockholders than would the Merger and (iii) based upon the advice of counsel to Coda given to the Board of Directors, the Board of Directors determines in good faith that there is a significant risk that the failure to negotiate with the potential acquiror could constitute a breach of the Board's fiduciary duty to Coda's stockholders. TAURUS DISPOSITION On August 23, 1995, Coda announced that it had received an offer to purchase substantially all of the assets of Taurus. On the same date Coda's Board of Directors authorized the Special Committee to reach a determination or recommendation, if any, with respect to the possible sale or restructuring of Coda's ownership of Taurus. The sale of Taurus on terms acceptable to JEDI Page - 5 is also a condition to the consummation of the Merger. Mr. Lohman is an officer and director of Taurus. The Company understands that Mr. Lohman has been active in trying to find a buyer for Taurus in a transaction that would provide a continuing role for Taurus' management. During the period after execution of the Merger Agreement and prior to the Effective Time, Coda has agreed in the Merger Agreement to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to promptly negotiate a definitive agreement (the "Taurus Disposition Agreement") providing for the sale of Taurus, whether by merger, sale of all or substantially all of the assets of Taurus, sale of all of the capital stock of Taurus or otherwise (the "Taurus Disposition") as soon as reasonably practicable. Coda has agreed to deliver the final version of the Taurus Disposition Agreement to JEDI for review at least five business days prior to its execution. Coda has agreed to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the Taurus Disposition if a Taurus Disposition Agreement that has been approved by JEDI is executed. SOURCES AND AMOUNT OF FUNDS The total amount of funds required by JEDI and Purchaser to acquire all of the then-outstanding (except for shares of Coda Common Stock held by Purchaser) capital stock of Coda (including options and warrants to purchase Coda Common Stock, but excluding the Specified Options and the Specified Warrants), is estimated to be approximately $182.2 million. Coda will also need cash to pay the fees and expenses incurred or to be incurred by Coda associated with effecting the Merger, the financing thereof and with providing loans to certain members of management to purchase shares of capital stock of Purchaser, including an estimated $3.8 million in transaction fees expected to be paid to ECT Securities Corp., an affiliate of the general partner of JEDI. JEDI expects Purchaser to have available to it at the Effective Time approximately $190 million from (i) a $90 million equity investment to be made in Purchaser by JEDI prior to the Effective Time and (ii) proceeds of a $100 million loan to be made to Purchaser by JEDI prior to the Effective Time. The obligation of JEDI and Purchaser to consummate the Merger under the Merger Agreement is not subject to a condition that any financing be available to JEDI or Purchaser. INTERESTS OF CERTAIN PERSONS IN THE MERGER Four of Coda's ten directors, Douglas H. Miller, Chairman of the Board and Chief Executive Officer, Jarl P. Johnson, Vice Chairman and President of Diamond, Grant W. Henderson, Executive Vice President and Chief Financial Officer, and Tommie E. Lohman, President of Taurus, abstained from voting on the Merger Agreement and related resolutions because of their interests in the transactions. Messrs. Miller, Johnson and Henderson have entered into written agreements with Purchaser pursuant to which, effective at the Effective Time, they will be employed by the Surviving Corporation and will acquire equity interests in the Surviving Page - 6 Corporation. Certain members of Coda's management have also entered into written agreements with Purchaser concerning their employment with and/or equity participation in the Surviving Corporation. Immediately following closing of the Merger, management will hold an aggregate of approximately 1.5% of the Surviving Corporation's common stock (approximately 5% on a fully diluted basis, including options granted to such persons). These agreements will terminate automatically if the Merger Agreement is terminated. The agreements are summarized below: Subscription Agreement. The Purchaser has entered into a Subscription Agreement dated as of October 30, 1995, with each member of the Management Group (the "Subscription Agreement") which provides for the acquisition by such persons of Purchaser common stock and the grant to them of nonqualified stock options to purchase shares of Surviving Corporation common stock (the "Replacement Options"). Under the Subscription Agreement, each member of the Management Group who is acquiring Purchaser common stock is paying $100 per share for shares of Purchaser common stock, which is the same price per share being paid by JEDI for the remaining shares of Purchaser. Under the Subscription Agreement, the Management Group will acquire Purchaser common stock immediately prior to the Effective Time in exchange for varying combinations of (i) proceeds from limited recourse promissory notes payable to the Purchaser (the "Notes"), (ii) Coda Common Stock, which is valued for this purpose at $8.00 per share and (iii) cash. The Purchaser common stock so acquired will not have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws and will not have the benefit of any registration rights, but will be subject to the Stockholders Agreement described below. By virtue of the Merger, each share of Purchaser common stock will be converted into one share of Surviving Corporation common stock. The Subscription Agreement provides that the Specified Options (representing certain Coda stock options held by certain members of the Management Group) and Specified Warrants (representing warrants to purchase Coda Common Stock held by certain members of the Management Group) will not be exercised prior to the Effective Time and shall, as of the Effective Time, be canceled without exercise and without payment of consideration. Concurrently, the Management Group will enter into Nonstatutory Stock Option Agreements governing the Replacement Options providing for the right for a period of 10 years from and after the Effective Time to purchase shares of Surviving Corporation common stock for $.01 per share. However, the Replacement Options may only be exercised while the holder remains an employee of the Surviving Corporation and for a limited period of time thereafter. The number of shares of Surviving Corporation common stock underlying the Replacement Options each member of the Management Group receives is based on the amount of cash the holder would have received if his Specified Options or Specified Warrants had been converted into cash in the Merger on the same basis as other outstanding options and warrants to purchase Coda Common Stock were converted, divided by the $100 per share purchase price paid by JEDI and the other Management Group members for their common stock of Purchaser. Thus, if the Replacement Options are exercised, the holders will have effectively paid the same purchase price per share Page - 7 as JEDI and the Management Group paid for their shares of common stock of the Surviving Corporation. The Notes will be due on the fifth anniversary of the Effective Time, will bear interest at the mid-term applicable federal rate (annual compounding) for the month in which the Effective Time occurs (6.11% for November 1995), will be secured by the Surviving Corporation common stock purchased with the proceeds thereof and certain rights of the maker under the Stockholders Agreement described below, and will provide that in no event will an individual maker's liability thereunder for any deficiency on his respective Note (after the sale and disposition of all collateral securing same) exceed 35% of the original principal balance of the Note. The members of the Management Group, their current positions with Coda and/or Diamond and the number of shares of fully diluted Purchaser Common Stock to be acquired by them are set forth in the following table:
Name of Member of Surviving Fully Diluted Management Group Corporation Ownership and Current Position with Common Stock Replacement -------------------- Coda and/or Diamond Direct Ownership Options Shares % - --------------------------------------- ---------------- ----------- ---------- -------- Randell A. Bodenhamer, Vice President - Land; Executive Vice President, Diamond Energy Operating Company.................... 2,322 178 2,500 .26 Joe I. Callaway, Vice President - General Counsel....... 500 500 1,000 .11 J. David Choisser, Vice President - Controller............ 1,105 395 1,500 .17 J. William Freeman, Vice President - Engineering........... 1,250 1,250 2,500 .26 Roy Harney, Manager - Engineering, Diamond Energy Operating Company.................... 500 0 500 .05 Grant W. Henderson, Executive Vice President, Chief Financial Officer and Director........................... 2,500 2,500 5,000 .53 Jarvis A. Hensley, Vice President - Operations, Diamond Energy Operating Company.............................. 500 0 500 .05 Chris A. Jackson, Manager - Production................... 500 500 1,000 .11
Page - 8 Jarl P. Johnson, Vice Chairman of the Board, Director; President, Diamond Energy Operating Company.................... 2,543 1,457 4,000 .42 Douglas H. Miller, Chairman of the Board, Chief Executive Officer and Director........................... 0 25,000 25,000 2.64 Gary M. Nelson, Manager - Data Processing.............. 250 250 500 .05 Gary R. Scoggins, Vice President - Human Resources...................... 250 250 500 .05 Claude A. Seaman, Manager - Financial Reporting............................ 250 250 500 .05 J. W. Spencer, III, Vice President - Operations............ 1,372 1,128 2,500 .26 Scott E. Studdard, Manager - Tax Department............... 250 250 500 .05 ------ ------ ------ ---- Total............................. 14,092 33,908 48,000 5.06 ====== ====== ====== ====
Stockholders Agreement. The Purchaser, JEDI and the Management Group have entered into a Stockholders Agreement dated as of October 30, 1995 (the "Stockholders Agreement"), which provides generally that all parties, including JEDI and the Management Group, (i) have rights of first refusal to acquire additional shares of Surviving Corporation Common Stock that may be issued by the Surviving Corporation and (ii) are restricted from transferring their Surviving Corporation common stock. The Surviving Corporation has a right to match any third party offer to purchase shares of Surviving Corporation common stock from any stockholder, and, in the event that the Surviving Corporation does not purchase those shares, the other stockholders may have a right to include a pro rata portion of their Surviving Corporation common stock in the transaction. The Stockholders Agreement provides that, if the employment of a member of the Management Group terminates for any reason (including death or disability) other than his voluntary termination (except upon retirement at age 65 or older or the expiration of the term of any employment agreement he has with the Surviving Corporation) or his termination by the Surviving Corporation for cause, then the Surviving Corporation shall have a right to purchase such member's shares of Surviving Corporation common stock at a purchase price to be determined from time to time by the Surviving Corporation pursuant to a formula that values the shares on the basis of a comparison of the discretionary cash flow and EBITDA (as defined therein) of the Surviving Corporation and a group of peer companies. The Stockholders Agreement also provides that, if the employment of a member of the Management Group terminates for any reason other than voluntary termination or termination of such member for Page - 9 cause, then such member shall have the right to require the Surviving Corporation to purchase such member's shares of Surviving Corporation common stock based on the previously described formula. The purchase price under the formula will vary depending on the financial performance of the Surviving Corporation and the group of peer companies. The Stockholders Agreement provides that each member of the Management Group shall have the right (the "Special Management Rights") to receive from JEDI, upon the occurrence of certain events (generally an initial public offering, a business combination with another person or the liquidation of the Surviving Corporation) (each, a "Trigger Event"), an amount, which is payable in cash or additional shares of Surviving Corporation Common Stock depending upon the cause of the Trigger Event, designed to result in the Management Group receiving in connection with the Trigger Event one-third of the proceeds, attributable to the shares of Surviving Corporation common stock purchased by JEDI, above the amount of proceeds necessary for JEDI to achieve an internal annual rate of return on that investment of 15%. The individual member's interest in such Special Management Rights is proportional to such member's ownership of the fully diluted common stock of the Surviving Corporation, as reflected in the table above. The Stockholders Agreement also provides that if the employment of a member of the Management Group terminates, then his Special Management Rights shall terminate and, if the termination is other than a voluntary termination or a termination for cause, he may be entitled to receive an amount based on the discretionary cash flow and EBITDA formula discussed above. The Stockholders Agreement further provides that, after the Effective Time, the Surviving Corporation will establish an employee benefit plan for the benefit of its employees who are not members of the Management Group and will contribute to the plan 2,000 shares of Surviving Corporation common stock, and pursuant to the Stockholders Agreement 4% of the Special Management Rights will be allocated thereto. The Stockholders Agreement will terminate and no party thereto will have any further obligations or rights thereunder upon the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms, (ii) October 30, 2005, (iii) the date on which an initial public offering of Surviving Corporation common stock is consummated or of any business transaction involving the Surviving Corporation whereby Surviving Corporation common stock becomes a publicly traded security, (iv) the date of the dissolution, liquidation or winding-up of the Surviving Corporation and (v) the date of the delivery to the Surviving Corporation of a written termination notice executed by certain parties to the Stockholders Agreement. Business Opportunity Agreement. ECT, the Purchaser, JEDI and the Management Group have also entered into a Business Opportunity Agreement (the "Business Opportunity Agreement") that is intended to make it clear that Enron and its affiliates have no duty to make business opportunities available to the Surviving Corporation in most circumstances. The Business Opportunity Agreement also provides that ECT and its affiliates may pursue certain business opportunities to the exclusion of the Surviving Corporation. The Business Opportunity Agreement may limit the business opportunities available to the Surviving Corporation and the opportunity of the Management Group to earn incentive compensation under the Stockholders Agreement or otherwise. In addition, there may be circumstances in which the Surviving Corporation will offer business opportunities to certain affiliates of Enron. If an Enron affiliate Page - 10 is offered such an opportunity and decides to pursue it, the Surviving Corporation may be unable to pursue it. Employment Agreements. Messrs. Miller, Johnson, Henderson, Randell A. Bodenhamer, J. William Freeman and J.W. Spencer, III, have entered into employment agreements (the "Employment Agreements") with the Purchaser to become effective at the Effective Time. The Employment Agreements are for a period of five years from the Effective Time (three years in the case of Messrs. Johnson and Spencer) and provide for the payment of base salaries, together with other benefits generally available to employees of the Surviving Corporation, and positions with the Surviving Corporation as set forth below:
Name Position with Surviving Corporation Annual Base Salary - ----------------------- ---------------------------------------------- ------------------ Randell A. Bodenhamer.. Vice President - Land $145,000 J. William Freeman..... Vice President - Engineering $170,000 Grant W. Henderson..... President and Chief Financial Officer $225,000 Jarl P. Johnson........ Vice Chairman of the Board and Chief $250,000 Operating Officer Douglas H. Miller...... Chairman of the Board and Chief Executive $350,000 Officer J.W. Spencer, III...... Vice President - Operations $170,000
Each of these persons would receive his salary for the remaining term of his Employment Agreement if the Surviving Corporation were to terminate his Employment Agreement other than for cause. The Employment Agreements provide that the employees agree not to compete with the Surviving Corporation for a period of six months after their voluntary termination or termination for cause; in the case of Mr. Miller, the covenant not to compete is for a period of two years, except that the noncompetition period is one year in the event of incapacity, involuntary termination other than for cause or his resignation due to a breach by Surviving Corporation of Mr. Miller's Employment Agreement. OPERATION AND MANAGEMENT OF SURVIVING CORPORATION AFTER THE MERGER Following the Merger, JEDI and the Management Group will own approximately 98.5% and 1.5%, respectively, of the outstanding shares of Surviving Corporation Common Stock (approximately 95% and 5%, respectively, on a fully diluted basis, including options granted to the Management Group). Coda is expected to continue to manage and operate its business and properties substantially as before the Merger and is expected to maintain its current offices. The Bylaws of the Surviving Corporation will provide that the Chairman of the Board and the Vice Chairman of the Board of the Surviving Corporation will be directors. As such, Douglas H. Miller, as Chairman of the Board of the Surviving Corporation, and Jarl P. Johnson, Page - 11 as Vice Chairman of the Board of the Surviving Corporation, will be directors of the Surviving Corporation. The other five members of the Board of Directors will be elected by the stockholders of the Surviving Corporation. JEDI anticipates that Grant W. Henderson will also be elected to one of the other five positions on the Board of Directors of the Surviving Corporation. In addition, the respective executive officers of Coda, with the exception of T.W. Eubank, Coda's President and Chief Operating Officer, will continue as executive officers of Surviving Corporation. Grant W. Henderson will assume the additional title of President and Jarl P. Johnson will assume the additional title of Chief Operating Officer. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The receipt of cash for shares of Coda Common Stock pursuant to the Merger or pursuant to the exercise of appraisal rights will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign or other tax laws. For United States federal income tax purposes, in general, a stockholder who receives cash for shares of Coda Common Stock pursuant to the Merger will recognize a gain or loss equal to the difference between the stockholder's tax basis for the shares of Coda Common Stock converted into the right to receive cash in such transaction and the amount of cash received in exchange therefor. Assuming that the shares of Coda Common Stock constitute capital assets in the hands of the stockholder, such gain or loss will be long-term capital gain or loss if, as of the date of disposition, such shares of Coda Common Stock have been held for more than one year. Page - 12 Item 7. Financial Statements and Exhibits --------------------------------- The following documents are attached hereto as exhibits: 2.1 Agreement and Plan of Merger by and among Coda Energy, Inc., Joint Energy Development Investments Limited Partnership and Coda Acquisition, Inc. dated as of October 30, 1995. 99.1 Coda Energy, Inc. Press Release dated October 31, 1995. 99.2 Stockholders Agreement dated October 30, 1995, including exhibits but omitting schedules. 99.3 Subscription Agreement among Coda Acquisition, Inc. and The Management Investors dated October 30, 1995, including exhibits but omitting schedules. 99.4 Business Opportunity Agreement dated as of October 30, 1995. 99.5 Executive Employment Agreement between Coda Acquisition, Inc. and Randell A. Bodenhamer. 99.6 Executive Employment Agreement between Coda Acquisition, Inc. and J. William Freeman. 99.7 Executive Employment Agreement between Coda Acquisition, Inc. and Grant W. Henderson. 99.8 Executive Employment Agreement between Coda Acquisition, Inc. and Jarl P. Johnson. 99.9 Executive Employment Agreement between Coda Acquisition, Inc. and Douglas H. Miller. 99.10 Executive Employment Agreement between Coda Acquisition, Inc. and J.W. Spencer, III. 99.11 Agreement of Coda to provide schedules to Stockholders Agreement (Exhibit 99.3) and Subscription Agreement (Exhibit 99.4). Page - 13 - -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 9, 1995 CODA ENERGY, INC. By: \s\ Joe Callaway ------------------------------------- Joe Callaway, Vice President and General Counsel Page - 14 EXHIBIT INDEX Sequential Exhibit No. Description of Exhibit Page No. - ----------- ---------------------- ---------- 2.1 Agreement and Plan of Merger by and among Coda Energy, Inc., Joint Energy Development Investments Limited Partnership and Coda Ac- quisition, Inc. dated as of October 30, 1995. 99.1 Coda Energy, Inc. Press Release dated October 31, 1995. 99.2 Stockholders Agreement dated October 30, 1995. 99.3 Subscription Agreement among Coda Acquisi- tion, Inc. and The Management Investors dated October 30, 1995. 99.4 Business Opportunity Agreement dated as of October 30, 1995. 99.5 Executive Employment Agreement between Coda Acquisition, Inc. and Randell A. Bodenhamer. 99.6 Executive Employment Agreement between Coda Acquisition, Inc. and J. William Freeman. 99.7 Executive Employment Agreement between Coda Acquisition, Inc. and Grant W. Henderson. 99.8 Executive Employment Agreement between Coda Acquisition, Inc. and Jarl P. Johnson. 99.9 Executive Employment Agreement between Coda Acquisition, Inc. and Douglas H. Miller. 99.10 Executive Employment Agreement between Coda Acquisition, Inc. and J.W. Spencer, III. 99.11 Agreement of Coda to provide schedules to Stockholders Agreement (Exhibit 99.3) and Subscription Agreement (Exhibit 99.4). Page - 15 EX-2.1 2 AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG CODA ACQUISITION, INC., JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP AND CODA ENERGY, INC. DATED AS OF OCTOBER 30, 1995 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 30, 1995, by and among Coda Acquisition, Inc., a Delaware corporation ("Sub"), Coda Energy, Inc., a Delaware corporation (the "Company") and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership ("JEDI"): W I T N E S S E T H: - - - - - - - - - - WHEREAS, JEDI and the Company desire to effect a merger of Sub with and into the Company (the "Merger"); WHEREAS, the Board of Directors of the Company has appointed a special committee of independent directors (the "Special Committee") to consider the Merger; WHEREAS, the Special Committee, with the advice and assistance of Bear, Stearns & Co. Inc. and independent legal counsel, has unanimously recommended (subject to the satisfaction of the conditions precedent set forth herein) that the Board of Directors of the Company approve this Agreement and the transactions contemplated hereby; WHEREAS, the Board of Directors of the Company has determined it advisable and in the best interests of the Company's stockholders to consummate the Merger, upon the terms and subject to the conditions set forth herein; and WHEREAS, the Board of Directors of Sub has determined it advisable and in the best interests of Sub's stockholders to consummate the Merger, upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE MERGER Section 1.1 The Merger. Upon the terms and subject to the conditions ---------- set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time (as hereinafter defined), Sub shall be merged with and into the Company and the separate corporate existence of Sub shall thereupon cease, and the Company, as the surviving corporation in the Merger (the "Surviving Corporation"), shall by virtue of the Merger continue its corporate existence in accordance with the DGCL. Section 1.2 Effective Time of the Merger. The Merger shall become ---------------------------- effective at the date and time (the "Effective Time") when a properly executed certificate of merger, in such form as is required by and executed in accordance with the DGCL, is duly filed with the Secretary of State of the State of Delaware or at such later time as the parties hereto shall have provided in such certificate. The parties hereto shall cause such filing to occur as soon as practicable on or after the Closing Date (as hereinafter defined). ARTICLE II THE SURVIVING CORPORATION Section 2.1 Certificate of Incorporation. At the Effective Time, the ---------------------------- Restated Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended to read in its entirety as set forth in Exhibit 2.1 hereto, and such Restated Certificate of Incorporation, as so amended, shall be the Restated Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law. Section 2.2 By-Laws. The By-laws of the Company as in effect at the ------- Effective Time shall be the By-laws of the Surviving Corporation and shall be amended and restated to conform to the By-laws of Sub as in effect immediately prior to the Effective Time, until thereafter further amended as provided by law. Section 2.3 Board of Directors and Officers of the Surviving ------------------------------------------------ Corporation. The directors of Sub and the officers designated by Sub prior to - ------------ the Effective Time of the Company immediately prior to the Effective Time, subject to the applicable provisions of the Certificate of Incorporation and By- laws of the Surviving Corporation, shall be the directors and officers, respectively, of the Surviving Corporation until their respective successors shall be duly elected or appointed and qualified. Section 2.4 Effects of Merger. The Merger shall have the effects set ----------------- forth in Section 259 of the DGCL. The corporate existence of the Company, with all its purposes, powers and objects, shall continue unaffected and unimpaired by the Merger and, as the Surviving Corporation, it shall be governed by the laws of the State of Delaware and shall succeed to all rights, assets, liabilities, properties, privileges, powers, franchises and obligations of Sub in accordance with the DGCL. ARTICLE III CONVERSION OF SECURITIES Section 3.1 Merger Consideration. At the Effective Time, by virtue -------------------- of the Merger and without any action on the part of Sub, the Company or their respective stockholders (other than the filing of the certificate of merger referred to in Section 1.2 hereof) (a) each share (a "Share") of common stock, par value $0.02 per share, of the Company ("Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than (i) Shares held by Sub, (ii) Shares held in the treasury of the Company or owned by any subsidiary of the Company and (iii) Dissenting Shares (as hereinafter defined) in respect of which appraisal rights are properly exercised and perfected) shall be canceled and extinguished and be converted automatically into the right to receive, pursuant to Section 3.2 hereof, $8.00 per Share in cash, without interest thereon (the "Merger Consideration"), less any required withholding of taxes, which Merger Consideration shall be payable upon surrender of the certificate formerly representing such Share (a "Certificate") in the -2- manner provided in Section 3.2(b), (b) each Share then held in the treasury of the Company and each Share owned by any subsidiary of the Company shall be canceled and retired without conversion thereof and without payment of any consideration and shall cease to exist, and (c) each Share owned beneficially or of record by Sub immediately prior to the Effective Time shall be canceled and retired without conversion thereof and without payment of any consideration and shall cease to exist. Section 3.2 Paying Agent and Surrender of Certificates. (a) Prior to ------------------------------------------ the Effective Time, the Company and Sub shall appoint a bank reasonably acceptable to the Company, and having a place of business in New York City, as paying agent (the "Paying Agent") for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 3.1. At Closing, JEDI shall cause to be deposited in trust with the Paying Agent, cash in the aggregate amount equal to the sum of (i) the cash consideration required pursuant to Section 3.6 to make payments with respect to Outstanding Options and Outstanding Warrants and (ii) the product of (A) the number of Shares outstanding immediately prior to the Effective Time (other than Shares held by Sub and Shares held in the treasury of the Company) and (B) the Merger Consideration. Such funds shall be invested by the Paying Agent as directed by JEDI, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $100 million (based on the most recent financial statements of such bank which are then publicly available at the Commission (as hereinafter defined) or otherwise); provided, however, that no loss on any investment made pursuant to this Section 3.2(a) shall relieve JEDI or the Surviving Corporation of its obligation to pay the Merger Consideration for each Share outstanding immediately prior to the Effective Time. JEDI shall promptly replace, or cause to be replaced, any monies lost through any investment made pursuant to this Section 3.2(a). (b) As soon as practicable after the Effective Time, JEDI shall cause the Surviving Corporation to mail to each person who was a record holder of Shares immediately prior to the Effective Time (other than holders of Dissenting Shares, Sub, the Company and the Company's subsidiaries), a form of letter of transmittal and instructions for use in effecting the surrender for payment of Certificates that immediately prior to the Effective Time represented Shares. Upon surrender of a Certificate to the Paying Agent, together with a duly executed and completed letter of transmittal and any other required documents, the holder of the Certificate shall receive in exchange , and the Paying Agent will pay (via U.S. mail. postage prepaid) as soon as practicable to such holder, cash in an amount equal to the product of the number of Shares represented by the Certificate or Certificates surrendered and the Merger Consideration, without any interest thereon and less any required withholding of taxes, and such Certificate(s) shall forthwith be canceled. If the payment is to be made to a person other than the person in whose name a surrendered Certificate is registered, it shall be a condition of payment that (x) the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that (y) the person requesting such payment shall either pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation or the Paying Agent that such tax has been paid or is not applicable. The -3- Surviving Corporation shall pay all charges and expenses (except those taxes described in the immediately preceding sentence and expenses incurred by the holders of Certificates in tendering their Certificates), including those of the Paying Agent, in connection with the distribution of the Merger Consideration. After the Effective Time, until surrendered in accordance with the provisions of this Section 3.2(b), a Certificate shall represent only the right to receive the Merger Consideration in cash multiplied by the number of Shares evidenced by such Certificate, without any interest thereon. On or after the one-hundred eightieth day following the Effective Time, the Surviving Corporation may by written request require the Paying Agent to pay to the Surviving Corporation that portion of the funds deposited with the Paying Agent pursuant to this Section 3.2(b) (and any income earned thereon) that have not been disbursed pursuant to this Section 3.2(b), and holders of Certificates shall thereafter look only to the Surviving Corporation for any payment to be made pursuant to this Section 3.2(b). Notwithstanding anything to the contrary, none of the Paying Agent, the Surviving Corporation or any party hereto shall be liable to a holder of a Certificate for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar law. Section 3.3 Dissenting Shares. Notwithstanding anything in this ----------------- Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and which are held by stockholders who have properly exercised appraisal rights with respect thereto under Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration as provided in Sections 3.1 and 3.2, but the holders of Dissenting Shares shall be entitled to receive such payment of the appraised value of such Shares held by them from the Surviving Corporation (or the Paying Agent, if applicable) as shall be determined pursuant to Section 262 of the DGCL; provided, however, that if any such holder shall have failed to perfect or shall withdraw or lose the right to appraisal and payment under the DGCL, each such holder's Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon and less any required withholding of taxes as provided in Section 3.1, and upon surrender of the Certificate(s) representing such Shares, in the manner provided in Section 3.2, such Shares shall no longer be Dissenting Shares. Section 3.4 Conversion of Sub Securities. At the Effective Time, ---------------------------- each share of common stock, par value $0.01 per share, of Sub issued and outstanding immediately prior to the Effective Time shall be converted, by virtue of the Merger and without any action on the part of the holder thereof, into one fully paid and nonassessable share of the common stock of the Surviving Corporation. Section 3.5 Stockholders to Have No Further Rights. At and after the -------------------------------------- Effective Time, the holder of a Certificate shall cease to have any rights as a stockholder of the Company, except for (i) the right to surrender such Certificate in exchange for the amount of Merger Consideration to which such holder is entitled under this Agreement, or (ii) the rights available under the DGCL for Dissenting Shares. -4- Section 3.6 Stock Options and Warrants. -------------------------- (a) Following the execution of this Agreement, the Company shall use its reasonable best efforts to cause all holders of options to purchase Company Common Stock granted under the Company's 1989 Incentive Stock Option Plan and the 1993 Incentive Stock Option Plan, each as amended (collectively, the "Stock Option Plans"), except for the options referred to in Schedule 3.6(a)(1) of the Company Disclosure Schedule (the "Specified Options"), to execute prior to the Effective Time an Option Relinquishment and Release Agreement (herein so called) in the form attached hereto as Exhibit 3.6(a)(2). As soon as practicable after the Effective Time, JEDI and the Surviving Corporation shall cause the Paying Agent to pay (via U.S. mail, postage prepaid) to such holders who have previously delivered an Option Relinquishment and Release Agreement the cash amount equal to the product of (i) the number of shares of Company Common Stock subject to such option (irrespective of whether such option is then exercisable) and (ii) the amount by which $8.00 exceeds the exercise or strike price per share of Company Common Stock subject to such option immediately prior to the Effective Time, less any required withholding taxes. In the event that an option holder fails to deliver an Option Relinquishment and Release Agreement prior to the Effective Time, such holder's options (the "Outstanding Options") shall, in accordance with the terms and conditions of the governing Stock Option Plan and the holder's stock option agreement(s), be converted without any action on the part of the holder thereof into the right to receive an amount equal to the Merger Consideration, upon the exercise of such holder's options in accordance with, and within the time period prescribed by, the applicable Stock Option Plan and the holder's stock option agreement(s). The Surviving Corporation shall pay, or cause the Paying Agent to pay (via U.S. mail, postage prepaid), to each holder of Outstanding Options the Merger Consideration, less any required withholding taxes, as promptly as practicable after receiving a valid exercise of such options by the holder thereof. To the extent that options to purchase Company Common Stock are exercised by holders prior to the Effective Time, such holders shall receive Certificates evidencing the Shares underlying such options and may surrender such Certificates to the Paying Agent after the Effective Time for payment in cash, as provided in Article III hereof. As of the Effective Time, the Specified Options shall be canceled without exercise and without payment of consideration and shall cease to exist, in accordance with the provisions of the subscription agreement executed by the holders of such options relating to their equity ownership of the Surviving Corporation. (b) Following the execution of this Agreement, the Company shall send to all holders of warrants to purchase Company Common Stock granted under the Company's Compensation Plan for Directors (the "Warrant Plan") and the warrant to purchase Company Common Stock issued to Douglas H. Miller as of October 26, 1989 (together, the "Outstanding Warrants"), except for the warrants referred to in Schedule 3.6(a)(1) of the Company Disclosure Schedule (the "Specified Warrants"), written notice (i) of the Merger contemplated hereby, (ii) that all unvested warrants are deemed fully vested pursuant to Section 6 of the Warrant Plan or otherwise, and (iii) that all unexercised Warrants held by such persons shall be cancelled as of the Effective Time pursuant to Section 6 of the Warrant Plan or otherwise. In lieu of having to exercise their warrants, the Company also shall send to all such persons a Warrant Relinquishment and Release Agreement (herein so called) in the form attached hereto as Exhibit 3.6(b)(2) for execution and delivery by the warrant holder prior to the Effective Time permitting the holder to receive the cash amount equal to the product of (i) the number of shares of Company Common Stock subject to such warrant (irrespective of whether such warrant is then exercisable) and (ii) the amount by which $8.00 -5- exceeds the exercise or strike price per share of Company Common Stock subject to such warrant immediately prior to the Effective Time (the "Warrant Merger Consideration"), less any required withholding taxes. As soon as practicable after the Effective Time, JEDI and the Surviving Corporation shall cause the Paying Agent to pay (via U.S. mail, postage prepaid) to such holders who have previously executed a Warrant Relinquishment and Release Agreement the Warrant Merger Consideration, less any required withholding taxes. To the extent that warrants to purchase Company Common Stock are exercised by holders prior to the Effective Time, such holders shall receive Certificates evidencing the Shares underlying such warrants and may surrender such Certificates to the Paying Agent after the Effective Time for payment in cash, as provided in Article III hereof. As of the Effective Time, the Specified Warrants shall be canceled without exercise and without payment of consideration and shall cease to exist, in accordance with the provisions of the subscription agreement executed by the holders of such options relating to the equity ownership of the Surviving Corporation. Section 3.7 Stockholders' Meeting. The Company, acting through its --------------------- Board of Directors, shall take all action necessary, in accordance with applicable law and its Certificate of Incorporation and By-laws, to convene a special meeting of the holders of Company Common Stock (the "Company Meeting") as promptly as practicable for the purpose of considering and taking action to authorize this Agreement and the Merger pursuant to the DGCL. Subject to its fiduciary duties under applicable law as advised by outside counsel, the Board of Directors of the Company will recommend that holders of Company Common Stock vote in favor of and approve the Merger and the adoption of this Agreement at the Company Meeting. At the Company Meeting, all of the shares of Company Common Stock then owned by Sub, or with respect to which Sub holds the power to direct the voting, will be voted in favor of approval of the Merger and adoption of this Agreement. Section 3.8 Closing of the Company's Transfer Books. At the --------------------------------------- Effective Time, the stock transfer books of the Company shall be closed and no transfer of Shares shall be made thereafter. In the event that, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration as provided in Sections 3.1 and 3.2. Section 3.9 Closing. Unless this Agreement is terminated and the ------- transactions contemplated herein abandoned pursuant to Section 11.1 and subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article X, the consummation of the Merger and the closing of the transactions contemplated by this Agreement (the "Closing") shall take place (i) at the offices of Vinson & Elkins L.L.P., Houston, Texas, at 11:00 A.M. local time on a date to be specified by JEDI and the Company, but as soon as practicable (and in any event within two business days) after the day on which the last of the conditions set forth in Article X is fulfilled (other than deliveries of instruments to be made at Closing) or, if permissible, waived by the relevant party or (ii) at such other time and place as JEDI and the Company shall agree upon in writing. The date on which the Closing occurs is referred to herein as the "Closing Date." -6- ARTICLE IV DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: "Agreement"shall have the meaning set forth in the opening paragraph. "Antitrust Division" shall have the meaning set forth in Section 9.4. "Approved Taurus Disposition Agreement" shall have the meaning set forth in Section 9.7. "CERCLA" shall mean the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, as amended. "Certificate" shall have the meaning set forth in Section 3.1. "Closing" shall have the meaning set forth in Section 3.9. "Closing Date" shall have the meaning set forth in Section 3.9. "Code" shall have the meaning set forth in Section 7.9(b). "Commission" shall have the meaning set forth in Section 7.5. "Commonly Controlled Entity" shall have the meaning set forth in Section 7.9(b). "Company" shall have the meaning set forth in the opening paragraph. "Company Common Stock" shall have the meaning set forth in Section 3.1. "Company Disclosure Schedule" shall have the meaning set forth in Section 7.1. "Company Estimated Proved Reserves" shall have the meaning set forth in Section 7.19(a). "Company Material Adverse Effect" shall have the meaning set forth in Section 7.1. "Company Meeting" shall have the meaning set forth in Section 3.7. "Company Reserve Report" shall have the meaning set forth in Section 7.19(a). "Company SEC Reports" shall have the meaning set forth in Section 7.5. "Company Voting Debt" shall have the meaning set forth in Section 7.2. "Confidentiality Agreement" shall have the meaning set forth in Section 9.1. -7- "Defensible Title" shall mean, subject to and except for the Permitted Encumbrances, (i) the title of the Company and its Subsidiaries to such assets is free and clear of all liens, encumbrances and defects of any kind whatsoever, and (ii) as to those wells for which a "Working Interest" and a "Net Revenue Interest" are set forth in the Company Engineering Report, the Company or its Subsidiaries are entitled to receive the percentage of all Hydrocarbons produced, saved and marketed from such wells in an amount not less than the Net Revenue Interest set forth in the such engineering report, without reduction, suspension or termination throughout the duration of the productive life of such wells (except as set forth in such report), and such party is obligated to bear the percentage of costs and expenses related to the maintenance, development and operation of such wells in an amount not greater than the Working Interest set forth in such engineering report, without increase throughout the productive life of such wells, except increases that also result in a proportionate increase in Net Revenue Interest and as set forth in such report. "Dissenting Shares" shall have the meaning set forth in Section 3.3. "DGCL" shall have the meaning set forth in Section 1.1. "ECT" shall have the meaning set forth in Section 9.1. "Effective Time" shall have the meaning set forth in Section 1.2. "Environmental Laws" shall mean any and all laws, statutes, ordinances, rules, regulations, or orders of any Governmental Entity pertaining to health or the environment currently in effect in any or all jurisdictions in which the Company and its Subsidiaries own property or conduct business, including without limitation, the Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, RCRA, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing federal laws, any state laws pertaining to the handling of oil and gas exploration and production wastes or the use, maintenance, and closure of pits and impoundments, and all other environmental conservation or protection laws. "ERISA" shall have the meaning set forth in Section 7.9(a). "Exchange Act" shall have the meaning set forth in Section 5.2. "Fixed Price Contracts" means any contracts, commitments or agreements for the purchase or sale of Hydrocarbons (i) having, as of the date hereof, a remaining term of two months or more, wherein the purchase or sales price thereunder throughout all or part of the life of such contract, commitment or agreement is a fixed amount or an amount that is otherwise reasonably determinable as of the date hereof pursuant to the terms of such contract, commitment or agreement, or (ii) which the Company or any Subsidiary thereof has hedged with futures contracts or otherwise; provided, that the term Fixed Price Contracts will not include any contract, commitment or agreement wherein -8- the purchase or sales price thereunder throughout all of the life of the contract, commitment or agreement is based on a market responsive reference price for a Hydrocarbon. "FTC" shall have the meaning set forth in Section 9.4. "GAAP" shall have the meaning set forth in Section 6.3. "Governmental Entity" shall have the meaning set forth in Section 7.16. "HSR Act" shall have the meaning set forth in Section 5.2. "Hydrocarbons" means oil, gas, condensate, casinghead gas, helium, carbon dioxide, mineral and other liquid or gaseous hydrocarbons. "Indebtedness" means any liability in respect of (A) borrowed money, (B) capitalized lease obligations, (C) the deferred purchase price of property or services (other than trade payables in the ordinary course of business) and (D) guarantees of any of the foregoing. "JEDI" shall have the meaning set forth in the opening paragraph. "JEDI Material Adverse Effect" shall have the meaning set forth in Section 6.2. "Leases" shall have the meaning set forth in Section 7.20(e). "Loss" shall have the meaning set forth in Section 10.3. "Material Company Assets" shall have the meaning set forth in Section 7.21. "Merger" shall have the meaning set forth in the recitals. "Merger Consideration" shall have the meaning set forth in Section 3.1. "Oil and Gas Interests" means, when used with respect to the Company or its Subsidiaries, direct and indirect interests in and rights with respect to Hydrocarbons and related properties and assets of any kind and nature, direct or indirect, including working, royalty, and overriding royalty interests, production payments, operating rights, net profits interests, other nonworking interests, and nonoperating interests; and all revenues therefrom and all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, divisions orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations and concessions; all easements, rights of way, licenses, permits, leases and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including tanks, batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing. -9- "Option Relinquishment and Release Agreement" shall have the meaning set forth in Section 3.6(a). "Other Acquisition Transaction" shall have the meaning set forth in Section 9.6. "Outstanding Options" shall have the meaning set forth in Section 3.6(a). "Outstanding Warrants" shall have the meaning set forth in Section 3.6(b). "Paying Agent" shall have the meaning set forth in Section 3.2. "PBGC" shall have the meaning set forth in Section 7.9(b). "Permitted Encumbrances" shall mean any of the following: (i) any liens for taxes and assessments not yet delinquent or, if delinquent, that are being contested in good faith in the ordinary course of business; (ii) any obligations or duties to any municipality or public authority with respect to any franchise, grant, certificate, license or permit, and all applicable laws; (iii) any easements, rights-of-way, servitudes, permits and other rights in respect of surface operations, pipelines or the like, and easements for pipelines, power lines and other similar rights-of-way, and encroachments, on, over or in respect of any property or lands of the Company and its Subsidiaries or over which such party owns rights-of-way, easements, permits or licenses, that do not unreasonably or materially interfere with the operation of any property or lands for exploration and production of hydrocarbon or related operations; (iv) all royalties, overriding royalties, net profits interests, production payments, carried interests, reversionary interests, calls on production and other burdens on or deductions from the proceeds of production that do not operate to (A) reduce the Net Revenue Interest below that set forth in the Company Engineering Report, or (B) increase the Working Interest of the Company and its Subsidiaries above that set forth in the engineering report without a proportionate increase in the Net Revenue Interest of such party; (v) the terms and conditions of all leases, servitudes, production sales contracts, division orders, contracts for sale, purchase, exchange, refining or processing of hydrocarbons, unitization and pooling designations, declarations, orders and agreements, operating agreements, agreements of development, area of mutual interest agreements, farmout agreements, gas balancing or deferred production agreements, processing agreements, plant agreements, pipeline, gathering and transportation agreements, injection, repressuring and recycling agreements, carbon dioxide purchase or sale agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements, to the extent that such contracts and agreements do not (A) reduce the Net Revenue Interest below that set forth in the Company Engineering Report, or (B) increase the Working Interest above that set forth in the Company Engineering Report, as applicable, without a proportionate increase in the Net Revenue Interest of the applicable party; (vi) conventional rights of reassignment prior to abandonment; (vii) materialmen's, mechanics', repairmen's, employees', contractors', operators', tax and other similar liens or charges arising in the ordinary course of business incidental to construction, maintenance or operation of any of the assets (A) if they have not been filed pursuant to law, (B) if filed, they have not yet become due and payable or payment is being withheld as provided by law or (C) if their validity is being contested in good faith in the ordinary course of business by appropriate action; and (viii) any other encumbrances that (A) do not secure an -10- obligation in respect of borrowed money (B) do not interfere materially with the operation, value or use of assets of the Company or its Subsidiaries. "Plan" shall have the meaning set forth in Section 7.9(a). "Potential Acquirer" shall have the meaning set forth in Section 9.6. "Proxy Statement" shall have the meaning set forth in Section 5.3. "RCRA" shall mean the Resource Conservation and Recovery Act of 1976, as amended. "Securities Act" shall have the meaning set forth in Section 7.5. "Share" shall have the meaning set forth in Section 3.1. "Special Committee" shall have the meaning set forth in the recitals. "Specified Options" shall have the meaning set forth in Section 3.6(a). "Specified Parties" shall mean Douglas H. Miller, Grant W. Henderson, J. William Freeman, J. W. Spencer III, Randy Bodenhamer and Jarl P. Johnson. "Specified Warrants" shall have the meaning set forth in Section 3.6(b). "Stock Option Plans" shall have the meaning set forth in Section 3.6(a). "Sub Material Adverse Effect" shall have the meaning set forth in Section 5.1. "Subsidiaries" shall have the meaning set forth in Section 7.3. "Superior Proposal" shall have the meaning set forth in Section 9.6. "Surviving Corporation" shall have the meaning set forth in Section 1.1. "Taurus" shall have the meaning set forth in Section 7.24. "Taurus Disposition" shall have the meaning set forth in Section 9.7. "Taurus Disposition Agreement" shall have the meaning set forth in Section 9.7. "Taurus Disposition Notice" shall have the meaning set forth in Section 9.7. "Tax" shall mean all federal, state, local and foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, property, withholding, excise and other taxes, duties and -11- assessments of any nature whatsoever together with all interest, penalties and additions imposed with respect to such amounts. "Tax Return" shall mean any return, declaration, report, estimate, claim for refund, information return, statement, request for extension, or other similar document relating to any tax, including any schedule or attachment thereto, and including any amendment thereof. "Terminating Other Acquisition Transaction" shall have the meaning set forth in Section 11.1(e). "Warrant Merger Consideration" shall have the meaning set forth in Section 3.6(b). "Warrant Plan" shall have the meaning set forth in Section 3.6(b). "Warrant Relinquishment and Release Agreement" shall have the meaning set forth in Section 3.6(b). ARTICLE V REPRESENTATIONS AND WARRANTIES OF SUB Sub hereby represents and warrants to the Company as follows: Section 5.1 Organization and Qualification. Sub is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power to carry on its business as it is now being conducted. Sub is duly qualified as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a direct or indirect material adverse effect on the business, assets, condition (financial or otherwise), liabilities or operations of Sub or Sub's ability to consummate the Merger (a "Sub Material Adverse Effect"). Complete and correct copies as of the date hereof of the Certificate of Incorporation and By-laws of Sub have been delivered to the Company. Section 5.2 Authority Relative to this Agreement. Sub has the ------------------------------------ requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Sub and the consummation of the transactions contemplated hereby by Sub have been duly authorized by all necessary corporate action on the part of Sub. This Agreement has been duly executed and delivered by Sub and, assuming the due authorization, execution and delivery of this Agreement by the Company and JEDI, this Agreement constitutes a legal, valid and binding obligation of Sub enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. -12- Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with or violate the Certificate of Incorporation or By-laws of Sub or (ii) result in any breach or constitute a default (with or without notice or lapse of time, or both) or give rise in others of any rights of termination, cancellation or acceleration under any indenture, contract, license, franchise, permit, order, decree, concession, lease, instrument, judgment, statute, law, ordinance, rule or regulation applicable to Sub or its assets, other than, in the case of clause (ii) only, breaches, defaults, violations and losses of rights that would not have a Sub Material Adverse Effect. Except as referred to herein, or in connection or in compliance with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the filing and recordation of the certificate of merger pursuant to the DGCL, no filing or registration with, or authorization, consent or approval of, any governmental or regulatory body or authority or third party is necessary for the consummation by Sub of the Merger or the other transactions contemplated by this Agreement, except where the failure to make any such filing or registration or to obtain such authorization, consent or approval would not prevent consummation of the Merger or have a Sub Material Adverse Effect. Section 5.3 Information in Proxy Statement. None of the information ------------------------------ supplied by Sub for inclusion in the preliminary and definitive proxy statement of the Company and any amendments or supplements thereto (collectively the "Proxy Statement") to be mailed to the stockholders of the Company in connection with the Merger will, at the time of the mailing thereof or at the time of the Company Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 5.4 Capitalization of Sub. The authorized capital stock of --------------------- Sub consists of 1,000,000 shares of common stock, par value $0.01 per share, 1,000 of which shares, as of the date of this Agreement, are validly issued and outstanding, fully paid and nonassessable and are owned by JEDI free and clear of all liens, claims and encumbrances. Section 5.5 Financing. Sub has or will have available to it at the --------- time the Surviving Corporation is required to pay for the Shares pursuant to Article III hereof sufficient funds to permit it to (i) pay for all of the outstanding shares of Company Common Stock, (ii) pay for the cancellation of the Outstanding Options and the Outstanding Warrants in accordance with Article III, and (iii) pay amounts due to stockholders of the Company who have perfected dissenters' rights in accordance with the DGCL. Section 5.6 Operations of the Company Following the Merger. Based ---------------------------------------------- upon, among other things, Sub's review of the Company's financial condition and operations, the Company's business plan and the representations made by the Company in this Agreement, the financial condition of Sub and Sub's present plans with respect to the Company and its subsidiaries following the Merger, Sub has no reason to believe that, following the consummation of the Merger, the Surviving Corporation will not be able to meet its obligations as they come due. -13- Section 5.7 Finder's Fees. Sub has not made any arrangements with ------------- any broker, finder or investment banker that would require the Company to pay any fee or commission if the Merger or the other transactions contemplated by this Agreement are not consummated. Section 5.8 Review of Company. Without in any way affecting the ----------------- importance of, or impacting its reliance on, any other provision of this Agreement, Sub acknowledges that it has had a full opportunity to request from the Company and its representatives, and has received and reviewed, all oral and written information concerning the Company and its Subsidiaries that Sub deems relevant to its decision to enter into this Agreement and to consummate the transactions contemplated hereby. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF JEDI JEDI hereby represents and warrants to the Company as follows: Section 6.1 Organization. JEDI is a limited partnership duly ------------ organized, validly existing and in good standing under the laws of the State of Delaware and has the partnership power to carry on its business as it is now being conducted. Schedule 6.1 sets forth the names of the general partner and the limited partners and their respective percentages of ownership. Section 6.2 Authority and Capacity. JEDI has the requisite ---------------------- partnership power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by JEDI and the consummation of the transactions contemplated hereby by JEDI have been duly authorized by all necessary partnership action on the part of JEDI. This Agreement has been duly executed and delivered by JEDI and, assuming the due authorization, execution and delivery of this Agreement by the Company and Sub, this Agreement constitutes a legal, valid and binding obligation of JEDI enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with or violate the partnership agreement of JEDI, or (ii) result in any breach or constitute a default (with or without notice or lapse of time, or both) under, or give rise in others to any rights of termination, cancellation or acceleration under, any indenture, contract, instrument, or loan agreement pursuant to which JEDI is a borrower, or any license, franchise, permit, order, decree, concession, lease, judgment, statute, law, ordinance, rule or regulation applicable to JEDI or its assets, other than, in the case of clause (ii) only, such breaches, defaults, violations and losses of rights that would not have a Sub Material Adverse Effect or a JEDI Material Adverse Effect (as defined below). Except as referred to herein, or in connection or in compliance with the provisions of the HSR Act, the Exchange Act and the filing and recordation of the certificate of merger pursuant to the DGCL, no filing or registration with, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the -14- consummation by JEDI of the Merger or the other transactions contemplated hereby, except where failure to make such filing or registration or obtain such authorization, consent or approval would not prevent consummation of the Merger or have a Sub Material Adverse Effect or, individually or in the aggregate, a direct or indirect material adverse effect on the business, assets, conditions (financial or otherwise), liabilities or operations of JEDI or JEDI's ability to consummate the Merger (a "JEDI Material Adverse Effect"). Section 6.3 Financial Information. --------------------- (a) JEDI has furnished the Company with true and complete copies of JEDI's audited consolidated financial statements as of December 31, 1994 and unaudited interim financial statements as of June 30, 1995. As of their respective dates, the audited financial statements and unaudited interim financial statements of JEDI were (i) prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") during the periods presented (except as may be indicated therein or in the notes thereto, or in the case of the unaudited statements, subject to normal year-end audit adjustments), (ii) present fairly, in all material respects, the financial position of JEDI as of the dates thereof and the results of their operations and cash flow for the periods then ended subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments and any other adjustments described therein and (iii) are, in all material respects, in accordance with the books of account and records of JEDI. (b) JEDI has or will have sufficient funds available to perform its obligations under Section 9.8 of this Agreement. Section 6.4 Operations of the Company Following the Merger. Based ---------------------------------------------- upon, among other things, JEDI's review of the Company's financial condition and operations, the Company's business plan and the representations made by the Company in this Agreement, the financial condition of Sub and Sub's present plans with respect to the Company and its subsidiaries following the Merger, JEDI has no reason to believe that, following the consummation of the Merger, the Surviving Corporation will not be able to meet its obligations as they come due. Section 6.5 Information in Proxy Statement. None of the information ------------------------------ supplied by JEDI for inclusion in the Proxy Statement will, at the time of the mailing thereof or at the time of the Company Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 6.6 Finder's Fees. JEDI has not made any arrangements with ------------- any broker, finder or investment banker that would require the Company to pay any fee or commission if the Merger or the other transactions contemplated by this Agreement are not consummated. Section 6.7 Review of Company. Without in any way affecting the ----------------- importance of, or impacting its reliance on, any other provision of this Agreement, JEDI acknowledges that it has had a full opportunity to request from the Company and its representatives, and has received and reviewed, all oral and written information concerning the Company and its Subsidiaries that JEDI -15- deems relevant to its decision to enter into this Agreement and to consummate the transactions contemplated hereby. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to JEDI and Sub as follows: Section 7.1 Organization and Qualification. The Company is a ------------------------------ corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power to carry on its business as it is now being conducted. The Company is duly qualified as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a direct or indirect material adverse effect on the business, assets, condition (financial or otherwise), liabilities or operations of the Company and its Subsidiaries (as hereinafter defined) taken as a whole or its ability to consummate the Merger (a "Company Material Adverse Effect"). Complete and correct copies of the charter and by-laws or comparable organizational documents of the Company and each of its Subsidiaries as of the date hereof have been previously provided to Sub, and a list of each jurisdiction in which the Company is duly qualified as a foreign corporation has been delivered to Sub as Schedule 7.1 of a disclosure schedule delivered by the Company to Sub on the date of this Agreement (the "Company Disclosure Schedule"). Section 7.2 Capitalization. The authorized capital stock of the -------------- Company consists of 40,000,000 shares of Company Common Stock and 7,500,000 shares of preferred stock, par value $0.001 per share. As of the date of this Agreement, 22,088,903 shares of Company Common Stock were outstanding, no shares of Company Common Stock were held in the treasury of the Company, no shares were held by Subsidiaries of the Company and no shares of preferred stock were outstanding. All the outstanding shares of Company Common Stock are validly issued, fully paid and non-assessable and were issued free of preemptive rights. As of the date hereof, there are no bonds, debentures, notes or other evidences of indebtedness having the right to vote on any matters on which the Company's stockholders may vote ("Company Voting Debt") issued or outstanding. Except for (i) options to acquire 1,116,632 shares of Company Common Stock pursuant to the Stock Option Plans, and (ii) warrants to purchase 1,300,000 shares of Company Common Stock pursuant to the warrant agreements referred to in Section 3.6(b) hereof, there are no options, warrants, calls or other rights, agreements or commitments outstanding obligating the Company to issue, deliver or sell shares of its capital stock or debt securities, or obligating the Company to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. Section 7.3 Subsidiaries. Schedule 7.3 of the Company Disclosure ------------ Schedule lists all subsidiaries of the Company (the "Subsidiaries"). Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to carry on its business as it is now being conducted. Each Subsidiary is duly qualified as a foreign corporation, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes -16- such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect. All the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable and are owned by the Company free and clear of any liens, claims or encumbrances. There are no existing options, warrants, calls or other rights, agreements or commitments of any character relating to the issued or unissued capital stock or other securities of any of the Subsidiaries. Other than the Subsidiaries and except as set forth in Schedule 7.3, the Company does not directly or indirectly own any interest in any other corporation, partnership, joint venture or other business association or entity, excluding joint interest operations of oil and gas wells and drilling ventures arising in the ordinary course of business. Section 7.4 Authority Relative to this Agreement. The Company has ------------------------------------ the requisite corporate power and authority to enter into this Agreement and, subject to approval of this Agreement by the holders of a majority of the outstanding shares of the Company Common Stock, the corporate power and authority to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company (except for the approval of the holders of a majority of the outstanding shares of Company Common Stock). This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by Sub and JEDI, this Agreement constitutes a legal, valid and binding obligation of the Company enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. Except as set forth in Schedule 7.4 of the Company Disclosure Schedule, neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with or violate the Certificate of Incorporation or By-laws of the Company or any of its Subsidiaries, or (ii) result in any breach or constitute a default (with or without notice or lapse of time, or both) under, or give rise in others to any rights of termination, cancellation or acceleration under, any indenture, contract, loan agreement, license, franchise, permit, order, decree, concession, lease, instrument, judgment, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or its or their respective assets, other than, in the case of clause (ii) only, such breaches, defaults, violations and losses of rights that would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as disclosed in Schedule 7.4 of the Company Disclosure Schedule or, in connection or in compliance with the provisions of the HSR Act, the Exchange Act and the filing and recordation of the Certificate of Merger pursuant to the DGCL, no filing or registration with, or authorization, consent or approval of, any governmental or regulatory body or authority or third party is necessary for the consummation by the Company of the Merger or the other transactions contemplated hereby, except where failure to make such filing or registration or obtain such authorization, consent or approval would not, individually or in the aggregate, prevent consummation of the Merger or have a Company Material Adverse Effect. -17- Section 7.5 Reports and Financial Statements. The Company has -------------------------------- furnished Sub with true and complete copies of the Company's (i) Annual Reports on Form 10-K for the fiscal years ended December 31, 1993 and December 31, 1994, as filed with the Securities and Exchange Commission (the "Commission"), (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993, September 30, 1993, March 31, 1994, June 30, 1994, September 30, 1994, March 31, 1995 and June 30, 1995, as filed with the Commission, (iii) proxy statements related to all meetings of its stockholders (whether annual or special) held since January 1, 1993 and (iv) all other reports on Form 8-K and registration statements declared effective by the Commission since December 31, 1992, except registration statements on Form S-8 relating to employee benefit plans and reports on Form 10-C relating to securities quoted on the NASDAQ Interdealer Quotation system, which are all the documents (other than preliminary material) that the Company was required to file with the Commission since January 1, 1993 (all items in clauses (i) through (iv) being referred to herein collectively as the "Company SEC Reports"). As of their respective dates, the Company SEC Reports complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the Commission thereunder applicable to such Company SEC Reports. As of their respective dates, the Company SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the audited consolidated financial statements and unaudited interim financial statements of the Company included in the Company SEC Reports complied in all material respects with applicable accounting requirements of the Securities Act and the Exchange Act, and with the published rules and regulations of the Commission with respect thereto. The financial statements included in the Company SEC Reports (i) have been prepared in accordance with GAAP during the periods presented (except as may be indicated therein or in the notes thereto or, in the case of the unaudited statements, subject to normal year-end audit adjustments and except for the fact that such unaudited statements do not contain all notes required by GAAP), (ii) present fairly, in all material respects, the financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flow for the periods then ended (except as may be indicated therein or in the notes thereto, or , in the case of the unaudited interim financial statements, subject to normal year-end audit adjustments and any other adjustments described therein and except for the fact that certain information and notes have been condensed or omitted in accordance with the Securities Act and the Exchange Act and the rules promulgated thereunder) and (iii) are, in all material respects, in accordance with the books of account and records of the Company. Neither the Company nor any of its Subsidiaries has any liability or is subject to any loss contingency material to the Company and its Subsidiaries, taken as a whole, other than as reflected or disclosed in the financial statements or notes thereto included in the Company SEC Reports filed prior to the date hereof or as otherwise disclosed on Schedule 7.6 of the Company Disclosure Schedule. Any reports or other material filed by the Company with the Commission after the date hereof and prior to the Effective Time (other than preliminary material) shall be deemed to be included in the defined term "Company SEC Reports" for purposes of this Agreement and the Company shall be deemed to have made the representations set forth in this Section 7.5 in respect of such reports or other material and any financial statements set forth therein. Section 7.6 Absence of Certain Changes or Events. Except as ------------------------------------ contemplated by this Agreement or as disclosed in Schedule 7.6 of the Company Disclosure Schedule or in any of the -18- Company SEC Reports filed prior to the date hereof, there have not been (i) since June 30, 1995 transactions, commitments, disputes, events, damage, destruction or losses, whether or not covered by insurance, development or condition (financial or otherwise) of any character (whether or not in the ordinary course of business) individually or in the aggregate having, or which could reasonably be expected to have, a Company Material Adverse Effect or (ii) since December 31, 1994 (A) any entry into any commitment or transaction material to the Company and its Subsidiaries taken as a whole (including, without limitation, any borrowing or sale of assets) except in the ordinary course of business consistent with past practice or (B) any action taken by the Company or its Board of Directors in connection with the adoption or implementation of any plan or arrangement or the entry into any agreement (x) principally intended to discourage an Other Acquisition Transaction, or (y) pursuant to which the officers, directors or employees of the Company or its Subsidiaries have been granted any benefits payable or distributable upon severance or upon a change of control of the Company or pursuant to which any rights held by such persons have been accelerated to occur or vest at or prior to a change of control, including without limitation any amendments to, modifications of, or elections of other rights under existing benefit plans (including the Stock Option Plans and Warrants). Section 7.7 Litigation. Except as disclosed in the Company's Annual ---------- Report on Form 10-K for the year ended December 31, 1994 or as disclosed in Schedule 7.7 of the Company Disclosure Schedule, there is no claim, suit, action or proceeding pending or, to the knowledge of the officers of the Company, overtly threatened, against or affecting the Company or any of its Subsidiaries which, either individually or in the aggregate, has or could reasonably be expected to have a Company Material Adverse Effect, nor, as of the date of this Agreement, is there any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against the Company or any of its Subsidiaries. Section 7.8 Information in Disclosure Documents. None of the ----------------------------------- information with respect to the Company or its Subsidiaries included or incorporated by reference in the Proxy Statement will, at the time of the mailing thereof and at the time of the Company Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that this provision shall not apply to, and no representation or warranty is made by the Company with respect to, statements or omissions in the Proxy Statement based upon information furnished by or on behalf of JEDI or Sub for use therein. The Proxy Statement will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. No representation or warranty made by the Company contained in this Agreement and no statement in the Company Disclosure Schedule, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. Section 7.9 Employee Benefits Plans; Labor Matters. -------------------------------------- (a) Schedule 7.9 (a) of the Company Disclosure Schedule lists each "employee benefit plan," as such term is defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including, but not limited to, employee benefit plans, such as foreign -19- plans, which are not subject to the provisions of ERISA) ("Plan"), sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of the employees of the Company or any of its Subsidiaries, or that has been so sponsored, maintained or contributed to by Company or any of its Subsidiaries within six years prior to the Closing. (b) Except as otherwise set forth in Schedule 7.9(b) of the Company Disclosure Schedule or as previously disclosed in writing to Sub by the Company: (i) the Company and its Subsidiaries do not contribute to or have an obligation to contribute to, and have not at any time within six years prior to the Closing contributed to or had an obligation to contribute to, a multiemployer plan within the meaning of Section 3(37) of ERISA; (ii) all reports and disclosures relating to the Plans required to be filed with or furnished to governmental agencies, Plan participants or Plan beneficiaries the failure to file of which would, individually or in the aggregate, have a Company Material Adverse Effect have been filed or furnished in accordance with applicable law in a timely manner, and each Plan has been administered in substantial compliance with its governing documents and in accordance with ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and other applicable laws, except for any failure of compliance or violation of applicable law which would not, individually or in the aggregate, have a Company Material Adverse Effect; (iii) there are no actions, suits, claims, governmental (and, to the knowledge of the Company's officers, non-governmental) investigations or audits pending (other than routine claims for benefits) or, to the knowledge of the Company's officers, threatened against, or with respect to, any of the Plans or their assets which, individually or in the aggregate, have or could reasonably be expected to have a Company Material Adverse Effect; (iv) no act, omission or transaction has occurred which would result in imposition on the Company of (A) a breach of fiduciary duty liability damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code, which (in the case of (A), (B) or (C) above), individually or in the aggregate, could have a Company Material Adverse Effect; (v) each of the Plans intended to be qualified under Section 401 of the Code satisfies the requirements of such Section and has received a favorable determination letter from the Internal Revenue Service regarding such qualified status and has not, since receipt of the most recent favorable determination letter, been amended or, to the knowledge of Company, operated in a way which would adversely affect such qualified status; (vi) no Plan is subject to Title IV of ERISA; (vii) as to any Plan intended to be qualified under Section 401 of the Code, to the knowledge of the Company's officers there has been no termination or partial termination of the Plan within the meaning of Section 411 (d) (3) of the Code which has had or could reasonably be expected to have a Company Material Adverse Effect; and -20- (viii) with respect to any Plan which is sponsored, maintained or contributed to, or has been sponsored, maintained or contributed to within six years prior to the Closing Date, by any corporation, trade, business or entity under common control with the Company, within the meaning of Section 4104 (b), (c) or (m) of the Code or Section 4001 of ERISA ("Commonly Controlled Entity"), (A) no withdrawal liability, within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability has not been satisfied, (B) no liability to the Pension Benefit Guaranty Corporation ("PBGC") has been incurred by any Commonly Controlled Entity, which liability has not been satisfied, (C) no accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, and (D) all contributions (including installments) to such Plan required by section 302 of ERISA and Section 412 of the Code have been timely made. (c) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining or other labor union contracts. There is no pending or threatened labor dispute, strike or work stoppage against the Company or any of its Subsidiaries which may materially interfere with the respective business activities of the Company or any of its Subsidiaries. (d) Except as set forth in Schedule 7.9(d) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or is bound by any severance agreements, programs or policies. Schedule 7.9(d) of the Company Disclosure Schedule sets forth, and the Company has provided to Sub, true and correct copies of (i) all agreements with employees or consultants of the Company or its Subsidiaries, obligating the Company or any Subsidiary to make annual cash payments in an amount exceeding an aggregate of $50,000, (ii) all non-competition agreements with the Company or a Subsidiary executed by officers of the Company or a Subsidiary, and (iii) all plans, programs, agreements and other arrangements of the Company or its Subsidiaries with or relating to the employment and to the remuneration and compensation of its employees. (e) Except as provided in Schedule 7.9(e) of the Company Disclosure Schedule, (i) no Plan provides retiree medical or retiree life insurance benefits to any person and (ii) neither the Company nor any of its Subsidiaries is contractually or otherwise obligated (whether or not in writing) to provide any person with life insurance or medical benefits upon retirement or termination of employment, other than as required by the provisions of Section 601 through 608 of ERISA and Section 4980B of the Code. (f) Except as provided in Schedule 7.9(f) of the Company Disclosure Schedule, the Company has not amended, terminated or taken any other actions with respect to any of the Plans or any of the plans, programs, agreements, policies or other arrangements described in this Section 7.9 since December 31, 1994 which, individually or in the aggregate, have or could reasonably be expected to have a Company Material Adverse Effect. Section 7.10 Environmental Matters. Except for matters disclosed in --------------------- Schedule 7.10 of the Company Disclosure Schedule, the Company and its Subsidiaries and the properties and operations of the Company and its Subsidiaries are not subject to any existing, pending or, to the knowledge of the Company, overtly threatened action, suit, investigation, inquiry or proceeding by or before any Governmental Entity under any Environmental Law. Except for matters disclosed in Schedule 7.10 of the Company Disclosure Schedule and except for matters that would not result, individually or -21- in the aggregate, in a Company Material Adverse Effect, (i) the properties, operations and activities of the Company and its Subsidiaries are in compliance with all applicable Environmental Laws; (ii) all notices, permits, licenses, or similar authorizations, if any, required to be obtained or filed by the Company or any of its Subsidiaries under any Environmental Law in connection with any aspect of the business of the Company or its Subsidiaries, including without limitation those relating to the treatment, storage, disposal or release of a hazardous substance, have been duly obtained or filed and will remain valid and in effect after the Merger, and the Company and its Subsidiaries are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (iii) there are no physical or environmental conditions existing on any property of the Company or its Subsidiaries or resulting from the Company's or such Subsidiaries' operations or activities, past or present, at any location, that would give rise to any on-site or off- site remedial obligations imposed on the Company or any of its Subsidiaries under any Environmental Laws; (iv) to the Company's knowledge, since the effective date of the relevant requirements of applicable Environmental Laws and to the extent required by such applicable Environmental Laws, all hazardous substances generated by the Company and its Subsidiaries have been transported only by carriers authorized under Environmental Laws to transport such substances and wastes, and disposed of only at treatment, storage, and disposal facilities authorized under Environmental Laws to treat, store or dispose of such substances and wastes; (v) there has neither been any exposure of any person or property to hazardous substances or any pollutant or contaminant released by the Company or its Subsidiaries, nor has there been any release of hazardous substances, or any pollutant or contaminant into the environment by the Company or its Subsidiaries or in connection with their properties or operations that could reasonably be expected to give rise to any claim against the Company or any of its Subsidiaries for damages or compensation; and (vi) the Company and its Subsidiaries have made available to Sub all internal and external environmental audits and studies and all correspondence on substantial environmental matters in the possession of the Company or its Subsidiaries relating to any of the current or former properties or operations of the Company and its Subsidiaries. For purposes of this Agreement, the terms "hazardous substance" and "release" have the meanings specified in CERCLA, and the term "disposal" has the meaning specified in RCRA; provided, however, that to the extent the laws of the state in which the property is located establish a meaning for "hazardous substance," "release," or "disposal" that is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. Section 7.11 Public Utility Holding Company Act. None of the Company ---------------------------------- or any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder. Section 7.12 Futures Trading and Fixed Price Exposure. Schedule ---------------------------------------- 7.12 to the Company Disclosure Schedule sets forth a true and correct statement of the position, as of the date hereof, of the Company and its Subsidiaries with respect to obligations under Fixed Price Contracts (including, with respect to each Fixed Price Contract, location of delivery and variations in the obligation to take or deliver) and related Hydrocarbon price swaps, hedges, futures or similar instruments to which the Company or any of its Subsidiaries is a party. Section 7.13 Takeover Provisions Inapplicable. As of the date hereof -------------------------------- and at all times on or prior to the Effective Time, Section 203 of the DGCL is, and shall be, inapplicable to the Merger and the transactions contemplated hereby or connected herewith. -22- Section 7.14 Fairness Opinion. The Special Committee has been orally ---------------- advised by Bear, Stearns & Co. Inc., financial advisor to the Company, that it believes that the Merger is fair to the stockholders of the Company from a financial point of view (except that such advice is not provided to management stockholders who will participate in the equity ownership of the Surviving Corporation). Section 7.15 Finder's Fees. Except as set forth in Schedule 7.15 of ------------- the Company Disclosure Schedule, since December 31, 1994, neither the Company nor any of its Subsidiaries have made any arrangements with any broker, finder or investment banker that would require the Company or any of its Subsidiaries to pay any fee or commission in connection with any material transaction by the Company or any of its Subsidiaries, and no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. A complete and correct copy of all agreements referenced in Schedule 7.15 of the Company Disclosure Schedule has been provided to Sub. Section 7.16 Compliance with Applicable Laws. Except as disclosed in ------------------------------- the Company SEC Reports filed prior to the date of this Agreement or in Schedule 7.16 of the Company Disclosure Schedule, the Company and the Subsidiaries are not in violation of any law, ordinance, regulation, order or writ of any courts, administrative agencies or commissions or other governmental authorities or instrumentalities, domestic or foreign (each a "Governmental Entity") applicable to the Company or any of the Subsidiaries or by which any of them or their assets may be bound, except for violations that would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as disclosed in Schedule 7.16 of the Company Disclosure Schedule, neither the Company nor any of the Subsidiaries has received notice of violation of any law, ordinance, regulation, order or writ, or is in default with respect to any order, writ, judgment, award injunction or decree of any Governmental Entity, except for such notices or defaults which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 7.17 Taxes. Each of the Company and the Subsidiaries has ----- timely filed when due (taking into account permitted extensions) all material federal, state and local income and franchise Tax Returns and all other Tax Returns required to be filed by any of them and has paid (or the Company has paid on its behalf), or has set up an adequate reserve for the payment of, all Taxes required to be paid in respect of the periods covered by such Tax Returns. The information contained in such Tax Returns is true, complete and accurate in all material respects. Except as disclosed in Schedule 7.17 of the Company Disclosure Schedule, neither the Company nor any Subsidiary is delinquent in the payment of any Tax, assessment or governmental charge in an amount exceeding $100,000. Except as disclosed in Schedule 7.17 of the Company Disclosure Schedule, no deficiencies for any Taxes have been proposed, asserted or assessed against the Company or any of the Subsidiaries, by delivery of a written instrument to the Company or to the knowledge of the officers of the Company, that have not been finally settled or paid in full, and no requests for waivers of the time to assess any such Tax are pending. The federal income Tax Returns of the Company and each of the Subsidiaries consolidated in such returns have been examined by and settled with the Internal Revenue Service as set forth in Schedule 7.17 of the Company Disclosure Schedule. Neither the Company nor any of the Subsidiaries is a party to or obligated under any agreement, -23- commitment or arrangement that could require the payment of any "excess parachute payment" within the meaning of Section 280G of the Code. Section 7.18. Certain Agreements. ------------------ Except as listed as an exhibit to the Company SEC Reports filed prior to the date of this Agreement or as disclosed in Schedule 7.18 of the Company Disclosure Schedule, neither the Company nor any of the Subsidiaries is a party to any oral or written (i) agreements, contracts, indentures or other instruments relating to Indebtedness which, when aggregated with all such other agreements, contracts, indentures or instruments, exceeds an amount of $500,000, (ii) confidentiality or standstill agreements or other material contract or agreement which, after giving effect to the transactions contemplated by this Agreement, purports to restrict or bind Sub or any of its affiliates (other than the Surviving Corporation and its subsidiaries), (iii) collective bargaining agreement, (iv) contract, agreement or commitment not entered into in the ordinary course of business consistent with past practice and for which the Company could become liable for payments in excess of $500,000 (in respect of all such contracts, agreements or commitments, collectively), (v) any contract or agreement granting a preferential right of purchase or similar right to any person or entity with respect to any Material Company Asset (as hereinafter defined), or (vi) material contract or agreement that is not expected to be fully performed within 30 days following the Effective Time excluding oil and gas leases, farmout agreements, gas sales or purchase contracts, joint operating agreements, unit operating agreements and unit agreements entered into in the ordinary course of business. Section 7.19. Engineering Reports. ------------------- (a) The estimates of proved reserves of oil and natural gas (the "Company Estimated Proved Reserves") prepared by the Company and set forth in the report of Company Estimated Proved Reserves as of December 31, 1994 (the "Company Reserve Report") were reviewed by independent petroleum engineers Lee Keeling and Associates, Inc. as indicated in, and with the conclusion set forth in, their reports dated February 1, 1995, effective as of January 1, 1995; and (b) All information and production data provided to Lee Keeling and Associates, Inc. for the preparation of the Company Reserve Report were true and correct in all material respects as of the date provided. Section 7.20 Oil and Gas Reserve Information. Except as otherwise ------------------------------- set forth in Schedule 7.20 of the Company Disclosure Schedule and except for exceptions that would not, and could not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect: (a) To the knowledge of the Company's officers, none of the wells included in the Oil and Gas Interests of the Company and its Subsidiaries has been overproduced such that it is subject or liable to being shut-in or to any other overproduction penalty (including cash payments); (b) There are no wells included in the Oil and Gas Interests of the Company and its Subsidiaries that: (i) the Company or any of its Subsidiaries are currently obligated by law or -24- contract to plug and abandon; (ii) are subject to exceptions to a requirement to plug and abandon issued by a regulatory authority having jurisdiction over such Oil and Gas Interests; or (iii) to the knowledge of the Company, have been plugged and abandoned but have not been plugged or reclaimed in accordance with all applicable requirements of each regulatory authority having jurisdiction over such Oil and Gas Interests; (c) No person has any call on, option to purchase, or similar rights with respect to the Oil and Gas Interests of the Company and its Subsidiaries (including without limitation the production attributable thereto) and upon consummation of the transactions contemplated by this Agreement, the Company and its Subsidiaries will have the right to market production from the Oil and Gas Interests of the Company and its Subsidiaries on terms no less favorable than the terms upon which such company is currently marketing such production; (d) To the knowledge of the Company's officers, all royalties, overriding royalties, compensatory royalties and other payments due with respect to the Oil and Gas Interests of the Company and its Subsidiaries (excluding those held in suspense in accordance with past operating practices or in connection with post-closing adjustments in respect of acquired properties) have been properly and timely paid; and (e) To the knowledge of the Company's officers, with respect to those assets of the Company and its Subsidiaries that are oil and gas leases ("Leases"), there has not occurred any event, fact or circumstance which with the lapse of time or the giving of notice, or both, would constitute a breach or default on behalf of the Company and its Subsidiaries or, to the knowledge of the Company and its Subsidiaries, with respect to any other parties under the Leases. Section 7.21 Title to Property. The Company or its Subsidiaries has ----------------- Defensible Title to all of the material assets reflected on the consolidated financial statements of the Company included in the Company SEC Reports as being owned by it or its Subsidiaries (including Oil and Gas Interests of the Company and its Subsidiaries) and all of the material assets thereafter acquired by it or its Subsidiaries (except to the extent that such assets have thereafter been disposed of in the ordinary course of business consistent with past practice) (collectively, the "Material Company Assets"). All material payments of any kind required to be made by the Company and its Subsidiaries to third parties under any contract or agreement relating to the Material Company Assets have been or will be properly and timely paid or provided for. Section 7.22 Insurance. Schedule 7.22 to the Company Disclosure --------- Schedule contains a summary of all material policies of insurance (including all directors' and officers' liability insurance coverage) maintained by the Company and its Subsidiaries during the past five years. Section 7.23 Affiliate Transactions. Except for the transactions ---------------------- described in Schedule 7.23 of the Company Disclosure Schedule, all transactions involving the Company or any of its Subsidiaries that are required to be disclosed in the Company SEC Reports in accordance with Item 404 of Regulation S-K have been so disclosed, and since December 31, 1994, neither the Company nor any of its Subsidiaries has entered into any transactions that would be required to be disclosed in future public filings under the Exchange Act pursuant to such Item which have not already been disclosed in the Company SEC Reports filed prior to the date hereof. -25- Section 7.24 Taurus Energy. Except as set forth in Schedule 7.24 of ------------- the Company Disclosure Schedule, since December 31, 1994 neither the Company nor any of its Subsidiaries (other than Taurus Energy Corp. ("Taurus")) have made any capital contribution to Taurus, engaged in a transaction with Taurus not in conformance with past practice or which added material value to Taurus or otherwise transferred value to Taurus (including by way of assumption of liabilities). ARTICLE VIII CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME Section 8.1 Conduct of Business by the Company. Following the date ---------------------------------- hereof and prior to the Effective Time, except as otherwise contemplated by this Agreement or unless Sub shall otherwise consent in writing: (a) subject to the limitations contained in or transactions contemplated by (including, but not limited to, the Taurus Disposition) this Agreement, the Company shall, and shall cause its Subsidiaries to, carry on their respective operations in the usual and ordinary course consistent with past practice, and shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, to preserve substantially intact its present business organization, keep available the services of its present officers and employees, maintain and keep its material assets in as good repair and condition as of the date hereof, ordinary wear and tear and damage due to casualty excepted, and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and on-going businesses shall be materially unimpaired at the Effective Time; (b) the Company shall not, nor shall it propose to, except as required by this Agreement, (i) sell or pledge or agree to sell or pledge any capital stock owned by it in any of its Subsidiaries, (ii) amend its Certificate of Incorporation or By-laws, (iii) split, combine or reclassify its outstanding capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of the capital stock, or declare, set aside or pay any dividend or other distribution payable in cash, stock or property, or (iv) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (c) the Company shall not, nor shall it permit any of its Subsidiaries to, (i) except as required or contemplated by this Agreement, issue, deliver or sell or agree to issue, deliver or sell any additional shares of, or stock appreciation rights or rights of any kind to acquire any shares of, its capital stock of any class, any Company Voting Debt, or any option, rights or warrants to acquire, or securities convertible into, shares of capital stock, other than issuances of Company Common Stock pursuant to the exercise of options granted pursuant to the Stock Option Plans or Outstanding Warrants, (ii) amend in any respect existing agreements evidencing the options granted pursuant to the Stock Option Plans or Outstanding Warrants (including, without limitation, the exercise or strike prices thereof) or the Stock Option Plan pursuant to which such options were granted, except to permit the acceleration of the vesting or exercisability of the options granted pursuant to the Stock Option Plans and Outstanding Warrants in connection with the settlement thereof in accordance with Section 3.6, (iii) acquire or lease or agree to acquire or lease any material capital asset or assets, or make any other capital expenditures, which exceed the Company's capital expenditure budgets for -26- the fourth quarter of 1995 and the first quarter of 1996 set forth in Schedule 8.1(c) of the Company Disclosure Schedule, in the aggregate for all such assets or other capital expenditures in both quarters, by $2.0 million or more (including in such calculation the proceeds of any sale/leaseback transactions), (iv) dispose or agree to dispose of capital assets or any other assets other than in the ordinary course, with a value in the aggregate in excess of $2.0 million, (v) (A) create, incur, assume or permit additional material indebtedness (including obligations in respect of capital leases), other than periodic drawdowns under the Company's credit facilities existing as of the date hereof, provided that such drawdowns are in the ordinary course of business consistent with past practice, and provided further that the amount available under such facilities as of the date hereof is not increased, (B) assume, guarantee, endorse or otherwise become liable or responsible for the obligations of any other person (other than a Subsidiary of the Company, or as to a Subsidiary, another Subsidiary of the Company) in an amount in excess of $10,000, (excluding suspense account obligations assumed in connection with acquisitions by the Company whereby the Company also receives the funds held in suspense or an adjustment to the purchase price is made in an equal amount), (C) encumber or grant a security interest in any Material Company Asset other than for the Company's credit facilities existing as of the date hereof, or (D) make any loans or advances to any other person (excluding intercompany transactions), enter into any agreement or instrument relating to the borrowing of money or the extension of credit or enter into any other material transaction, other than in each case in the ordinary course of business consistent with past practice, (vi) acquire or agree to acquire oil or gas properties or other assets of a type not covered by Schedule 8.1(c) of the Company Disclosure Schedule, or acquire or agree to acquire by merging or consolidating with, or by purchasing the assets of or a substantial equity interest in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, for an aggregate purchase price in excess of $5.0 million, (vii) enter into or renew any material agreements, contracts or other commitments that are not expected to be fully performed within thirty days after the Effective Time excluding oil and gas leases, farmout agreements, gas sales or purchase contracts, joint operating agreements, unit operating agreements and unit agreements entered into in the ordinary course of business, or (viii) adopt, enter into, amend or terminate any contract, agreement, commitment or arrangement with respect to any of the foregoing; (d) the Company shall not, nor shall it permit any of its Subsidiaries to, except as required to comply with applicable law and except as provided in Section 9.3 hereof and other than acceleration of vesting permitted by this Agreement, (i) adopt, enter into, terminate or amend any bonus, profit sharing, compensation, severance, termination, stock option, pension, retirement, deferred compensation, employment or other Plan, agreement, trust, fund or other arrangement for the benefit or welfare of any current or former director, officer or employee (other than the adoption of any special compensation for the members of the Special Committee), (ii) increase in any manner the compensation or fringe benefits of any director (other than the adoption of any special compensation for the members of the Special Committee), executive officer or employee (provided, however, that the Company shall be permitted to award normal salary increases to employees (other than executive officers) of the Company in the ordinary course of business that are consistent with past practice (including, without limitation, in connection with any promotion of such employee) and that, in the aggregate, do not result in a material increase in compensation expense to the Company and its Subsidiaries relative to the level in effect prior to such increase), unless consented to by Sub, which consent shall not be unreasonably withheld, (iii) pay any benefit not provided under any existing plan or arrangement, except for payments set forth in Schedule 8.1(d) of the Company -27- Disclosure Schedule, (iv) grant any awards under the Stock Option Plan or any other bonus, incentive, performance or other compensation plan or arrangement or Plan (including, without limitation, the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Plans or agreements or awards made thereunder), (v) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Plan, other than in the ordinary course of business consistent with past practice, or (vi) adopt, enter into, amend or terminate any contract, agreement, commitment or arrangement to do any of the foregoing; (e) the Company shall not, nor shall it permit its Subsidiaries to, make any change in its accounting policies or procedures, except as required under GAAP; (f) the Company shall use its reasonable best efforts to refrain from taking, and shall use its reasonable best efforts to cause its Subsidiaries to refrain from taking, any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect as of the Effective Time, or in any of the conditions to the Merger set forth in Article X not being satisfied, or (unless such action is required by applicable law) that would adversely affect the ability of the Company to obtain any of the regulatory approvals required to consummate the Merger, as contemplated hereby; (g) the Company shall not settle or compromise any claim for dissenters' rights in respect of the Merger; (h) the Company shall maintain in full force and effect all of its policies of insurance in existence as of the date hereof or insurance comparable to the coverage afforded by such policies; and (i) the Company shall not enter into any natural gas or other future or options trading or be a party to any price swaps, hedges, futures or similar instruments without first obtaining the consent of Sub, which consent shall not be unreasonably withheld. Section 8.2 Obligations of JEDI and Sub. Each of JEDI and Sub shall ---------------------------- use its reasonable best efforts to refrain from taking any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect as of the Effective Time, or in any of the conditions to the Merger set forth in Article X not being satisfied, or (unless such action is required by applicable law) that would adversely affect the ability of JEDI or Sub to obtain any of the regulatory approvals required to consummate the Merger, as contemplated hereby. Section 8.3 Notice of Breach. Each party shall promptly give written ---------------- notice to the other party upon becoming aware of the occurrence or, to its knowledge, impending or threatened occurrence, of any event that would cause any of the representations and warranties to be untrue on the Effective Time or cause a breach of any covenant contained or referenced in this Agreement and will use its reasonable best efforts to prevent or promptly remedy the same. Any such notification shall not be deemed an amendment of the Company Disclosure Schedule. -28- ARTICLE IX ADDITIONAL AGREEMENTS Section 9.1 Access and Information. Upon reasonable notice, the ---------------------- Company and its Subsidiaries shall afford to Sub and to Sub's affiliates, accountants, lenders, counsel and other representatives full access, during normal business hours (and at such other times as the parties may mutually agree) and in a manner so as not to materially interfere with the normal business operations of the Company and its Subsidiaries throughout the period prior to the Effective Time, to all of their properties (which shall include the right to conduct an environmental assessment thereof), books, contracts, commitments, records and personnel. During such period, the Company shall furnish promptly to Sub (i) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of federal or state securities laws, and (ii) all other information concerning its business, properties and personnel as Sub may reasonably request. JEDI and Sub shall hold all such information in confidence and hereby assume all of the obligations of Enron Capital & Trade Resources Corp. ("ECT") set forth in that certain Confidentiality Agreement, dated June 12, 1995, as amended, between ECT and the Company (the "Confidentiality Agreement") the terms of which are incorporated herein by reference and made a part of this Agreement, and, in the event of termination of this Agreement for any reason, shall comply with the terms of the Confidentiality Agreement regarding the return of information. During the period prior to the Effective Time, the Company shall make its accountants, counsel, lenders and other representatives available to Sub and to Sub's affiliates, accountants, lenders, counsel and other representatives at reasonable times. Section 9.2 Proxy Statement. (a) As promptly as reasonably --------------- practicable after the execution of this Agreement, the Company shall prepare and file with the Commission preliminary proxy materials with respect to the actions to be taken at the Company Meeting, which shall be in form and substance reasonably satisfactory to Sub. As promptly as reasonably practicable after comments are received from the Commission with respect to such preliminary proxy materials, the Company shall use its reasonable best efforts to respond to the comments of the Commission. Sub and JEDI shall provide the Company with such information as may be required to be included in the proxy statement or as may be reasonably required to respond to any comment of the Commission. After all the comments received from the Commission have been cleared by the Commission staff and all information required to be contained in the proxy statement has been included therein by the Company, the Company shall file with the Commission the Proxy Statement and the Company shall use its reasonable best efforts to have the Proxy Statement cleared by the Commission as soon thereafter as practicable. The Company shall cause the Proxy Statement to be mailed to its stockholders of record as promptly as reasonably practicable after clearance by the Commission. Unless the Company is advised by outside counsel that such a recommendation is no longer consistent with the discharge of applicable fiduciary duties of directors of the Company, the Proxy Statement shall include the recommendation of the Board of Directors of the Company in favor of the Merger. If requested by Sub, the Company shall use its reasonable best efforts to obtain an "SAS No. 71 letter" from the Company's independent public accountants addressed to the Company, in form and substance reasonably satisfactory to Sub, with respect to interim financial statements included in the Proxy Statement. -29- (b) The Company shall retain the services of a proxy soliciting firm reasonably acceptable to Sub for the purpose of communicating to the Company's stockholders the recommendation of the Company's Board of Directors and of seeking to ensure that sufficient votes are cast to satisfy the requirements of applicable law for the completion of the Merger. (c) Each of Sub and the Company shall make all necessary filings applicable to it with respect to the Merger under the Exchange Act and the rules and regulations thereunder and shall use its reasonable best efforts to obtain required clearances with respect thereto. Section 9.3 Indemnification. (a) The Certificate of Incorporation of --------------- the Surviving Corporation and each of its Subsidiaries shall contain provisions that acknowledge and agree that, to the fullest extent permitted by law, the provisions relating to limitation on liability that are set forth in Article 10 of the Certificate of Incorporation of the Company as of the date of this Agreement, shall remain effective for a period of six years from the Effective Time with respect to individuals who at any time from and after the date of this Agreement and to and including the Effective Time were directors, officers, employees, fiduciaries or agents of the Company or any of its Subsidiaries in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the matters contemplated by this Agreement), and the Surviving Corporation shall not amend (in any manner that would diminish the effect of such provisions) or repeal such provisions for a period of six years from the Effective Time. If, at any time during such period of six years and prior to an underwritten public offering of capital stock of the Surviving Corporation, the Surviving Corporation is unable to make any indemnification payments required by this Section 9.3, then JEDI shall be liable for such payments, but only to the extent of all dividends or other distributions paid in respect of capital stock of the Surviving Corporation prior to or upon the dissolution of the Surviving Corporation that have been made to JEDI or any of its Affiliates (as defined in Rule 405 of Regulation C promulgated under the Securities Act) by the Surviving Corporation during such period. (b) The Surviving Corporation shall, for six years from the Effective Time, maintain in effect the current directors' and officers' liability insurance coverage listed, and identified as such, on Schedule 7.22 of the Company's Disclosure Schedule maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to such officers and directors so long as substitution does not result in gaps or lapses in coverage) with respect to matters occurring through the Effective Time, provided that in no event shall the Surviving Corporation be required to expend to maintain or procure insurance coverage pursuant to this Section 9.3 any amount per annum in excess of 50% of the aggregate premiums paid in 1995 on an annualized basis for such purpose. (c) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation, or at JEDI's option, JEDI, shall assume the obligations set forth in this Section 9.3. -30- (d) The By-laws of the Surviving Corporation and each of its Subsidiaries shall contain provisions that acknowledge and agree that, to the fullest extent permitted by law, the provisions relating to indemnification and advancement of expenses that are set forth in the By-laws of the Company as of the date of this Agreement shall remain effective for a period of six years from the Effective Time with respect to individuals who at any time from and after the date of this Agreement and to and including the Effective Time were directors, officers, employees, fiduciaries or agents of the Company or any of its Subsidiaries in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the matters contemplated by this Agreement), and the Surviving Corporation shall not amend or repeal such provisions for a period of six years from the Effective Time. (e) The obligations of the Surviving Corporation under this Section 9.3 shall not be terminated or modified in such a manner as to adversely affect any director, officer, employee, fiduciary and agent to whom this Section 9.3 applies without the consent of each affected director, officer, employee, fiduciary and agent (it being expressly agreed that the directors, officers, employees, fiduciaries and agents to whom this Section 9.3 applies shall be third-party beneficiaries of this Section 9.3). (f) Sub understands that the Company has entered into contractual indemnification arrangements with each of its current directors, true and correct copies of which have previously been delivered to Sub. Section 9.4 HSR Act. The Company shall use its reasonable best ------- efforts to file, and Sub shall use its reasonable best efforts to cause its ultimate parent entity to file, as soon as practicable following the execution of this Agreement, notifications under the HSR Act in connection with the Merger and the transactions contemplated hereby, and to respond as promptly as practicable to any inquiries received from the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") for additional information or documentation and to respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other governmental authority in connection with antitrust matters relating to the transactions contemplated by this Agreement. Each of the parties shall provide a copy of its filing materials under the HSR Act to the other party prior to making such filing and the parties shall confer on the matters set forth therein. Section 9.5 Reasonable Best Efforts. (a) Subject to the terms and ----------------------- conditions of this Agreement, each of the parties hereto agrees to cooperate with each other and to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, in each case consistent with the fiduciary duties of their respective Boards of Directors, all things necessary, proper or advisable (i) under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement as soon as reasonably practicable, including to obtain all necessary waivers, consents and approvals and to effect all necessary registrations and filings and (ii) to lift any injunction or other legal bar to the Merger as soon as reasonably practicable (and, in such case, to proceed with the Merger as expeditiously as possible); provided, however, that nothing in this Section or elsewhere in this Agreement shall require any party hereto to incur expenses in connection with the transactions contemplated hereby which are not reasonable under the circumstances in relation to the size of the transaction contemplated hereby or to require any party -31- or any affiliate of any party to hold separate or make any divestiture of a significant asset or otherwise agree to any material restriction on the operations of any party in order to obtain any waiver, consent or approval required by this Agreement. (b) In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the Surviving Corporation shall take all such necessary action. (c) If at any time prior to the Effective Time any information, event or circumstance shall be discovered that should be set forth in a supplement to the Proxy Statement, the discovering party shall promptly inform the other party of such information, event or circumstance, and the Company shall as soon as practicable prepare a supplement to the Proxy Statement, which shall be in form and substance reasonably satisfactory to Sub, and mail such supplement to its stockholders. Section 9.6 No Solicitation. Prior to the Effective Time, the --------------- Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, directly or indirectly, initiate, solicit, negotiate or encourage (including by way of furnishing information), or take any other action to facilitate or entertain, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any proposal or offer to acquire all or substantially all of the business of the Company and its Subsidiaries, or all or substantially all of the capital stock of the Company, whether by merger, purchase of assets, tender offer, exchange offer or otherwise, whether for cash, securities or any other consideration or combination thereof (any such transaction being referred to herein as an "Other Acquisition Transaction") or agree to endorse or recommend any such Other Acquisition Transaction or enter into an agreement relating to an Other Acquisition Transaction; provided, however, that the Company and its Subsidiaries may negotiate with a corporation, partnership, person or other entity or group (a "Potential Acquirer") if (i) the Potential Acquirer has, in circumstances not involving any prior breach by the Company of the foregoing provisions, made a tender or exchange offer for, or a proposal to the Board of Directors of the Company to acquire, a majority of the capital stock of the Company or made a proposal for a merger, purchase of all or substantially all of the assets of the Company, or other business combination transaction involving a change of control of the Company, (ii) the Company's Board of Directors believes, based in part upon advice of its financial advisor, and after having an opportunity to discuss any such proposal with the Potential Acquirer, which contacts shall not be deemed a violation of this Section 9.6, that such Potential Acquirer has the financial wherewithal to consummate such offer or transaction and such offer or transaction would yield a better value to the Company's stockholders than would the Merger (a "Superior Proposal"), and (iii) based upon the advice of counsel to the Company to such effect given to the Board of Directors of the Company (notice of which advice has been communicated to Sub), the Company's Board of Directors determines in good faith that there is a significant risk that the failure to negotiate with the Potential Acquirer could constitute a breach of the Board's fiduciary duty to the stockholders of the Company. The Company shall promptly advise Sub in writing of any request for non-public written information or of any Other Acquisition Transaction, or any inquiry that could reasonably be expected to lead to any Other Acquisition Transaction, the terms and conditions of such request, Other Acquisition Transaction or inquiry, the identity of the person making any such request, Other Acquisition Transaction or inquiry, and whether the Company has elected to negotiate -32- with a Potential Acquirer in accordance with the preceding sentence. The Company shall use its reasonable best efforts to keep Sub fully informed of the status and details of any such request, Other Acquisition Transaction, inquiry, or negotiation. The Company may not enter into a definitive agreement for an Other Acquisition Transaction with a Potential Acquirer with which the Company is permitted to negotiate pursuant to this Section 9.6 unless (i) at least 10 business days prior to the Company's execution thereof the Company shall have furnished Sub with a description of all of the material terms thereof and (ii) the Company shall terminate this Agreement in accordance with Section 11.1(e) hereof. Notwithstanding the foregoing, the Taurus Disposition shall be excluded from the provisions of this Section 9.6 for all purposes. Each of Sub and JEDI agrees and acknowledges that any information furnished to it by the Company pursuant to this Section 9.6 shall be subject to the terms and conditions set forth in the Confidentiality Agreement. Section 9.7 Taurus Disposition. The Company shall use its reasonable ------------------ best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to promptly negotiate a definitive agreement (the "Taurus Disposition Agreement") providing for the sale of Taurus, whether by merger, sale of all or substantially all of the assets of Taurus, sale of all of the capital stock of Taurus or otherwise (the "Taurus Disposition") as soon as reasonably practicable. Prior to the execution of the final version of the Taurus Disposition Agreement, Taurus shall deliver such version to JEDI for review at least five business days prior to its execution. JEDI may, by delivering notice to the Company within such five business days, object to the terms or conditions of such agreement as it determines in its sole discretion, and if such objection is not made then such agreement shall be an "Approved Taurus Disposition Agreement." The Company shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the Taurus Disposition if an Approved Taurus Disposition Agreement is executed and the Company shall cause Taurus to repay all indebtedness owed to the Company or its other Subsidiaries prior to the consummation of the Taurus Disposition. Except as otherwise provided in the Taurus Disposition Agreement, neither the Company nor any of its Subsidiaries (other than Taurus) shall make any capital contribution to Taurus, engage in any transaction with Taurus not in conformance with past practice or which would add material value to Taurus or otherwise transfer value to Taurus (including the assumption of liabilities), unless Sub shall otherwise consent in writing. The Company shall keep Sub informed of the status of the transactions relating to the Taurus Disposition. Notwithstanding the foregoing, if JEDI delivers its written objection to the Company of the Taurus Disposition Agreement within the time period delineated above, the Company may, in its sole discretion, proceed with the execution of the Taurus Disposition Agreement and the consummation of such Taurus Disposition, but shall deliver written notice to such effect to JEDI (the "Taurus Disposition Notice") within five business days following the receipt by the Company of JEDI's written objection notice. In such event, Sub shall have the right to terminate this Agreement as set forth in Section 11.1(h). Section 9.8 JEDI. ---- JEDI agrees to take all action necessary to cause Sub to perform all of Sub's, and the Surviving Corporation to perform all of the Surviving Corporation's, agreements, covenants and obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. Sub and JEDI shall be liable for any breach of any representation, warranty, covenant or agreement of Sub or Surviving Corporation and for any breach of this covenant; -33- provided, however, that JEDI shall not have any responsibility for, or provide any guaranties of, any actions of Sub or any obligation or liability otherwise hereunder after the Effective Time, except as expressly provided in Sections 3.2 and 9.3. Section 9.9 Certain Employee Benefit Matters. The Company and Sub -------------------------------- acknowledge and agree that it is currently anticipated that the Surviving Corporation will not become a participating employer in any employee benefit or compensation plans sponsored or maintained by Enron Corp. for the benefit of its subsidiaries or affiliated companies. For a period of 24 months following the Effective Time, the Surviving Corporation will maintain in place the Company's current health and 401(k) plans or substantially equivalent plans. ARTICLE X CONDITIONS PRECEDENT Section 10.1 Conditions to Each Party's Obligation to Effect the --------------------------------------------------- Merger. The respective obligations of each party to effect the Merger shall be - ------ subject to the fulfillment at or prior to the Effective Time of the following conditions, any one or more of which may be waived in a writing executed by Sub and the Company subject to and in accordance with Section 11.4 hereof: (a) This Agreement and the Merger shall have been approved and adopted by the requisite vote of the holders of the Company Common Stock. (b) The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (c) No United States or state governmental authority or other agency or commission or United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the Merger illegal or otherwise preventing or prohibiting consummation of the Merger. (d) The Company shall have received the written opinion of Bear, Stearns & Co. Inc., financial advisor to the Company, dated the date of the Proxy Statement, to the effect that the Merger is fair to the stockholders of the Company from a financial point of view (except that such advice need not be provided to management stockholders who will participate in the equity ownership of the Surviving Corporation). (e) At the time of the Company Meeting, the Company shall have confirmed that the written opinion of Bear, Stearns & Co. Inc., referred to in Section 10.1(d) hereof has not been withdrawn. (f) There shall not be pending any action, proceeding or investigation brought by any person or entity before any Governmental Entity challenging, affecting, or seeking material damages in connection with, the transactions contemplated by this Agreement. -34- Section 10.2 Conditions to Obligation of the Company to Effect the ----------------------------------------------------- Merger. The obligation of the Company to effect the Merger shall be subject to - ------ the fulfillment at or prior to the Effective Time of the following additional conditions, unless waived in writing by the Company in accordance with Section 11.4 hereof: (a) JEDI and Sub shall have performed in all material respects their respective agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of JEDI and Sub contained in this Agreement shall be true and correct in all material respects when made and on and at the Effective Time as if made at such time (except to the extent they expressly relate to the date of this Agreement or any other particular date), and the Company shall have received a certificate of the President or Chief Executive Officer (or comparable officer) of JEDI and Sub, dated the Closing Date, to that effect. (b) The Company shall have received the opinion of Vinson & Elkins L.L.P., dated the Closing Date, substantially in the form of Exhibit A hereto. Section 10.3 Conditions to Obligations of Sub to Effect the Merger. ----------------------------------------------------- The obligations of Sub to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions, unless waived in writing by Sub in accordance with Section 11.4 hereof: (a) The Company shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of the Company contained in this Agreement which are qualified with respect to materiality shall be true and correct in all respects, and such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case when made and on and at the Effective Time as if made at such time (except to the extent they expressly relate to the date of this Agreement or any other particular date), and Sub shall have received a certificate signed on behalf of the Company by its President or Chief Executive Officer, dated the Closing Date, to that effect. Notwithstanding anything to the contrary herein, with respect to any representation or warranty in this Agreement which refers to a Company Material Adverse Effect, a Company Material Adverse Effect shall mean adverse effects resulting in an aggregate Loss in excess of $5.0 million. "Loss" shall mean the amount that would be required to be contributed to the Surviving Corporation at the Effective Time so that the owners of the Surviving Corporation would be in the same economic position as they would have been if such adverse effects had not occurred and would not occur. (b) All permits, consents, authorizations, approvals, registrations, qualifications, designations and declarations set forth on Schedule 7.4 of the Company Disclosure Schedule as a result of the last sentence of Section 7.4 hereof shall have been obtained, on terms and conditions reasonably satisfactory to Sub, and, to the extent required to be submitted prior to the Effective Time, all filings and notices set forth on Schedule 7.4 of the Company Disclosure Schedule as a result of the last sentence of Section 7.4 hereof shall have been submitted by the Company. -35- (c) Sub shall have received the opinion of Haynes and Boone, L.L.P. and Joe Callaway, General Counsel to the Company, dated the Closing Date, substantially in the form of Exhibit B-1 and Exhibit B-2, respectively, hereto. (d) The Company shall have consummated the Taurus Disposition in accordance with the Approved Taurus Disposition Agreement. (e) The number of Dissenting Shares shall not exceed 10% of the number of outstanding shares of Company Common Stock. (f) None of the Specified Parties to the Employment Agreements, Subscription Agreements, Stockholders Agreement and Business Opportunity Agreement as set forth in Schedule 10.3(f) of the Company Disclosure Schedule shall have breached or anticipatorily breached any such agreements and none of Douglas H. Miller, Grant W. Henderson or J. William Freeman shall have died or become disabled. (g) Sub shall have received the written resignations, effective as of the Effective Time, of each director of each of the Company and its Subsidiaries. (h) Each holder of all Outstanding Warrants shall have executed a Warrant Relinquishment and Release Agreement, as contemplated by Section 3.6. (i) All members of management of the Company shall have repaid all indebtedness owed by them to the Company. (j) Assuming the representations and warranties of the Company were made without regard to any "materiality qualifications," the amount that would be required to be contributed to the Surviving Corporation at the Effective Time so that the owners of the Surviving Corporation would be in the same economic position as they would have been if the representations and warranties, without regard to any such materiality qualifications, had been true and correct in all respects, would in the aggregate not exceed $7.5 million. Without regard to any "materiality qualifications" shall mean that references to "material" and words of similar import shall, for such purpose, be considered to have been deleted from the text herein and that references to exclusions or other qualifications for items that would not, individually or in the aggregate, have or cause a Company Material Adverse Effect or phrases of similar import shall, for such purposes, be considered to have been deleted from the text herein. ARTICLE XI TERMINATION, AMENDMENT AND WAIVER Section 11.1 Termination. This Agreement may be terminated at any ----------- time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of the Company: -36- (a) by mutual consent of the Board of Directors of Sub and the Board of Directors of the Company; (b) by either Sub or the Company if the Merger shall not have been consummated on or before March 15, 1996 (unless, such circumstance is the result of a breach of the terms hereof by the party exercising the termination right); (c) by Sub if there has been a material breach on the part of the Company, or by the Company if there has been a material breach on the part of Sub or JEDI, of any representation, warranty, covenant or agreement set forth in this Agreement, which breach has not been cured within fifteen business days following receipt by the breaching party of written notice of such breach; (d) by either Sub or the Company upon written notice to the other party if any Governmental Entity of competent jurisdiction shall have issued (i) a final permanent order enjoining or otherwise prohibiting the consummation of any of the transactions contemplated by this Agreement, and in any such case the time for appeal or petition for reconsideration of such order shall have expired without such appeal or petition being granted, or (ii) any order or directive that does not directly enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, but that would, if JEDI, Sub or the Company were to comply with such order or directive as a condition to consummating the transactions contemplated hereby, have a material adverse effect on the business, operations or financial condition of either JEDI or the Surviving Corporation and its Subsidiaries taken as a whole; (e) by the Company if (i) the Board of Directors of the Company reasonably believes that an Other Acquisition Transaction is a Superior Proposal, (ii) the ten business day period referred to in Section 9.6 shall have expired, and (iii) simultaneously with such termination the Company enters into a definitive agreement to effect such Other Acquisition Transaction (a "Terminating Other Acquisition Transaction"); (f) by either Sub or the Company if the required approval of the Company's stockholders is not received in a vote duly taken at the Company Meeting contemplated by Section 3.7 hereof; (g) by Sub if the Board of Directors of the Company or any committee thereof (i) shall have amended, modified, rescinded or repealed the recommendation of the Company's Board of Directors to the stockholders of the Company to approve the Merger and the adoption of this Agreement, or (ii) shall have adopted any other resolution in connection with this Agreement and the transactions contemplated hereby inconsistent with such recommendation of the consummation of the transactions contemplated hereby; (h) by Sub (i) upon written notice to the Company if the Company does not present to JEDI within 60 days after the signing of this Agreement a Taurus Disposition Agreement that is satisfactory to JEDI in its sole discretion, provided however, that the Company may extend such 60 day period (A) for an additional 30 days by notifying Sub prior to the 60th day in writing of its decision to do so accompanied with a payment of $175,000 and (B) for an additional 30 days by written notification to Sub prior to the 90th day accompanied with an additional $75,000; or (ii) upon -37- written notice to the Company within five business days after JEDI receives a Taurus Disposition Notice as contemplated by Section 9.7; (i) by Sub, if any representation or warranty of the Company shall have become untrue such that the condition set forth in Section 10.3(a) would be incapable of being satisfied by March 15, 1996 or by the Company if any representation or warranty of Sub or JEDI shall have become untrue such that the condition set forth in Section 10.2(a) would be incapable of being satisfied by March 15, 1996. Section 11.2 Effect of Termination. In the event of termination of --------------------- this Agreement pursuant to Section 11.1, no party hereto shall have any obligation or liability to any other party hereto except (i) that the penultimate sentence of Section 9.1, this Section 11.2 and Sections 12.3 and 12.6 shall survive any such termination and (ii) that, except as set forth herein, nothing herein and no termination pursuant hereto will relieve any party from liability for any breach of this Agreement. Section 11.3 Amendment. This Agreement may be amended by the parties --------- hereto, by or pursuant to action taken by their respective Boards of Directors, at any time before or after approval hereof by the stockholders of the Company, but, after such approval, no amendment shall be made that under applicable law requires further approval of such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 11.4 Waiver. At any time prior to the Effective Time, the ------ parties hereto may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of any other party contained herein or in any documents delivered pursuant hereto by any other party and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. ARTICLE XII GENERAL PROVISIONS Section 12.1 Non-Survival of Representations and Warranties. All ---------------------------------------------- representations, warranties, agreements and covenants set forth in this Agreement shall terminate at the Effective Time or upon termination of this Agreement pursuant to Section 11.1, as the case may be, except that (i) the agreements set forth in Sections 9.3, 9.5(b), 9.8 and 9.9 and Articles III and XII (excluding Section 12.3) shall survive the Effective Time indefinitely and (ii) the agreements set forth in the penultimate sentence of Section 9.1 and in Article XII (including Section 12.3) shall survive termination indefinitely. Section 12.2 Notices. All notices or other communications under this ------- Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile transmission (with a hard copy delivered by overnight delivery service) or by overnight delivery service, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: -38- If to the Company: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: General Counsel Telecopy No.: (214) 265-4777 With a copy to: Haynes and Boone, L.L.P. 901 Main Street, Suite 3100 Dallas, Texas 75202 Attention: William L. Boeing Telecopy No.: (214) 651-5940 And with a copy to: Locke Purnell Rain Harrell 2200 Ross Avenue, Suite 2200 Dallas, Texas 75201 Attention: Dan Busbee Telecopy No.: (214) 740-8800 If to Sub or JEDI: c/o Enron Corp. 1400 Smith Street Houston, Texas 77002 Attention: Keith Power/Brenda McGee, Specialist - 28th Floor Telecopy No.: (713) 646-3602 Telephone No.: (713) 853-5259 With a copy to: Tim Detmering 1400 Smith Street Houston, Texas 77002 Telecopy No.: (713) 646-3750 and Vinson & Elkins L.L.P. 1001 Fannin, Suite 2300 Houston, Texas 77002 -39- Attention: Scott N. Wulfe Telecopy No.: (713) 758-2346 or to such other address as any party may have furnished to the other parties in writing in accordance with this Section 12.2. Section 12.3 Expenses; Termination Fees. -------------------------- (a) Subject to Sections 12.3(b), (c) and (e), whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated herein shall be paid by the party incurring such expenses. (b) If this Agreement is terminated by Sub pursuant to Sections 11.1(c), (e), (f) or (g), then the Company shall, by wire transfer of immediately available funds to an account designated by Sub, reimburse Sub and its affiliates, not later than two business days after Sub submits to the Company statements therefor, for all reasonable and necessary out-of-pocket fees and expenses (including, without limitation, all reasonable fees and expenses of counsel, accountants, financial institutions, experts and consultants) incurred in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the arranging of financing for the Merger and all other matters related to the consummation of the transactions contemplated hereby up to a maximum amount of $750,000 (exclusive of any expenses and fees specifically agreed to by the Company and incurred in connection with any proposed placement of subordinated debt to finance or refinance the transactions contemplated hereby) in the case of a termination pursuant to Sections 11.1(c), (e) or (g) and up to a maximum amount of $500,000 (exclusive of any expenses and fees specifically agreed to by the Company and incurred in connection with any proposed placement of subordinated debt to finance or refinance the transactions contemplated hereby) in the case of a termination pursuant to Section 11.1(f). A payment under this Section 12.3(b) shall not limit Sub's or JEDI's right to pursue all other available remedies if the Company has breached this Agreement, although neither JEDI nor Sub shall be permitted to recover such fees and expenses more than once. (c) If this Agreement is terminated by the Company pursuant to Section 11.1(c), then JEDI shall, by wire transfer of immediately available funds to an account designated by the Company, reimburse the Company, not later than two business days after the Company submits to JEDI statements therefor, for all reasonable and necessary out-of-pocket fees and expenses (including, without limitation, all reasonable fees and expenses of counsel, accountants, financial institutions, experts and consultants) incurred in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, and all other matters related to the consummation of the transactions contemplated hereby up to a maximum amount of $750,000 (exclusive of any expenses and fees specifically agreed to by the Company and JEDI and incurred in connection with any proposed placement of subordinated debt to finance or refinance the transactions contemplated hereby). A payment under this Section 12.3(c) shall not limit the Company's right to pursue all other available remedies if Sub or JEDI has breached this Agreement, although the Company shall not be permitted to recover such fees and expenses more than once. -40- (d) In addition to any amounts payable pursuant to Section 12.3(b), if this Agreement is terminated for any reason other than a termination by Sub pursuant to Section 11.1(b), (h) or (i) or by the Company pursuant to Section 11.1(c), then if (i) a Terminating Other Acquisition Transaction is consummated or (ii) an Other Acquisition Transaction that provides a better value to the holders of Company Common Stock than the Merger would have provided is consummated prior to the first anniversary of the date of this Agreement, then the Company shall pay to Sub, by wire transfer of immediately available funds to an account designated by Sub, $3.5 million not later than the second business day following such consummation. A payment under this Section 12.3(d) shall not limit Sub's right to pursue all other available remedies if the Company has breached this Agreement. (e) If (i) prior to the termination of this Agreement, any person (other than Sub or any affiliate thereof) or group (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than 20% or more of the outstanding Company Common Stock; (ii) either this Agreement is terminated pursuant to Section 11.1(f) or such beneficial owner takes any action to oppose or prevent the consummation of the Merger and this Agreement is terminated for any reason; and (iii) an Other Acquisition Transaction is consummated within one calendar year of the date of the Company Meeting, then the Company shall pay to Sub, by wire transfer of immediately available funds to an account designated by Sub $3.5 million plus all out-of-pocket fees and expenses (of the type referred to in Section 12.3(b) and subject to the limitations set forth in Section 12.3(b)) not later than two business days after Sub submits to the Company a request therefore. Notwithstanding the foregoing, no payment shall be required under Sections 12.3(b) or 12.3(d), if the payment specified by this Section 12.3(e) has been made to Sub, and no payment shall be required under this Section 12.3(e) if the payments specified by Sections 12.3(b) and (d) have been made to Sub. A payment under this Section 12.3(e) shall not limit Sub's right to pursue all other available remedies if the Company has breached this Agreement. Section 12.4 Publicity. So long as this Agreement is in effect, none --------- of JEDI, Sub nor the Company shall issue any press release or otherwise make any public statement with respect to the transactions contemplated by this Agreement without the consent of the other, which consent shall not be unreasonably withheld, unless such press release or public statement is required by law, regulation or rules of any applicable market or exchange, in which case such press release or public statement may be made after providing the other parties hereto a reasonable opportunity to comment thereon. Section 12.5 Interpretation. The headings contained in this -------------- Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 12.6 Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner -41- in order that the transactions contemplated hereby may be consummated to the fullest extent possible. Section 12.7 Miscellaneous. This Agreement (together with the ------------- exhibits and the Company Disclosure Schedule referred to herein) and the Confidentiality Agreement (i) constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, (ii) except as provided in Section 9.3, is not intended to confer upon any other person any rights or remedies hereunder and shall be binding upon and inure to the benefit solely of each party hereto, and their respective successors and assigns, (iii) shall not be assigned by operation of law or otherwise, except that Sub shall have the right to assign to any direct wholly owned subsidiary of JEDI incorporated under the laws of Delaware any and all rights and obligations of Sub under this Agreement, and (iv) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware with respect to the procedures applicable to the Merger and the internal affairs of the parties and the laws of the State of Texas, with respect to all other matters (without giving effect to the provisions thereof relating to conflicts of law). This Agreement may be executed in any number of counterparts which together shall constitute a single agreement. -42- IN WITNESS WHEREOF, Sub, JEDI and the Company have caused this Agreement to be signed by their respective officers thereunder duly authorized all as of the date first written above. CODA ACQUISITION, INC. By:____________________________________________ Name: C. John Thompson Title: Vice President CODA ENERGY, INC. By:____________________________________________ Name: Douglas H. Miller Title: Chairman of the Board and Chief Executive Officer JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP By: Enron Capital Management Limited Partnership, its general partner By: Enron Capital Corp., its general partner By:____________________________________________ Name: C. John Thompson Title: Agent and Attorney-in-Fact -43- AGREEMENT AND PLAN OF MERGER TABLE OF CONTENTS -----------------
ARTICLE I THE MERGER..................................................................1 Section 1.1 The Merger..............................................................1 ---------- Section 1.2 Effective Time of the Merger............................................1 ---------------------------- ARTICLE II THE SURVIVING CORPORATION..................................................2 Section 2.1 Certificate of Incorporation............................................2 ---------------------------- Section 2.2 By-Laws.................................................................2 ------- Section 2.3 Board of Directors and Officers of the Surviving Corporation............2 ------------------------------------------------------------ Section 2.4 Effects of Merger.......................................................2 ---------------- ARTICLE III CONVERSION OF SECURITIES..................................................2 Section 3.1 Merger Consideration....................................................2 -------------------- Section 3.2 Paying Agent and Surrender of Certificates..............................3 ------------------------------------------ Section 3.3 Dissenting Shares.......................................................4 ----------------- Section 3.4 Conversion of Sub Securities............................................4 ---------------------------- Section 3.5 Stockholders to Have No Further Rights..................................4 -------------------------------------- Section 3.6 Stock Options and Warrants..............................................5 -------------------------- Section 3.7 Stockholders' Meeting...................................................6 --------------------- Section 3.8 Closing of the Company's Transfer Books.................................6 --------------------------------------- Section 3.9 Closing.................................................................6 ------- ARTICLE IV DEFINITIONS................................................................7 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SUB......................................12 Section 5.1 Organization and Qualification.........................................12 ------------------------------ Section 5.2 Authority Relative to this Agreement...................................12 ------------------------------------ Section 5.3 Information in Proxy Statement.........................................13 ------------------------------ Section 5.4 Capitalization of Sub..................................................13 --------------------- Section 5.5 Financing..............................................................13 --------- Section 5.6 Operations of the Company Following the Merger.........................13 ---------------------------------------------- Section 5.7 Finder's Fees..........................................................14 ------------- Section 5.8 Review of Company......................................................14 ----------------- ARTICLE VI REPRESENTATIONS AND WARRANTIES OF JEDI....................................14 Section 6.1 Organization...........................................................14 ------------ Section 6.2 Authority and Capacity.................................................14 ---------------------- Section 6.3 Financial Information..................................................15 --------------------- Section 6.4 Operations of the Company Following the Merger.........................15 ---------------------------------------------- Section 6.5 Information in Proxy Statement.........................................15 ------------------------------
-i- Section 6.6 Finder's Fees..........................................................16 ------------- Section 6.7 Review of Company......................................................16 ----------------- ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................16 Section 7.1 Organization and Qualification.........................................16 ------------------------------ Section 7.2 Capitalization.........................................................16 -------------- Section 7.3 Subsidiaries...........................................................17 ------------ Section 7.4 Authority Relative to this Agreement...................................17 ------------------------------------ Section 7.5 Reports and Financial Statements.......................................18 -------------------------------- Section 7.6 Absence of Certain Changes or Events...................................19 ------------------------------------ Section 7.7 Litigation.............................................................19 ---------- Section 7.8 Information in Disclosure Documents....................................19 ----------------------------------- Section 7.9 Employee Benefits Plans; Labor Matters.................................20 -------------------------------------- Section 7.10 Environmental Matters..................................................22 --------------------- Section 7.11 Public Utility Holding Company Act.....................................23 ---------------------------------- Section 7.12 Futures Trading and Fixed Price Exposure...............................23 ---------------------------------------- Section 7.13 Takeover Provisions Inapplicable.......................................23 -------------------------------- Section 7.14 Fairness Opinion.......................................................23 ---------------- Section 7.15 Finder's Fees..........................................................23 ------------- Section 7.16 Compliance with Applicable Laws........................................23 ------------------------------- Section 7.17 Taxes..................................................................24 ----- Section 7.18. Certain Agreements.....................................................24 ------------------ Section 7.19. Engineering Reports....................................................25 ------------------- Section 7.20 Oil and Gas Reserve Information........................................25 ------------------------------- Section 7.21 Title to Property......................................................26 ----------------- Section 7.22 Insurance..............................................................26 --------- Section 7.23 Affiliate Transactions.................................................26 ---------------------- Section 7.24 Taurus Energy..........................................................26 ------------- ARTICLE VIII CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.........................26 Section 8.1 Conduct of Business by the Company.....................................26 ---------------------------------- Section 8.2 Obligations of JEDI and Sub............................................29 ---------------------------- Section 8.3 Notice of Breach.......................................................29 ---------------- ARTICLE IX ADDITIONAL AGREEMENTS.....................................................29 Section 9.1 Access and Information.................................................29 ---------------------- Section 9.2 Proxy Statement........................................................30 --------------- Section 9.3 Indemnification........................................................30 --------------- Section 9.4 HSR Act................................................................32 ------- Section 9.5 Reasonable Best Efforts................................................32 ----------------------- Section 9.6 No Solicitation........................................................33 --------------- Section 9.7 Taurus Disposition.....................................................34 ------------------ Section 9.8 JEDI...................................................................34 ---- Section 9.9 Certain Employee Benefit Matters.......................................34 --------------------------------
-ii- ARTICLE X CONDITIONS PRECEDENT.......................................................35 Section 10.1 Conditions to Each Party's Obligation to Effect the Merger.............35 ---------------------------------------------------------- Section 10.2 Conditions to Obligation of the Company to Effect the Merger...........35 ------------------------------------------------------------ Section 10.3 Conditions to Obligations of Sub to Effect the Merger..................36 ----------------------------------------------------- ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.........................................37 Section 11.1 Termination............................................................37 ----------- Section 11.2 Effect of Termination..................................................39 --------------------- Section 11.3 Amendment..............................................................39 --------- Section 11.4 Waiver.................................................................39 ------ ARTICLE XII GENERAL PROVISIONS.......................................................39 Section 12.1 Non-Survival of Representations and Warranties.........................39 ---------------------------------------------- Section 12.2 Notices................................................................39 ------- Section 12.3 Expenses; Termination Fees.............................................40 -------------------------- Section 12.4 Publicity..............................................................42 --------- Section 12.5 Interpretation.........................................................42 -------------- Section 12.6 Severability...........................................................42 ------------ Section 12.7 Miscellaneous..........................................................42 -------------
-iii- SCHEDULES AND EXHIBITS Exhibit A - Opinion of Vinson & Elkins L.L.P. Exhibit B-1 - Opinion of Haynes and Boone L.L.P. Exhibit B-2 - Opinion of Joe Callaway Exhibit 2.1 - Restated Certificate of Incorporation of Surviving Corporation Exhibit 3.6(a)(2) - Option Relinquishment and Release Agreement Exhibit 3.6(b)(2) - Warrant Relinquishment and Release Agreement Schedule 3.6(a)(1) - Specified Options and Warrants Schedule 6.1 - JEDI Partners Schedule 7.1 - Charter, By-laws and Jurisdictions Schedule 7.3 - Subsidiaries of Company and Interests in Other Entities Schedule 7.4 - Conflicting Provisions and Regulatory Requirements Schedule 7.6 - Recent Developments Schedule 7.7 - Litigation Schedule 7.9(a) - Employee Benefit Plans Schedule 7.9(b) - ERISA and Plan Exceptions Schedule 7.9(d) - Severance Agreements Schedule 7.9(e) - Employee Benefits Schedule 7.9(f) - Plan Developments Schedule 7.10 - Environmental Issues Schedule 7.12 - Trading Positions Schedule 7.15 - Finder's Fees Schedule 7.16 - Violations of Laws Schedule 7.17 - Delinquent Taxes Schedule 7.18 - Additional Agreements Schedule 7.20 - Oil and Gas Exceptions Schedule 7.22 - Insurance Coverage Schedule 7.23 - Affiliate Transactions Schedule 7.24 - Taurus Transactions Schedule 8.1(c) - Capital Expenditure Budget Schedule 8.1(d) - Additional Benefit Arrangements Schedule 10.3(f) - Employment, Subscription and Stockholder Agreements -iv- EX-99.1 3 NEWS RELEASE EXHIBIT 99.1 CODA ENERGY, INC NEWS RELEASE CODA ANNOUNCES EXECUTION OF DEFINITIVE MERGER AGREEMENT Dallas, Texas, October 31, 1995....Coda Energy, Inc. (NASDAQ-NMS: CODA) announced today that it has entered into a definitive merger agreement with Joint Energy Development Investments Limited Partnership ("JEDI"), an affiliate of Enron Capital & Trade Resources Corp., whereby JEDI will acquire in the merger shares of common stock of Coda at a price of $8.00 per share in cash. Coda currently has a total of 24,505,535 shares of Common Stock outstanding on a fully diluted basis. The agreement has been approved by Coda's Board of Directors and its Special Committee of outside directors. Concurrently with the execution of the merger agreement, JEDI and a subsidiary of JEDI have entered into certain agreements with members of management of Coda providing for a continuing role of management in Coda after the acquisition. Consummation of the acquisition is subject to the satisfaction of various conditions, including (i) the approval of the transaction by the stockholders of Coda, (ii) the receipt of all necessary consents and governmental approvals, and (iii) the sale of Coda's gas gathering and processing subsidiary, Taurus Energy Corp., on terms acceptable to JEDI. Coda currently expects to hold a special meeting of its stockholders as soon as practicable after receipt of clearance from the Securities and Exchange Commission for the purpose of voting on the transaction. Coda Energy, Inc. is an independent energy company primarily engaged in oil and gas acquisition, exploitation, development and production, including natural gas gathering, processing and extraction. Company headquarters are located in Dallas, Texas with principal operations in Texas, Oklahoma and Kansas. The Company's stock is traded on the NASDAQ National Market System under the symbol CODA. Additional information about Coda Energy, Inc. may be obtained by contacting the Company's Vice President and General Counsel, Joe Callaway, at Coda's headquarters, 5735 Pineland Drive, Suite 300, Dallas, Texas 75231, telephone number (214) 692-1800 or (800) 486-2632. EX-99.2 4 STOCKHOLDERS AGREEMENT EXHIBIT 99.2 STOCKHOLDERS AGREEMENT DATED OCTOBER 30, 1995 STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as of October 30, 1995, among Coda Acquisition, Inc., a Delaware corporation ("Sub"), and the Persons (as defined herein) listed on Schedule I hereto, and their ---------- permitted successors and assigns, and each owner of Common Stock, as defined herein, who may hereafter execute in accordance with this Agreement a separate agreement to be bound by the terms hereof. W I T N E S S E T H: - - - - - - - - - - WHEREAS, concurrently with the execution and delivery of this Agreement, Sub, Joint Energy Development Investments Limited Partnership, a Delaware limited partnership ("JEDI"), and Coda Energy, Inc., a Delaware corporation (the "Corporation"), are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Sub with and into the Corporation (the "Merger"); WHEREAS, the Corporation shall be the surviving corporation of the Merger; and WHEREAS, upon the consummation of the Merger, the Initial Parties (as defined herein) shall receive shares of Common Stock (as defined herein) and/or Common Stock Equivalents (as defined herein). NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I CERTAIN TERMS; REPRESENTATIONS AND WARRANTIES ------------------------------ 1.1 CERTAIN TERMS. When used herein the following terms shall have the ------------- meanings indicated: "ACCREDITED INVESTOR" shall mean any Person deemed to be an accredited investor pursuant to Regulation D promulgated under the Securities Act, as amended from time to time. "ACCREDITED OFFEREE" shall have the meaning set forth in Section 3.1. "ACQUISITION PROPOSAL" means a bona fide written proposal to a Party for the acquisition of all or a portion of such Party's Common Stock for cash or Publicly Traded Securities or both. "ADOPTION AGREEMENT" means an agreement in the form of Exhibit "A" hereto or in such other form that is reasonably satisfactory to the Corporation. "AFFILIATE" of a Person means any Person controlling, controlled by, or under common control with such Person. For purposes of this Agreement only, Enron Corp., a Delaware corporation, and each of its subsidiaries shall be deemed to be Affiliates of JEDI. "AGREEMENT" shall have the meaning set forth in the opening paragraph. "ASSIGNMENT OFFER" shall have the meaning set forth in Section 4.4(i). "BUSINESS DAY" means any day other than (i) a Saturday or Sunday or (ii) a day that is a banking holiday in Houston, Texas. "BUSINESS OPPORTUNITY AGREEMENT" shall have the meaning set forth in Section 2.1. "CAPITAL STOCK" means any and all shares, interests, participations, or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation), and any and all warrants, options, or other rights to purchase or acquire any of the foregoing. "CASH TRIGGER EVENT" shall have the meaning set forth in Section 6.3. "CAUSE" shall mean (a) "cause" as defined in the applicable Management Investor's employment agreement with the Corporation or (b) if no such employment agreement exists, (i) the applicable Management Investor's gross negligence or willful misconduct in the performance of the duties and services required of such Management Investor by the Corporation, (ii) such Management Investor's final conviction of a felony or of a misdemeanor involving moral turpitude, or (iii) the Corporation's determination to terminate the employment of such Management Investor as a result of such Management Investor's involvement in a conflict of interest with the Corporation. "CLAIMS" shall have the meaning set forth in Section 8.19. "CLOSING" shall have the meaning set forth in Section 4.4(a). "CLOSING DATE" shall have the meaning set forth in Section 4.4(a). "COMMON STOCK" means shares of the common stock, par value $.01 per share, of the Corporation or Successor Corporation issued and outstanding from time to time after the consummation of the Merger and all securities of the Corporation or any other Person issued in respect of shares of such common stock in connection with any exchange, merger, recapitalization, consolidation, reclassification, reorganization, stock dividend or distribution or other transaction to which the Corporation is a party, but excluding any shares or securities which cease to be outstanding. "COMMON STOCK EQUIVALENTS" means any and all rights, warrants, options, convertible securities, or exchangeable securities or indebtedness, or other rights, exercisable for or convertible into or exchangeable for, directly or indirectly, Common Stock, whether at the time of issuance or -2- upon the passage of time or the occurrence of some future event, but does not include Common Stock or the Special Management Rights. "CONTROL", including the correlative terms "controlling", "controlled by" and "under common control with" means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person. For the purposes of the preceding sentence, control shall be deemed to exist when a Person possesses, directly or indirectly, through one or more intermediaries (A) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (B) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (C) in the case of any other Person, more than 50% of the economic or beneficial interest therein. "CORPORATION" shall have the meaning set forth in the recitals. "DIVORCED PARTY" shall have the meaning set forth in Section 4.3(c). "DIVORCED SPOUSE" shall have the meaning set forth in Section 4.3(c). "EFFECTIVE TIME" shall have the meaning ascribed to such term in the Merger Agreement. "EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in Section 2.4. "FAIR MARKET VALUE" shall have the meaning set forth in Section 4.4(c)(ii). "FULLY-DILUTED COMMON STOCK" means, at any time, the then outstanding Common Stock plus (without duplication) all shares of Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise, conversion or exchange of all then-outstanding Common Stock Equivalents. "GROUP" means the JEDI Group or the Management Group. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time. "INDEMNITEES" shall have the meaning set forth in Section 8.16. "INDEMNITOR" shall have the meaning set forth in Section 8.16. "INITIAL INVESTMENT" shall mean $90,000,000. "INITIAL PARTIES" means JEDI and the Management Investors listed on Schedule I. "INITIAL SHARES" means the 900,000 shares of Common Stock to be owned by the Non-Management Investors as of the Effective Time.. -3- "INVALID TRANSFER" shall have the meaning set forth in Section 4.4(h). "ISSUANCE" shall have the meaning set forth in Section 3.1. "JEDI" shall have the meaning set forth in the recitals. "JEDI ENTITY" means JEDI or any of its Affiliates including, without limitation, for purposes of this Agreement only any direct or indirect subsidiary of Enron Corp., a Delaware corporation, but excluding, for all purposes, Enron Oil & Gas Company, a Delaware corporation. "JEDI GROUP" means, as of the time in question, all JEDI Entities that are Parties and all JEDI Special Transferees. "JEDI PARTY" means any Person who, at the time in question, is included in the JEDI Group. "JEDI SPECIAL TRANSFEREE" means any Person (other than a JEDI Entity) who has acquired more than 10% of the Common Stock from any one or more JEDI Entities and/or JEDI Special Transferees in accordance with this Agreement (other than any such Person that notifies the Corporation in writing, with a copy to all Parties, that such Person has irrevocably elected not to be deemed included as a member of the JEDI Group), but excluding any such Person that is not a Party as of the time in question. "MANAGEMENT GROUP" means all of the Management Investors. "MANAGEMENT INVESTOR" means each of the Persons identified as a Management Investor Party on Schedule I hereto, but excluding any such Person who ceases to ---------- be a Party. "MANAGEMENT INVESTOR SPOUSES" means the Persons identified as such on the execution pages of this Agreement and any future spouses of any Management Investors who execute a counterpart of this Agreement or an Adoption Agreement. "MARKET PRICE" of a Publicly Traded Security for any day means the reported last sale price, regular way, on such day (unless such day is not a trading day, in which event for the most recent trading day), or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE Composite Tape, or, if the Publicly Traded Security is not listed or admitted to trading on the NYSE, on the principal national securities exchange on which the Publicly Traded Security is listed or admitted to trading, or if the Publicly Traded Security is not listed or admitted to trading on a national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc., or, if the Publicly Traded Security is not quoted or admitted to trading on such quotation system, on the principal quotation system on which the Publicly Traded Security is listed or admitted to trading or quoted, or, if not listed or admitting to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of the Publicly Traded Security in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available in such manner, -4- as furnished by any NYSE member firm selected from time to time by the Board of Directors of the Corporation for that purpose. "MERGER" shall have the meaning set forth in the recitals. "MERGER AGREEMENT" shall have the meaning set forth in the recitals. "NON-CASH TRIGGER EVENT" shall have the meaning set forth in Section 6.3. "NON-MANAGEMENT INVESTORS" shall have the meaning set forth in Section 4.4(c)(iii). "NOTICE" shall have the meaning set forth in Section 8.5. "NYSE" means the New York Stock Exchange. "OFFER" shall have the meaning specified in the applicable paragraph of Section 4.3. "OFFER DATE" shall have the meaning specified in the applicable paragraph of Section 4.3. "OFFER EXPIRATION TIME" means 5:30 p.m. Houston time on (a) in the case of an Offer pursuant to Section 4.3(b) on the death of a Management Investor, six months plus five business days following such Management Investor's death or (b) in the case of all other Offers, the 25th business day following the Offer Date. "OFFEROR" shall have the meaning specified in the applicable paragraph of Section 4.3. "OWN" or "OWNED", with respect to Common Stock, shall have the same meaning as beneficial ownership under Rule 13d-3 under the Securities Exchange Act of 1934, as amended from time to time; provided, however, that (i) such ownership shall be determined as if this Agreement did not exist and that there is no agreement among the Parties to act in concert in any respect, (ii) such ownership shall be determined without regard to any Common Stock Equivalents or any Special Management Rights unless otherwise expressly provided to the contrary herein, and (iii) with respect to the determination of the Common Stock owned by a Group, such determination shall be made by aggregating the ownership of all members of such Group but without duplication so that a share of Common Stock will be deemed owned by only one member of the Group. All references herein to Common Stock owned by a Party include the community interest or similar marital property interest, if any, of the spouse of such Party in such Common Stock. "PARTY" means each Initial Party and each other Person that may become a party to this Agreement pursuant to Section 4.5, but shall not mean (i) the Corporation or (ii) any Person who executes this Agreement or an Adoption Agreement solely in his or her capacity as a spouse of a Party; provided, however, that if any Party ceases to own any Common Stock, Common Stock Equivalents or Special Management Rights, then such Party shall cease to be a Party hereunder and shall not thereafter be subject to this Agreement even if such former Party thereafter acquires Common Stock, unless such former Party thereafter acquires Common Stock in a transaction in which it becomes a Party again pursuant to Section 4.5. -5- "PEER COMPANY" shall have the meaning set forth in Section 4.4(c)(iii). "PERMITTED MANAGEMENT INVESTOR FAMILY TRANSFEREE" means with respect to any Management Investor, his or her spouse, children or the legal guardian for the benefit of his or her minor children or a trust established for the benefit of his or her spouse and/or children. "PERMITTED TRANSFEREE" means (i) with respect to any member of the JEDI Group, any other JEDI Entity, (ii) with respect to any Management Investor, any Permitted Management Investor Family Transferee, (iii) with respect to any other Party or any JEDI Special Transferee, any Affiliate of such Party (including any such JEDI Special Transferee), (iv) any Person who acquires Common Stock pursuant to a Qualified IPO, and (v) any JEDI Special Transferee who acquires Common Stock from JEDI on or prior to the date that is six months after the date on which the Effective Time occurs. "PERSON" means any natural person, corporation, limited partnership, limited liability company, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust, or other organization, whether or not a legal entity, and any government or agency or political subdivision thereof. "POSITIVE RECEIPT NOTICE" shall have the meaning set forth in Section 4.4(a). "PUBLICLY TRADED SECURITY" means a security that is listed or admitted to trading on the NYSE or another national securities exchange or is quoted or admitted to trading on the National Market System of the National Association of Securities Dealers, Inc., or a security whose market price is available through the National Quotation Bureau Incorporation or a similar generally accepted reporting service. "PURCHASE PRICE" shall have the meaning set forth in Section 4.4(c)(i). "PUT REQUEST" shall have the meaning set forth in Section 5.2. "PUT SHARES" shall have the meaning set forth in Section 5.2. "QUALIFIED IPO" means a consummated public offering of Common Stock which is underwritten on a firm commitment basis by a nationally-recognized investment banking firm. "QUALIFIED PUBLIC BUSINESS COMBINATION" means a merger or other business combination involving the Corporation whereby the Common Stock becomes a Publicly Traded Security. "RECORD DATE" shall have the meaning set forth in Section 4.7. "RELEVANT INVESTORS" shall have the meaning set forth in Section 6.3. "REQUESTOR" shall have the meaning set forth in Section 5.2. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. -6- "SECURITY AGREEMENT" has the meaning given such term in Section 1.2(a)(iii). "SHARES SUBJECT TO THE OFFER" means with respect to an Offer (i) under Section 4.3(a), all shares of Common Stock as to which the Party proposes to accept the Acquisition Proposal in question, (ii) under Section 4.3(b), all shares of Common Stock (including any Common Stock transferred, or to be transferred, to such Management Investor under Article VI hereof) and Common Stock Equivalents owned by the Offeror; (iii) under Section 4.3(c), the Divorced Party's Common Stock and Common Stock Equivalents which have been Transferred to or which are retained by or vested in the Divorced Spouse by virtue of the divorce decree, property settlement or by operation of the community property or similar marital property laws; (iv) under Section 4.3(d), all Common Stock and Common Stock Equivalents vesting in or transferable to any heir or legatee other than the Surviving Party or a Permitted Management Investor Family Transferee; (v) under Sections 4.3(e)(i) and (ii), all Common Stock and Common Stock Equivalents owned by the Offeror immediately prior to the event triggering the Offer; (vi) under Section 4.3(e)(iii), all Common Stock and Common Stock Equivalents owned by the Party immediately prior to his death; and (vii) under Section 4.3(e)(iv), all Common Stock and Common Stock Equivalents, but only such Common Stock and Common Stock Equivalents that were involuntarily Transferred. "SPECIAL MANAGEMENT RIGHTS" shall have the meaning set forth in Section 6.1. "SPECIAL MANAGEMENT SHARES" shall have the meaning set forth in Section 6.4(b). "SUB" shall have the meaning set forth in the opening paragraph. "SUBSIDIARY" means (i) any corporation or other entity a majority of the Capital Stock of which having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by the Corporation or (ii) a partnership, joint venture or limited liability company in which the Corporation or any Subsidiary is a general partner, joint venturer or member. "SUCCESSOR CORPORATION" shall have the meaning set forth in Section 8.2. "SURVIVING PARTY" shall have the meaning set forth in Section 4.3(d). "TERMINATION DATE" means October 30, 2005. "TRANSFER", including the correlative terms "TRANSFERRING" or "TRANSFERRED", means any transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary or involuntary or by operation of law), of Common Stock (or any interest therein or right thereto), Common Stock Equivalents, or Special Management Rights; provided, however, that an exchange, merger, recapitalization, consolidation or reorganization involving the Corporation in which securities of the Corporation or any other Person are issued in respect of shares of the common stock of the Corporation shall not be deemed a Transfer if all shares of Common Stock are treated identically in such transaction. "TRIGGER EVENT" shall have the meaning set forth in Section 6.2. -7- "VOLUNTARY TERMINATION" shall mean the voluntary termination by a Management Investor of his employment with the Corporation other than upon the termination of such employment upon the later of (i) his retirement at age 65 or older or (ii) the end of the scheduled term of his employment agreement, if any, with the Corporation. 1.2 REPRESENTATIONS AND WARRANTIES. (a) Each of the Initial Parties (as ------------------------------ to itself only) represents and warrants to Sub and other Initial Parties that as of the date hereof: (i) such Party has full power and authority to execute and deliver this Agreement and the execution and delivery by such Party of this Agreement have been duly authorized by all necessary action; (ii) this Agreement has been duly and validly executed and delivered by such Party and constitutes the binding obligation of such Party, enforceable against such Party in accordance with its terms; and (iii) assuming that the Common Stock to be issued to it pursuant to the Merger Agreement is duly and validly issued free and clear of all liens and other encumbrances, immediately after the consummation of the Merger, such Party shall own as of the Effective Time the number of shares of Common Stock and such Common Stock Equivalents as are set forth on Schedule -------- I, and such Common Stock and Common Stock Equivalents shall be owned by - such Party free and clear of all liens and other encumbrances arising by, through or under such Party except for this Agreement, the Security Agreement, if any, dated as of the date on which the Effective Time occurs, executed by such Initial Party in favor of Sub (the "Security Agreement") and the agreements creating such Common Stock Equivalents. (b) Sub hereby represents and warrants to each Initial Party that: (i) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, it has full corporate power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery, and performance by it of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action; and (ii) this Agreement has been duly and validly executed and delivered by Sub and constitutes the binding obligation thereof, enforceable against Sub in accordance with its terms. ARTICLE II CERTAIN MATTERS --------------- 2.1 CERTAIN ACTIVITIES OF THE PARTIES. The Initial Parties acknowledge --------------------------------- that all such Parties and certain other Persons are executing and delivering a Business Opportunity Agreement -8- (the "Business Opportunity Agreement") concurrently with the execution and delivery of this Agreement. 2.2 ANNUAL MEETINGS. The Corporation shall hold annual meetings of --------------- stockholders in accordance with the General Corporation Law of the State of Delaware, which annual meetings shall be held in May of each year unless otherwise determined by the Board of Directors of the Corporation. 2.3 REPORTING OBLIGATIONS. The Corporation shall provide to the Parties --------------------- copies of (i) audited annual consolidated financial statements of the Corporation within 90 days after the end of each fiscal year, (ii) unaudited quarterly consolidated financial statements of the Corporation within 45 days after the end of each of the first three fiscal quarters of each fiscal year, (iii) unaudited monthly consolidated financial statements of the Corporation within 45 days after the end of each month, and (iv) annual reserve reports, prepared by an independent petroleum engineering firm, within 90 days after the end of each fiscal year. 2.4 CERTAIN EMPLOYEE MATTERS. Promptly after the Effective Time, the ------------------------ Corporation shall issue or contribute to an employee benefit plan (the "Employee Benefit Plan") for the benefit of the Corporation's employees, other than the Management Investors, to the fullest extent permitted by law 2,000 shares of Common Stock with such terms and conditions as the Board of Directors shall determine. ARTICLE III CERTAIN STOCK PURCHASE RIGHTS ----------------------------- 3.1 CERTAIN STOCK PURCHASE RIGHTS. If the Corporation proposes to issue, ----------------------------- sell, or grant (collectively, an "issuance") any of its Capital Stock (including Common Stock Equivalents) then the Corporation shall, no later than 30 days prior to the consummation of such issuance, give written notice to each JEDI Party and each Management Investor of such proposed issuance. Such notice shall describe the proposed issuance, identify the proposed purchaser or purchasers, and contain an offer to each such Party that in the reasonable judgment of the Corporation is an Accredited Investor (each an "Accredited Offeree") to sell to such Accredited Offeree, at the same price and for the same consideration to be paid by the proposed purchasers, such Accredited Offeree's pro rata portion (which is the ratio of the number of shares of Fully-Diluted Common Stock owned by such Accredited Offeree immediately prior to such issuance to the total number of shares of Fully-Diluted Common Stock owned by all Accredited Offerees immediately prior to such issuance) of such Capital Stock included in such issuance. Each Accredited Offeree shall have a right of over-allotment such that if any Accredited Offeree fails to exercise its rights hereunder to purchase its pro rata portion, the other Accredited Offerees may purchase the non-purchasing Accredited Offeree's portion on a pro rata basis or such other basis as such Accredited Offerees shall agree. Any Accredited Offeree desiring to exercise an over-allotment right shall so indicate in its response to the Corporation. Any Accredited Offeree desiring to purchase a portion or all of the issuance shall indicate its acceptance of the Corporation's offer by written notice within 15 days after its receipt of the Corporation's notice. If the Accredited Offerees collectively fail, after taking into account exercises of over-allotment rights, to elect to purchase all of the Capital Stock proposed to be issued, -9- then the Corporation may, within the 60 days following the expiration of such 15 day period, proceed with that portion of the issuance that the Accredited Offerees did not elect to purchase, free of any right on the part of such Accredited Offeree under this Section 3.1 in respect thereof. This Section 3.1 shall not apply to (i) issuances to employees pursuant to compensation arrangements or pursuant to employee benefit or stock option plans that have been approved by the board of directors of the Corporation in accordance with the Corporation's Bylaws; (ii) sales or issuances of Common Stock upon exercise of any Common Stock Equivalent issued in connection with the Merger or which, when issued, was subject to or exempt from the preemptive rights under this Section 3.1; (iii) securities distributed or set aside ratably to all holders of Common Stock on a per share equivalent basis, including rights issued pro-rata to holders of Common Stock to purchase Capital Stock of the Corporation; (iv) Capital Stock issued pursuant to the acquisition of a business entity or assets by way of merger, purchase of assets or otherwise; and (v) Capital Stock issued in a Qualified IPO or a Qualified Public Business Combination. ARTICLE IV RESTRICTIONS ON TRANSFERS ------------------------- 4.1 GENERAL RULE. No Party shall make any Transfer of Common Stock, ------------ Common Stock Equivalents, or Special Management Rights, directly or indirectly, through an Affiliate or otherwise except as expressly permitted herein. 4.2 TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHT. ------------------------------------------- (a) Certain Pledges. Any Party may (i) pledge Common Stock such Party --------------- owns to a commercial lending institution as security for indebtedness of such Party if, but only if, prior to any such pledge, the pledgee shall deliver to the Corporation such pledgee's written agreement, in form and substance satisfactory to the Corporation, (A) that such lender will not Transfer such Common Stock except in compliance with the provisions of this Agreement, and (B) that any Transfer of such stock upon or in lieu of foreclosure of its security interest will be subject to Section 4.3(e)(iv) and that the pledgee or its assignee must offer to sell the stock pursuant to Section 4.3(e)(iv) before it may accept any offer at foreclosure or in lieu of foreclosure or before it or its assignee may acquire such shares and (ii) pledge Common Stock to Sub pursuant to the Security Agreement, if any, dated as of the date of which the Effective Time occurs, by such Party in favor of Sub. (b) Certain Transfers. Subject to Section 4.5, any Party may Transfer, ----------------- from time to time, any Common Stock owned by such Party to a Permitted Transferee of such Party. 4.3 TRANSFERS SUBJECT TO PREFERENTIAL RIGHT. --------------------------------------- (a) Transfer in Response to Acquisition Proposals. Except as may --------------------------------------------- otherwise be expressly permitted herein, a Party may Transfer Common Stock to a transferee other than a Permitted Transferee if, but only if, an Acquisition Proposal is received by such Party from such transferee with respect to such Common Stock, and then only in compliance with this Agreement. Upon a Party's receipt of an Acquisition Proposal which such Party is permitted hereunder to accept and desires to accept, such Party (the "Offeror") shall offer (the "Offer"), by written notice to the Corporation, to -10- sell the Shares Subject to the Offer to the Corporation for the Purchase Price pursuant to the terms of this Agreement. Any Offer under this Section 4.3(a) shall be irrevocable for so long as the Corporation has the right to purchase any Shares Subject to the Offer. The Offer shall be delivered to the Corporation, and shall (i) state the Shares Subject to the Offer, the consideration to be paid therefor, the Offer Date and the Offer Expiration Time and (ii) contain a true and complete copy of the Acquisition Proposal. The date the Offer has been deemed received pursuant to Section 8.5 by the Corporation shall be the "Offer Date." (b) Termination of Employment. If the employment of a Management Investor ------------------------- with the Corporation and its Subsidiaries terminates for any reason other than such Management Investor's Voluntary Termination, then such Party, or his or her legal representatives, as the case may be, and all Permitted Management Investor Family Transferees to whom such Management Investor has transferred Common Stock (collectively, the "Offeror"), shall be deemed to have made an offer (the "Offer") to sell all Shares Subject to the Offer to the Corporation for the Purchase Price. The Offer Date shall be deemed to be the date of such termination of employment. (c) Divorce of Party. If the marital relationship of a Management ---------------- Investor is terminated by divorce, and pursuant to such divorce, any property settlement or otherwise in connection with such divorce, a Transfer (including any Transfer involving community property or other marital property) is made by such Party ("Divorced Party") to the former spouse of the Divorced Party ("Divorced Spouse"), the Divorced Party shall promptly notify the Corporation of such event. The Divorced Party shall have the option to purchase all of the Divorced Party's Common Stock and Common Stock Equivalents which have been Transferred to or which are retained by or vested in the Divorced Spouse by virtue of the divorce decree, property settlement, or by operation of the community property or similar marital property laws for the Purchase Price, and the Divorced Spouse shall be obligated to sell such Common Stock and Common Stock Equivalents to the Divorced Party for the Purchase Price. Such option must be exercised, and the purchase consummated, within 20 business days after the Common Stock and Common Stock Equivalents are Transferred to or allowed to be retained by or vested in the Divorced Spouse. The option shall be exercised by the giving of written notice of exercise to the Divorced Spouse. The Divorced Party shall, within five days after the expiration of such 20 business day period, deliver written notice to the Corporation as to whether the Divorced Party has purchased all of the Common Stock and Common Stock Equivalents so Transferred to or otherwise vested in or retained by the Divorced Spouse. In the event such written notice states that the Divorced Party has not purchased all such Common Stock and Common Stock Equivalents or no such notice is delivered to the Corporation within the time required, the Divorced Spouse (the "Offeror") shall be deemed to have made an irrevocable offer (the "Offer") to sell all such Common Stock and Common Stock Equivalents to the Corporation for the Purchase Price. The Offer Date shall be deemed to be the date such written notice is received by the Corporation or if such notice is not delivered within the time required, the receipt by the Corporation of evidence, satisfactory to it, that all such Common Stock was not purchased by the Divorced Party within such 20 business day period. (d) Death of Spouse. If the spouse of a Management Investor dies, and all --------------- or any portion of the Common Stock and Common Stock Equivalents registered in the name of such Party ("Surviving Party") vests in or is Transferred to any heir or legatee other than the Surviving Party or any Permitted Management Investor Family Transferee, the Surviving Party shall promptly notify -11- the Corporation of such event. The Surviving Party shall have the option to purchase all of the Common Stock and Common Stock Equivalents vesting in or Transferred to such heir or legatee for the Purchase Price, and such heir or legatee and the estate of the deceased spouse shall be obligated to sell such Common Stock and Common Stock Equivalents to the Surviving Party for the Purchase Price. Such option must be exercised, and the purchase consummated, within 20 business days after the last to occur of (i) the entry of an order of a probate or similar court (having jurisdiction over the estate of the deceased spouse) (a) admitting to probate the will of the deceased spouse, or (b) determining the heirs of the deceased spouse if the deceased spouse is determined to have died intestate, or (ii) the appointment of the executor, administrator or legal representative of the estate of the deceased spouse. The option shall be exercised by the giving of written notice of exercise to the executor, administrator or legal representative of the deceased spouse's estate. The Surviving Party shall, within five days after the expiration of such 20 business day period, deliver written notice to the Corporation as to whether the Surviving Party has purchased all of the Common Stock and Common Stock Equivalents vesting in or Transferred to any such heir or legatee. In the event such written notice states that the Surviving Party has not purchased all such Common Stock and Common Stock Equivalents, or no such notice is delivered to the Corporation within the time required, all such heirs and legatees (collectively, the "Offeror") shall be deemed to have made an irrevocable offer (the "Offer") to sell such Common Stock and Common Stock Equivalents to the Corporation for the Purchase Price. The Offer Date shall be deemed to be the date such written notice of the Offer is received by the Corporation or if such notice is not given within the time required, the date of the receipt by the Corporation of evidence, satisfactory to it, that all such Common Stock was not purchased by the Surviving Party within such 20 business day period. (e) Insanity, Bankruptcy and Certain Other Events. If any of the following --------------------------------------------- events occur (which does not result in a deemed offer pursuant to Section 4.3(b)): (i) any judicial determination of the insanity or incompetence of a Management Investor; (ii) the filing of a petition in bankruptcy by a Party, the filing of a petition in bankruptcy against a Party that is not dismissed within 90 days, the appointment of a receiver of a Party's property or the admission by a Party of such Party's inability to pay such Party's debts generally; (iii) death of a Management Investor; or (iv) any involuntary Transfer by a Party (including by operation of law) other than, subject to Section 4.5, a Transfer to a Permitted Transferee of such Party; then such Party, or his or her legal representatives or transferee, as the case may be, and all Permitted Management Investor Family Transferees to whom such Party has Transferred Common Stock (collectively, the "Offeror"), shall be deemed to have made an offer (the "Offer") to sell all Shares Subject to the Offer to the Corporation for the Purchase Price, and shall promptly notify the Corporation of such event. The Offer Date shall be deemed to be the date such written notice of the Offer is received by the Corporation or, if no such notice is delivered to the Corporation by such -12- Offeror, the date of the Corporation's receipt of evidence, satisfactory to it, of any of the foregoing events. 4.4 PROCEDURES WITH RESPECT TO TRANSFERS SUBJECT TO SECTION 4.3. ----------------------------------------------------------- (a) Election Procedure. With respect to any Offer made or deemed made ------------------ pursuant to Section 4.3, the Corporation shall have the option and preferential right, but shall not be obligated, to elect by the Offer Expiration Time, to purchase the Shares Subject to the Offer. If the Corporation desires to purchase the Shares Subject to the Offer it shall, prior to the Offer Expiration Time, deliver a written notice (a "Positive Receipt Notice") to the Offeror stating that the Corporation elects to purchase, subject to the requirements of Section 4.4(b), all of the Shares Subject to the Offer. The Positive Receipt Notice shall specify the number of shares of Common Stock and Common Stock Equivalents that the Corporation is electing to purchase and the time, date (the "Closing Date") and place of the closing of the acquisition of Shares Subject to the Offer by the Corporation (the "Closing") and shall specify the Purchase Price. The Closing Date shall be no less than 5 business days and no more than 20 business days following the delivery of the Positive Receipt Notice. (b) Requirement to Purchase Some or All. With respect to Offers made, or ----------------------------------- deemed made, pursuant to Section 4.3, the Corporation (or its assignees) may not elect to purchase less than all of the Shares Subject to the Offer. (c) Determination of Purchase Price. ------------------------------- (i) The "Purchase Price" for purposes of the purchase of Shares Subject to the Offer under Section 4.3(a) shall be the price per share set forth in the Acquisition Proposal, subject to the terms of Section 4.4(f). The "Purchase Price" for purposes of the purchase of Common Stock under all other provisions of Section 4.3 shall be the Fair Market Value of a share of Common Stock as of the applicable Offer Date and for purposes of the purchase of Common Stock under Section 5.2 shall be the Fair Market Value of a share of Common Stock as of the date of the applicable termination of employment. The "Purchase Price" for any Common Stock Equivalents shall be equal to (A) the number of shares of Common Stock then acquirable upon the exercise or conversion of such Common Stock Equivalents multiplied by the applicable Fair Market Value per share of Common Stock, less (B) the aggregate consideration required to be paid so to exercise or convert such Common Stock Equivalents. (ii) "Fair Market Value" means the value of a share of Common Stock as most recently determined in good faith by the Board of Directors in accordance with the procedures set forth in Schedule II hereto, which shall ----------- be made available to any Management Investor upon request. (iii) "Peer Company" means each of one or more companies with business and operations similar to the Corporation's selected in accordance with the procedures set forth in this Section 4.4(c)(iii). The Peer Companies shall be selected by a committee of two members appointed by the Board of Directors, which committee shall consist of one Management Investor who is a member of the Board of Directors (if a Management Investor -13- is a member of the Board of Directors) and one of the members of the Board of Directors nominated or elected by Parties other than the Management Investors (the "Non-Management Investors"). Such committee shall select by mutual agreement of the members of the committee a list of Peer Companies prior to the last day of the first calendar quarter following the Effective Time and on or prior to March 15 of each year thereafter. If the members of the committee are unable to agree on the list of Peer Companies on or prior to March 15 of each such year, the Board of Directors shall use the list of Peer Companies selected in the immediately preceding year for purposes of determining the Fair Market Value. If committee members initially appointed by the Board of Directors for purposes of making the first selection of a list of Peer Companies pursuant to this Section 4.4(c)(iii) are unable to agree on such list on or prior to the last day of the first calendar quarter following the Effective Time, the initial list of Peer Companies shall be the list attached to this Agreement as Schedule IV. ----------- (d) Election Not to Purchase. If the Corporation does not elect to ------------------------ purchase all of the Shares Subject to the Offer made under Section 4.3(a), the Offeror desiring to make the Transfer pursuant to Section 4.3(a) shall be permitted at any time within, but not after, 30 days after the Offer Expiration Time, to make a Transfer of all (but not less than all) of the Shares Subject to the Offer; provided, however, that no such Transfer shall be made on more favorable terms (including lower price) than the terms specified in the Acquisition Proposal or to a Person other than the proposed transferee specified in the Acquisition Proposal. All Common Stock Transferred by a Party (whether voluntarily, involuntarily, by operation of law or otherwise), even if one or more Parties had the right to purchase such Shares pursuant to Section 4.3 and failed to do so, and Common Stock owned by a Party that became subject to an Offer, whether or not such Common Stock was acquired by the Corporation, shall nonetheless remain subject to the terms of this Agreement, including becoming, under the applicable circumstances, subject again under Section 4.3 to the right of the Corporation to purchase such shares. (e) Closing. Unless otherwise agreed to by the Offeror and the ------- Corporation, the Closing shall be at 9:00 a.m., on the Closing Date at the Corporation's principal office. At the Closing, the Purchase Price shall be delivered to the transferor of the Common Stock and Common Stock Equivalents or the transferor's representative, and the transferor or the transferor's representative shall deliver to the Corporation such share certificates and agreements representing the Shares Subject to the Offer so purchased, duly endorsed for transfer or accompanied by duly executed stock powers or assignments, free and clear of all liens, encumbrances and adverse claims with respect thereto and such other matters as are deemed necessary by the Corporation for the proper Transfer of the Shares Subject to the Offer so purchased to the Corporation on the books of the Corporation. (f) Form of Payment. The Purchase Price of any Shares Subject to the --------------- Offer purchased pursuant to an Offer made under Section 4.3(a) shall be on such terms as contemplated by the Acquisition Proposal; provided, however, that if part or all of the consideration to be paid pursuant to the Acquisition Proposal consists of Publicly Traded Securities the Corporation may consummate the acquisition of Shares Subject to the Offer (pursuant to the terms hereof) wholly in cash, and the Market Price of the Publicly Traded Security as of the Offer Date shall be used to determine the equivalent cash price per share. The Purchase Price of all Shares Subject to the Offer pursuant to an Offer made under Sections 4.3(b) through 4.3(e) shall be paid in cash. -14- (g) Delay for Approvals. If any Positive Receipt Notice is delivered by ------------------- the Corporation, the Offeror and the Corporation shall cooperate in good faith in obtaining all necessary governmental and other third party approvals, waivers and consents. Any Closing pursuant to Section 4.4(e) shall be delayed, to the extent required, until the next succeeding business day following the expiration of any required waiting periods under the HSR Act and the obtaining of all necessary governmental approvals; provided, however, such delay shall not exceed 90 days, and if governmental approvals and waiting periods shall not have been obtained or expired by such 90th day following the applicable Closing Date, then the Corporation shall be deemed to have elected not to purchase any of the Shares Subject to the Offer and, if applicable, the Offeror shall be entitled to Transfer the Shares Subject to the Offer in accordance with Section 4.4(d) (except that such 90th day shall be deemed to be the applicable Offer Expiration Time). (h) Invalid Transfers. Any Transfer or attempted Transfer in breach of ----------------- this Agreement ("Invalid Transfer") shall be void and of no effect; provided that the Corporation may determine to treat any Invalid Transfer as an involuntary Transfer pursuant to Section 4.3(e)(iv). In connection with any Invalid Transfer, the Corporation may hold and refuse to transfer any Common Stock or any certificate therefor tendered to it for transfer, in addition to and without prejudice to any and all other rights or remedies which may be available to it or the Parties. (i) Assignment of Rights. Notwithstanding anything to the contrary -------------------- herein, the Corporation may from time to time assign some or all of its rights under Sections 4.3 and 4.4 herein to the Parties in accordance with this Section 4.4(i). In such an event, the Corporation shall continue to receive and provide the notices referred to in Section 4.4, but the applicable Shares Subject to the Offer shall be acquired by, and paid for by, any such assignees. If the Corporation receives an Offer under Section 4.3 and desires to assign some or all of its rights to purchase the Shares Subject to the Offer to the Parties, the Corporation shall give notice thereof to each Accredited Offeree other than the Offeror (the "Assignment Offer"). The Assignment Offer shall describe the Offer and state the number of Shares Subject to the Offer the right to purchase which the Corporation desires to assign. Each Accredited Offeree shall have the right, exercisable by notice to the Corporation on the day specified in the Assignment Offer, to acquire its pro-rata portion (which is the ratio of the number of shares of Fully-Diluted Common Stock owned by such Accredited Offeree over the total number of shares of Fully-Diluted Common Stock owned by all Accredited Offerees other than the Offeror) of such Shares Subject to the Offer for the Purchase Price. Each such Accredited Offeree shall have a right of over- allotment such that if any Accredited Offeree fails to exercise its rights hereunder to purchase its pro rata portion, the other Accredited Offerees may purchase the non-purchasing Accredited Offeree's portion on a pro rata basis or such other basis as such Accredited Offerees shall agree. Any Accredited Offeree desiring to exercise an over-allotment right shall so indicate in its response to the Corporation. If the Accredited Offerees collectively fail, after taking into account exercises of over-allotment rights, to elect to purchase all of such Shares Subject to the Offer, then the Corporation shall have the right to purchase such Shares Subject to the Offer in accordance with Sections 4.3 and 4.4, and unless the Corporation and its assignees collectively elect to purchase all of the Shares Subject to the Offer, neither the Corporation or any of such assignees shall have the right to purchase any of such Shares Subject to the Offer. The decision by the Corporation to assign some or all of its rights under Sections 4.3 or 4.4 herein shall be made by the directors of the Corporation not then associated or affiliated with the Offeror even if less than a quorum. The Corporation's assignment of such rights shall not affect or extend the Offer Expiration Time. -15- 4.5 CONDITIONS TO PERMITTED TRANSFERS; CONTINUED APPLICABILITY OF ------------------------------------------------------------- AGREEMENT. (a) As a condition to any Transfer permitted hereunder or if any - --------- Transfer otherwise occurs, any transferee of Common Stock (i) shall be required to become a Party to this Agreement, by executing (together with such Person's spouse, if applicable) an Adoption Agreement, and shall have all the obligations of a Party hereunder and the rights that are expressly provided for herein and (ii) shall be required to become a party to the Business Opportunity Agreement. If any Person acquires Common Stock from a Party in a Transfer notwithstanding such Person's failure to execute an Adoption Agreement in accordance with the preceding sentence (whether such Transfer resulted by operation of law or otherwise), such Person and such Common Stock shall be subject to this Agreement, including the provisions of Sections 4.3 and 4.4, even if such Person is not a Party. (b) No Party shall make any Transfer at any time if such action would constitute a violation of any federal or state securities laws. 4.6 RESTRICTIONS ON OTHER AGREEMENTS. Except as otherwise expressly -------------------------------- provided herein or in a Security Agreement, no Party shall grant any proxy or enter into or agree to be bound by any voting trust with respect to Common Stock or Common Stock Equivalents nor shall any Party enter into any stockholder agreement or arrangements of any kind with any Person with respect to Common Stock or Common Stock Equivalents (whether or not such agreements and arrangements are with other Parties), including, without limitation, agreements or arrangements with respect to the acquisition, disposition or voting of shares of Common Stock, in each case that is inconsistent with the terms of this Agreement. 4.7 EFFECT OF DISTRIBUTIONS AND CERTAIN TRANSACTIONS. If, in connection ------------------------------------------------ with any Offer, any record date for any dividend or distribution by the Corporation (other than any regular quarterly cash dividend) or any record date for the issuance of any securities of the Corporation or any other Person in respect of Common Stock in connection with any exchange, merger, recapitalization, consolidation, reorganization or other transaction involving the Corporation (in any such case, a "Record Date") occurs on or after the date on which the Purchase Price is determined and prior to the Closing, then the Corporation (or its assignees under Section 4.4(i)) shall be entitled to receive any such dividends, distributions or securities, as the case may be, in respect of the Common Stock it acquires pursuant to such Offer and appropriate documentation shall be delivered at the Closing by the Offeror to evidence the Corporation's right to receive such dividends, distributions or securities. 4.8 SPECIAL JEDI TRANSFER RESTRICTION. Any other provisions of this --------------------------------- Agreement notwithstanding, JEDI shall not transfer any Common Stock to any Person, by liquidating or other distribution or otherwise, if immediately following such transfer the Corporation would be included in the consolidated federal income tax return of any Person unless the Corporation and such Person shall have entered into a tax sharing agreement that is fair to the Corporation; provided, however, that this Section 4.8 shall not apply to any transfer, if immediately following such transfer, a Cash Trigger Event shall have occurred. -16- ARTICLE V CERTAIN TAGALONG AND PUT RIGHTS ------------------------------- 5.1 TAGALONG RIGHTS. On or before the fifth business day after the Offer --------------- Date with respect to any Offer made pursuant to Section 4.3(a), unless the Corporation or its assignees have elected to purchase the Shares Subject to the Offer, the Corporation shall deliver a copy of such Offer to each Party other than the Offeror. Unless the Corporation or its assignees elect to purchase the Shares Subject to the Offer, each such Party shall have the right to include in the proposed sale a number of shares of Common Stock designated by such Party not to exceed the number of shares equal to the product of (a) the aggregate number of shares to be sold by the Offeror to the proposed transferee and (b) a fraction with a numerator equal to the number of shares of Fully-Diluted Common Stock held by such other Party and a denominator equal to the number of shares of Fully-Diluted Common Stock held by all the Parties; provided that if the consideration to be received by the Offeror includes any securities, only Parties who are Accredited Investors shall be entitled to include their shares in such sale (but in such a case, each Party shall be entitled to include in such a sale a number of its shares, without duplication, equal to the total number of shares held by its Affiliates which are excluded from such sale by the operation of this proviso). Each Party who wishes to include shares of Common Stock in the proposed sale in accordance with the terms of this Section 5.1 shall so notify the Offeror not more than 10 business days after the Offer Date with respect to such Offer. The participation of any other Party in the sale made by the Offeror shall be conditioned upon the Offeror's sale of shares pursuant to the transactions contemplated in the Acquisition Proposal with the transferee named therein. If any other Party or other Parties have elected to participate in such sale by the Offeror, the Offeror shall cause the transferee that proposes to purchase the Common Stock of the Offeror to offer to purchase, on such terms, such number of shares of Common Stock from such Party or Parties; provided, however, that, if such transferee is for any reason unwilling or unable to purchase the aggregate number of shares from the Offeror as well as such other Party or Parties, then the Offeror shall reduce to the extent necessary the number of shares it otherwise would have sold in the proposed sale so as to permit other Parties who have elected to participate in such sale to sell the number of shares that they are entitled to sell under this Section 5.1, and the Offeror and such other Party or Parties shall sell the number of shares specified in the Acquisition Proposal to the proposed transferee in accordance with the terms thereof. 5.2 PUT RIGHTS. ---------- (a) If a Management Investor's employment with the Corporation or its Subsidiaries terminates for any reason (including such Management Investor's death or disability) other than for Cause or such Management Investor's Voluntary Termination, then upon the written request (the "Put Request") of such Management Investor or his or her legal representative, as the case may be (the "Requestor"), delivered to the Corporation no later than 20 business days following the date of such termination of employment (or, in the case of the death of the Management Investor, within six months of such Management Investor's death), the Corporation shall, subject to Section 5.2(b) and to the extent it has not acquired or elected to acquire pursuant to Article IV hereof all the Common Stock (including any Common Stock transferred, or to be transferred, to such Management Investor pursuant to Article VI hereof) and Common Stock Equivalents owned by such Management Investor, purchase from the Requestor, all (but not less than all) of the Common Stock and Common Stock -17- Equivalents owned by such Requestor (the "Put Shares") at the Purchase Price. The Corporation shall purchase the Put Shares at the Corporation's principal office at a closing to be held at the time and date specified by the Corporation (which shall be a date within 25 business days of the receipt of the Put Request). The provisions of Section 4.4(e) shall apply to such closing. (b) Notwithstanding any other provision of this Article V, the Corporation shall not be obligated to repurchase any Put Shares from a Requestor if there exists and is continuing an event of default which would, without further passage of time or further notice, permit acceleration of the indebtedness under the Corporation's loan or credit agreement with its principal lender or lenders or under any other material agreement for borrowed money, or if such purchase would result in a default or any event of default (without regard to the further passage of time or the giving of such notice) as defined in any such agreement, or if the capital of the Corporation is then impaired or such purchase would cause an impairment of the capital of the Corporation or would otherwise violate applicable law. ARTICLE VI SPECIAL MANAGEMENT RIGHTS ------------------------- 6.1 GRANT OF RIGHTS. The Parties desire to provide to the Management --------------- Investors an incentive to maximize the rate of return to stockholders of the Corporation. Subject to the terms and conditions of this Article VI, on the occurrence of the Trigger Event, each Management Investor shall have the right (collectively, the "Special Management Rights") to receive from JEDI the percentage set forth beside such Management Investor's name on Schedule III ------------ attached hereto of (a) in the case of a Cash Trigger Event, cash in the amount specified in Section 6.4(a), or (b) in the case of a Non-Cash Trigger Event, the number of shares of Common Stock specified in Section 6.4(b) for no additional consideration. 6.2 TRIGGER EVENT. The "Trigger Event" shall be the first of the ------------- following events to occur after the Merger: (a) the consummation of a Qualified IPO or a Qualified Public Business Combination; (b) any merger of the Corporation with or into any other Person (whether or not the Corporation is the survivor of such merger), any sale of Common Stock by the holder or holders thereof, any issuance of Common Stock by the Corporation to any Person, or any other transaction in each case resulting in any Person other than a JEDI Entity or a group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) of Persons not including any JEDI Entities owning a number of shares of Fully-Diluted Common Stock in excess of 50% of the number of shares of Fully-Diluted Common Stock outstanding after giving effect to such merger, sale, or issuance of Common Stock; and (c) the liquidation of the Corporation. -18- The occurrence of any of the events described in this Section 6.2(a) - (c) following the first thereof to occur shall not constitute a Trigger Event and shall not give rise to any right to receive any cash or Common Stock under this Article VI. 6.3 AMOUNT OF PROCEEDS. The proceeds or imputed proceeds to holders of ------------------ the Initial Shares (the "Relevant Investors") of the Trigger Event shall be (A) in the case of a Trigger Event resulting in all outstanding Common Stock being acquired from the holders thereof for cash (a "Cash Trigger Event"), the amount of cash proceeds from such acquisition payable to the Relevant Investors in respect of the Initial Shares, (B) in the case of the consummation of a Qualified IPO, the product of the number of Initial Shares multiplied by the per-share offering price at which public investors purchase the shares offered in the Qualified IPO, (C) in the case of any other Trigger Event whereby any Person acquires Common Stock for cash, the product of the number of Initial Shares multiplied by the per-share price paid by such Person for such Common Stock, (D) in the case of the consummation of a Qualified Public Business Combination or any other Trigger Event in which a Person acquires Common Stock in exchange for a Publicly Traded Security (with or without any additional cash consideration) the product of the number of Initial Shares multiplied by the Market Price of the Publicly Traded Security as of the Trigger Event (plus any additional per-share cash consideration paid in consideration for such Common Stock), or (E) in the case of any other Trigger Event, the product of the number of Initial Shares multiplied by the per-share Fair Market Value of such shares (each of (B) through (E) a "Non-Cash Trigger Event"). 6.4 PAYMENT OF CASH OR TRANSFER OF COMMON STOCK PURSUANT TO SPECIAL --------------------------------------------------------------- MANAGEMENT RIGHTS. - ----------------- (a) If the Trigger Event is a Cash Trigger Event, on the occurrence of the Trigger Event, JEDI shall pay or cause to be paid to each Management Investor, in cash in immediately available funds, an amount equal to the product of (i) one-third of the Excess Proceeds multiplied by (ii) the percentage set forth beside such Management Investor's name on Schedule III attached hereto. ------------- "Excess Proceeds" shall mean the excess of (A) the proceeds or deemed proceeds to the Relevant Investors as a result of the Trigger Event as determined pursuant to Section 6.3 over (B) the product of (1) the Initial Investment multiplied by (2) the value set forth in the "Factor" column on Schedule V ---------- attached hereto for the number of days from the date on which the Effective Time occurs through the date of the Trigger Event; provided that if the Excess Proceeds is not a positive amount, then no payment of cash or assignment of Common Stock shall be made pursuant to this Article VI. (b) If the Trigger Event is a Non-Cash Trigger Event, on the occurrence of the Trigger Event, JEDI shall assign or cause to be assigned to each Management Investor the percentage of the Special Management Shares set forth beside such Management Investor's name on Schedule III attached hereto. "Special Management ------------ Shares" means the number of shares of Common Stock equal to "X" in the following formula: [INSERT EQUATION HERE] -19- where: "Excess Proceeds" has the meaning given such term in Section 6.4(a). "Proceeds Per Share" means the amount of proceeds or deemed proceeds to the Relevant Investors as a result of the Trigger Event as determined pursuant to Section 6.3 divided by the number of Initial Shares. If the Trigger Event results in the then outstanding Common Stock being exchanged for other securities on other than a one-to-one basis, then the Special Management Shares shall be multiplied by the number of such securities issued in exchange for each share of Common Stock pursuant to such Trigger Event. (c) The Parties acknowledge that the calculation of the amount of cash or the number of shares of Common Stock that the Management Investors are entitled to receive pursuant to the Special Management Rights is designed to result in the Management Investors receiving in connection with a Trigger Event one-third of the proceeds attributable to the Initial Shares above the amount of proceeds necessary for an internal rate of return on the Initial Investment of 15% and that the product of the applicable value from the "Factor" column on Schedule V ---------- attached hereto multiplied by the Initial Investment determines the amount of proceeds necessary to achieve a 15% internal rate of return on the Initial Investment. The factors included in Schedule V assume that the Corporation pays ---------- no dividends or distributions and does not repurchase any of the Initial Shares from the Effective Time through the Trigger Event. It is the intention of the Parties to amend Schedule V contemporaneously with the occurrence of any such ---------- event such that it accurately determines the amount of such proceeds taking into account any such dividends, distributions or share repurchase. If the Parties do not so amend Schedule V following any such event and the Trigger Event occurs ---------- prior to Schedule V being amended to take such event into account, the "Excess ---------- Proceeds" shall be deemed to mean the amount of proceeds to the Relevant Investors as a result of the Trigger Event above the amount of proceeds necessary for an internal rate of return of 15% on the Initial Investment, taking into account any such dividends, distributions or share repurchases. (d) Notwithstanding the foregoing, JEDI shall have the right, in lieu of the issuance of the Special Management Shares to the Management Investors pursuant to Section 6.4(b), to pay or cause to be paid to each Management Investor for each Special Management Share that would otherwise be issued to such Management Investor under this Article VI an amount equal to the per-share proceeds or deemed proceeds to the Relevant Investors of the Trigger Event, determined as specified in Section 6.3. (e) Upon the issuance of the Special Management Shares or the payment of cash pursuant to this Section 6.4, the Special Management Rights shall terminate. (f) An example calculation of the Special Management Rights is attached hereto as Schedule III-A. -------------- -20- (g) To the extent that the receipt by the Management Investors of Common Stock or cash in accordance with the Special Management Rights or the disposition of such shares of Common Stock results in compensation income to any Management Investor for federal or state income tax purposes, such Management Investor shall deliver to the Corporation (or JEDI if required under applicable tax laws or regulations) on the date of the Trigger Event, and as a condition to such Management Investor's receipt of such Common Stock or cash, such amount of money as the Corporation (or JEDI if required under applicable tax laws or regulations) may require to meet its withholding obligation under applicable tax laws or regulations. If such Management Investor fails to do so but JEDI nonetheless agrees to assign such Common Stock or pay such cash to such Management Investor, the Corporation (or JEDI if required under applicable tax laws or regulations) is authorized to satisfy any such withholding requirement out of any cash or shares of Common Stock such Management Investor is entitled to receive on the occurrence of the Trigger Event and to withhold from any cash or Common Stock remuneration then or thereafter payable to such Management Investor any tax required to be withheld by reason of such resulting compensation income. 6.5 TERMINATION OF MANAGEMENT INVESTOR. If the employment of any ---------------------------------- Management Investor with the Corporation terminates for any reason (including such Management Investor's death or disability) other than for Cause or such Management Investor's Voluntary Termination, then such termination shall be deemed to be a Non-Cash Trigger Event of the type referred to in clause (E) of the last sentence of Section 6.3 with respect to such Management Investor only, and JEDI shall assign, or cause to be assigned by a Person other than the Corporation, to such Management Investor the number of Special Management Shares that such Management Investor would have received had an actual Non-Cash Trigger Event of such type occurred as of the date of such Management Investor's termination, and the Special Management Rights shall terminate with respect to such Management Investor; provided, however, that if the Board of Directors determines in good faith that the Trigger Event is reasonably likely to occur within one year after such Management Investor's termination, the Board of Directors shall have the right upon notice to the Management Investor within 20 business days of such Management Investor's termination to defer the issuance of the Special Management Shares to such Management Investor until the earlier of (a) one year after such Management Investor's termination (in which case the number of Special Management Shares shall be calculated based on the Fair Market Value as of such Management Investor's termination) and (b) the Trigger Event (in which case such Management Investor's Special Management Rights shall be determined as though he remained employed on the date of the Trigger Event). The Special Management Rights shall terminate without any payment or issuance as to any Management Investor whose employment by the Corporation is terminated for Cause or upon such Management Investor's Voluntary Termination. Even if a Management Investor's Special Management Rights terminate under this Section 6.5 or otherwise, the percentages set forth on Schedule III with respect to other Management Investors shall not change. Notwithstanding anything to the contrary in this Article VI, if any Management Investor commits actual fraud against the Corporation that could have affected or in any way could affect, in any material respect, the calculation of the cash or shares due to the Management Investors in respect of the Special Management Rights, such Management Investor shall forfeit his Special Management Rights and, in the event that such Management Investor receives cash or shares in respect of his Special Management Rights prior to the time that such actual fraud is discovered, such Management Investor shall be obligated to return to JEDI or to the -21- applicable Party the cash or shares, as applicable, received by such Management Investor in respect of his Special Management Rights. 6.6 OTHER EMPLOYEE INVESTORS. Four percent of the Special Management ------------------------- Shares, or the cash paid in lieu thereof, shall be reserved for employees of the Corporation at the time of the Trigger Event other than the Management Investors and shall be subject and allocated to the Employee Benefit Plan. 6.7 SUBSEQUENT HOLDERS OF COMMON STOCK. With respect to Persons that ----------------------------------- acquire Common Stock from JEDI and become Parties, JEDI and such Person may enter into such arrangements as they deem appropriate at the time of the transfer of Common Stock to such Person with regard to such Person's obligations to assign Common Stock or make payments in lieu thereof in connection with the Special Management Rights. If any Person or Persons pursuant to this Section 6.7 assumes some or all of the obligations of JEDI under this Article VI, then a copy of the document pursuant to which such Persons have assumed such obligations shall be sent to the Management Investors. If (i) such Person assuming such obligation then has debt with a maturity of at least five years that has a credit rating of BBB or higher from Standard & Poor's (or equivalent ratings from another nationally recognized rating agency) or (ii) Management Investors sufficient to consent to an amendment of this Agreement pursuant to Section 8.1 consent in writing to the assumption of such liability, then JEDI shall be relieved of liability under this Article VI to the extent such Persons have assumed JEDI's obligations hereunder, and in such event references to JEDI in this Article VI shall then be deemed to mean JEDI and such transferee, it being understood that the obligations of JEDI and such transferee under this Article VI are several and not joint. If neither condition referred to in clause (i) or (ii) of the preceding sentence is satisfied, then JEDI shall not be relieved of liability under this Article VI notwithstanding the assumption of such obligation by other Persons. ARTICLE VII TERMINATION ----------- 7.1 TERMINATION. This Agreement shall terminate and no Party shall have ----------- any further obligations or rights hereunder upon the earliest of (i) the termination of the Merger Agreement in accordance with its terms, (ii) the Termination Date, (iii) the date a Qualified IPO or a Qualified Public Business transaction is consummated (other than the provisions of Article VI which shall terminate as soon as the Corporation has complied with its obligations under Article VI hereof, if any, with respect thereto), (iv) the date of the dissolution, liquidation or winding-up of the Corporation and (v) the date of the delivery to the Corporation of a written termination notice executed by each JEDI Party and by Management Investors owning a majority of the Common Stock owned by the Management Group. -22- ARTICLE VIII MISCELLANEOUS ------------- 8.1 AMENDMENT; WAIVERS. This Agreement may only be altered, supplemented, ------------------ amended or waived by the written consent of (i) the Corporation, (ii) each JEDI Party that owns at least 5% of the Common Stock and (iii) either (A) Douglas H. Miller and other Management Investors owning at least one-third of the Fully- Diluted Common Stock owned by all Management Investors other than Douglas H. Miller or (B) Management Investors other than Douglas H. Miller owning a majority of the Fully-Diluted Common Stock owned by all Management Investors other than Douglas H. Miller; provided, however, that in no event shall any amendment impose any additional material obligation on any Party without such Party's written consent; provided further, however, (i) any Party may (without the consent of any other Person) waive, in writing, any obligation owed to it hereunder by any other Party or the Corporation, and (ii) any Party may (without the consent of any other Person) waive, in writing, any right it has hereunder. Any waiver permitted hereunder may be made prospectively or retroactively. 8.2 ASSIGNMENT. Except as otherwise expressly provided herein, the terms ---------- and conditions of this Agreement shall inure to the benefit of and be binding upon the Parties, the Corporation and their permitted assigns; provided, however, assigns shall only have those rights that are expressly provided for herein in accordance with Section 4.5. No such assignment shall relieve the assignor from any liability accruing hereunder prior to an assignment permitted hereunder. The Corporation agrees that it shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety, unless the Person formed by such consolidation or into which the Corporation merges or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Corporation substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America or a State thereof (the "Successor Corporation") and shall expressly assume, by written agreement signed by the Corporation and the Successor Corporation and delivered to each Party, the performance and observance of every obligation on the part of the Corporation to be performed or observed hereunder. 8.3 SHARES SUBJECT TO THIS AGREEMENT. Except as otherwise provided for -------------------------------- herein, all shares of Common Stock or Common Stock Equivalents now or hereafter owned by any of the Parties shall be subject to the terms of this Agreement including, without limitation, Common Stock acquired pursuant to the Special Management Rights. Common Stock and Common Stock Equivalents issued by the Corporation after the Effective Time that are not expressly subject to this Agreement pursuant to the terms hereof shall not be subject to this Agreement and the transferees of such Common Stock and Common Stock Equivalents shall not be Parties unless the Corporation, in connection with such issuance, elects that such Common Stock or Common Stock Equivalents be subject to this Agreement and promptly after such election the Corporation notifies the Parties of such election. -23- 8.4 LEGENDS. Each certificate for Common Stock and each agreement ------- representing Common Stock Equivalents that are subject to this Agreement shall include a legend in substantially the following form: THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 30, 1995, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. 8.5 NOTICES. Any and all notices, designations, consents, offers, ------- acceptances, or other communications provided for herein (each a "Notice") shall be given in writing by personal delivery, overnight courier, telegram, or telecopy which shall be addressed, or sent, to the respective addresses or telecopy numbers as follows (or such other address or telecopy number as the Corporation or any Party may specify for itself to the Corporation and all other Parties by Notice): The Corporation: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Chief Financial Officer Telecopy No. 214-265-4777 Telephone No. 214-265-4751 With a copy to: Enron Corp. 1400 Smith Houston, Texas 77002 Attention: Keith Power/Brenda McGee, Specialist - 28th Floor Telecopy No. 713-646-3602 Telephone No. 713-853-5259 Each Party: To such address or telecopy number of such Party as is set forth on Schedule I hereto or, if such address is not so ---------- provided, to such Party's address as is reflected on the stock transfer records of the Corporation at the time in question. All Notices shall be deemed effective, delivered and received (a) if given by personal delivery, when such Notice is personally delivered at the address specified above; (b) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (c) if given by overnight courier, on the business day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (d) if given by telegram, when such Notice is delivered at the address specified above. -24- 8.6 COUNTERPARTS. This Agreement may be executed in two or more ------------ counterparts and each counterpart shall be deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. 8.7 HEADINGS. Headings contained in this Agreement are inserted only as a -------- matter of convenience and in no way define, limit, or extend the scope or intent of this Agreement or any provisions hereof. 8.8 CHOICE OF LAW. This Agreement shall be governed by the internal laws ------------- of the State of Delaware without regard to the principles of conflicts of laws thereof. 8.9 ENTIRE AGREEMENT. This Agreement contains the entire understanding of ---------------- the parties hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. 8.10 CUMULATIVE RIGHTS. The rights of the Parties and the Corporation ----------------- under this Agreement are cumulative and in addition to all similar and other rights of the Parties and the Corporation under other agreements. 8.11 NO PARTNERSHIP. No term or provision of this Agreement shall be -------------- construed to establish any relationship of partnership, agency or joint venture between the parties hereto. 8.12 NUMBER; GENDER; WITHOUT LIMITATION; INTERPRETATION OF CERTAIN DEFINED --------------------------------------------------------------------- TERMS. Pronouns, wherever used in this Agreement, and of whatever gender, shall - ----- include Persons of every kind and character, and the singular shall include the plural whenever and as often as may be appropriate. Any reference herein to "including" and words of similar import refer to "including without limitation." When reference is made herein to one or more Groups or other specified Parties or Persons, the determination as to which Persons are thereby referenced shall be made as of the time in question. Unless the context otherwise requires, any reference herein to "or" shall also include "and," so that "A or B" shall include the possibilities of A, B, and A and B. 8.13 SEVERABILITY. In the event any one or more of the provisions ------------ contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which approximates as nearly as possible that of the invalid, illegal or unenforceable provisions. 8.14 THIRD PERSON. Nothing herein expressed or implied is intended or ------------ shall be construed to confer upon or to give any Person not a party hereto any rights or remedies under or by reason of this Agreement. 8.15 U.S. CURRENCY. All payments required or permitted hereunder shall be ------------- paid in U.S. dollars or other lawful currency constituting legal tender of the United States of America. -25- 8.16 INDEMNIFICATION. Each Party and the Corporation (the "Indemnitor") --------------- hereby agrees to protect, defend, indemnify and hold harmless all other Parties and their respective successors, heirs and assigns (the "Indemnitees") against any and all claims, lawsuits, damages and other liabilities and expenses (including reasonable attorneys' fees) suffered or incurred by any of the Indemnitees and which arise out of any breach by the Indemnitor of its representations, warranties, covenants or other obligations hereunder. 8.17 SPOUSAL CONSENTS. Each Management Investor represents and warrants ---------------- that his or her spouse is the Management Investor Spouse set forth next to such Management Investor's name on the execution pages hereof. Each Management Investor Spouse represents and warrants, and each Management Investor represents and warrants with respect to his or her spouse, that such Management Investor Spouse has duly and validly executed and delivered this Agreement. Each spouse of a Party, including each Management Investor Spouse, that executes and delivers to the Corporation, in his or her capacity as a spouse, this Agreement, a counterpart of this Agreement or an Adoption Agreement, agrees that such execution and delivery constitutes an acknowledgment that such spouse is fully aware of, understands and fully consents and agrees to the provisions of this Agreement and its binding effect upon any community property interests or similar marital property interests in the Common Stock or Common Stock Equivalents he or she may now or hereafter own, agrees that the termination of his or her marital relationship with any Party for any reason shall not have the effect of removing any Common Stock or Common Stock Equivalents otherwise subject to this Agreement from the coverage hereof and agrees that such spouse shall have no rights of any nature hereunder (including any preferential purchase rights or preemptive rights) unless and until such spouse becomes a Party in accordance with this Agreement. Furthermore, each individual Party agrees to cause his or her spouse (and any subsequent spouse) to execute and deliver to the Corporation a counterpart of this Agreement, or an Adoption Agreement. 8.18 CERTAIN RECORDS. In order to effectuate the purposes of this --------------- Agreement, the Corporation (i) shall maintain a record of the names and addresses of the Parties and the number of shares of Common Stock and Common Stock Equivalents owned by the Parties and each Group, (ii) at the request of any Party, it will provide such Party with a copy of the record, (iii) shall promptly notify the Parties in the event the Corporation receives notice that any shares of Common Stock or Common Stock Equivalents have been (or have purported to be) Transferred by or to any Party (including the name of the transferor and transferee or purported transferor or transferee and the number of shares transferred or purported to be transferred), (iv) shall not register, in the name of any Person, any shares subject to this Agreement unless the transferor and transferee have complied with the terms of this Agreement including Section 4.5 and (v) shall not issue to any Person any stock certificate representing shares subject to this Agreement or any agreement representing Common Stock Equivalents unless in each case the legend referred to in Section 8.4 hereof is set forth thereon. 8.19 ARBITRATION. Any and all claims, demands, causes of action, ----------- disputes, controversies and other matters in question arising out of or relating to this Agreement, the alleged breach thereof, or in any way relating to the subject matter of this Agreement ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding -26- arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator (with all Management Investors parties to the dispute considered to be one party) and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. The arbitrators shall have no authority to award punitive (including without limitation any exemplary damages, treble damages, or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) under any circumstances that exceed, with respect to any claim (regardless of the number of Persons asserting such Claim or the number of Persons against whom such Claim is asserted), the lesser of (i) the amount equal to the amount of actual damages awarded, if any and (ii) $500,000, regardless of whether such damages in excess of such amount may be available under applicable law or otherwise, the parties hereto hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any Claims. The arbitrators shall be entitled to award costs of the arbitration and attorney's fees as they deem appropriate. Prior to the institution of a Claim under this Agreement by any Person, such Person shall provide to the Corporation and all other Parties to this Agreement a written notice specifying the nature and basis of the Claim. The Persons who are the subject of any Claim shall be given thirty (30) days to cure any breach before any Claim is filed. It is further agreed that prior to such Claims being submitted to the arbitrators on such Claims, the parties to the Claims shall attempt to resolve such Claims through non-binding mediation of such Claims. -27- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written, but effective for all purposes as of the Effective Time. CODA ACQUISITION, INC. By:___________________________________ Name: C. John Thompson Title: Vice President JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP By: Enron Capital Management Limited Partnership, its general partner By: Enron Capital Corp., its general partner By: _________________________________ Name: C. John Thompson Title: Agent and Attorney-in-Fact MANAGEMENT INVESTOR SPOUSES: MANAGEMENT INVESTORS: __________________________ ______________________________________ Debbie Bodenhamer Randell A. Bodenhamer __________________________ ______________________________________ Karan Callaway Joe I. Callaway __________________________ ______________________________________ Cathy Choisser J. David Choisser __________________________ ______________________________________ Ryan Freeman J. W. Freeman -28- __________________________ ________________________________ Sharon Harney Roy G. Harney __________________________ ________________________________ Jill Henderson Grant W. Henderson __________________________ ________________________________ Jana Hensley Jarvis A. Hensley __________________________ ________________________________ Karen Jackson Chris A. Jackson __________________________ ________________________________ Naydene Johnson Jarl P. Johnson ________________________________ Douglas H. Miller __________________________ ________________________________ Donnetta Nelson Gary M. Nelson __________________________ ________________________________ Betty Scoggins Gary R. Scoggins __________________________ ________________________________ Karen Seaman Claude A. Seaman __________________________ ________________________________ Patricia Spencer Jay W. Spencer, III __________________________ ________________________________ Kate Studdard Scott E. Studdard -29- EXHIBIT "A" ADOPTION AGREEMENT (form) This Adoption Agreement ("Adoption") is executed pursuant to the terms of the Stockholders Agreement dated as of October __, 1995, a copy of which is attached hereto and is incorporated herein by reference (the "Stockholders Agreement"), by the transferee ("Transferee") executing this Adoption. By the execution of this Adoption, the Transferee agrees as follows: 1. Acknowledgment; Representations and Warranties. ____________________ ---------------------------------------------- ("Transferee") acknowledges that Transferee is acquiring _______ [number of shares to be acquired to be inserted] shares of the Common Stock from _______________, a Party, subject to the terms and conditions of the Stockholders Agreement. Capitalized terms used herein without definition are defined in the Stockholders Agreement and are used herein with the same meanings set forth therein. Transferee represents and warrants to the Corporation and the Parties that (i) Transferee has full power and authority to execute and deliver this Adoption and the execution and delivery by such Transferee of this Adoption have been duly authorized by all necessary action; (ii) this Adoption has been duly and validly executed and delivered by the Transferee and constitutes the binding obligation of the Transferee, enforceable against the Transferee in accordance with its terms; and (iii) the Transferee owns _______ shares of Common Stock in addition to those being acquired as hereinabove referenced. 2. Agreement. Transferee (i) agrees that shares of the Common Stock --------- acquired by Transferee, and shares of Common Stock and certain other securities that are currently owned or that may be acquired by Transferee in the future, shall be bound by and subject to the terms of the Stockholders Agreement pursuant to the terms thereof, and (ii) hereby adopts the Stockholders Agreement with the same force and effect as if he were originally a party thereto. 3. Notice. Any notice required as permitted by the Stockholders ------ Agreement shall be given to Transferee at the address listed beside Transferee's signature below. 4. Joinder. The spouse of the undersigned Transferee, if applicable, ------- executes this Adoption to acknowledge its fairness and that this Adoption is in such spouse's best interests, and to agree that such spouse's community interest, if any, in the shares of Common Stock and other securities referred to above and in the Stockholders Agreement shall be subject to the terms of the Stockholders Agreement. EXECUTED AND DATED this the ____ day of _____________, 19___. TRANSFEREE: A-1 By:______________________________________ Name:____________________________________ Address:_________________________________ _________________________________ SPOUSE: By:_____________________________________ Name:___________________________________ Agreed to on behalf of the Corporation and all Parties pursuant to Section 4.5 of the Stockholders Agreement. Coda Energy, Inc. (for itself and the Parties) By:_____________________________________ Name:___________________________________ Title:__________________________________ A-2 TABLE OF CONTENTS
PAGE ---- ARTICLE I CERTAIN TERMS; REPRESENTATIONS AND WARRANTIES - ------------------------------ 1.1 CERTAIN TERMS.............................................................1 ------------- 1.2 REPRESENTATIONS AND WARRANTIES............................................8 ------------------------------ ARTICLE II CERTAIN MATTERS --------------- 2.1 CERTAIN ACTIVITIES OF THE PARTIES......................................... 9 ----------------------------------- 2.2 ANNUAL MEETINGS........................................................... 9 ----------------------------------- 2.3 REPORTING OBLIGATIONS..................................................... 9 ----------------------------------- 2.4 CERTAIN EMPLOYEE MATTERS.................................................. 9 ----------------------------------- ARTICLE III CERTAIN STOCK PURCHASE RIGHTS ----------------------------- 3.1 CERTAIN STOCK PURCHASE RIGHTS............................................. 9 ----------------------------- ARTICLE IV RESTRICTIONS ON TRANSFERS ------------------------- 4.1 GENERAL RULE..............................................................10 ------------ 4.2 TRANSFERS NOT SUBJECT TO PREFERENTIAL RIGHT...............................10 ------------------------------------------- 4.3 TRANSFERS SUBJECT TO PREFERENTIAL RIGHT...................................11 --------------------------------------- 4.4 PROCEDURES WITH RESPECT TO TRANSFERS SUBJECT TO SECTION 4.3...............13 ----------------------------------------------------------- 4.5 CONDITIONS TO PERMITTED TRANSFERS; CONTINUED APPLICABILITY OF AGREEMENT...16 ----------------------------------------------------------------------- 4.6 RESTRICTIONS ON OTHER AGREEMENTS..........................................17 -------------------------------- 4.7 EFFECT OF DISTRIBUTIONS AND CERTAIN TRANSACTIONS..........................17 ------------------------------------------------ 4.8 SPECIAL JEDI TRANSFER RESTRICTION.........................................17 --------------------------------- ARTICLE V CERTAIN TAGALONG AND PUT RIGHTS ------------------------------- 5.1 TAGALONG RIGHTS...........................................................17 --------------- 5.2 PUT RIGHTS................................................................18 ---------- ARTICLE VI SPECIAL MANAGEMENT RIGHTS ------------------------- 6.1 GRANT OF RIGHTS...........................................................19 --------------- 6.2 TRIGGER EVENT.............................................................19 -------------
i 6.3 AMOUNT OF PROCEEDS..................................................19 ------------------ 6.4 PAYMENT OF CASH OR TRANSFER OF COMMON STOCK PURSUANT TO SPECIAL --------------------------------------------------------------- MANAGEMENT RIGHTS -----------------...................................................20 6.5 TERMINATION OF MANAGEMENT INVESTOR..................................22 ---------------------------------- 6.6 OTHER EMPLOYEE INVESTORS............................................23 ------------------------ 6.7 SUBSEQUENT HOLDERS OF COMMON STOCK..................................23 ---------------------------------- ARTICLE VII TERMINATION ----------- 7.1 TERMINATION.........................................................23 ----------- ARTICLE VIII MISCELLANEOUS ------------- 8.1 AMENDMENT; WAIVERS.................................................23 ------------------ 8.2 ASSIGNMENT.........................................................24 ---------- 8.3 SHARES SUBJECT TO THIS AGREEMENT...................................24 -------------------------------- 8.4 LEGENDS............................................................24 ------- 8.5 NOTICES............................................................25 ------- 8.6 COUNTERPARTS.......................................................26 ------------ 8.7 HEADINGS...........................................................26 -------- 8.8 CHOICE OF LAW......................................................26 ------------- 8.9 ENTIRE AGREEMENT...................................................26 ---------------- 8.10 CUMULATIVE RIGHTS..................................................26 ----------------- 8.11 NO PARTNERSHIP.....................................................26 -------------- 8.12 NUMBER; GENDER; WITHOUT LIMITATION; INTERPRETATION OF CERTAIN DEFINED --------------------------------------------------------------------- TERMS..............................................................26 8.13 SEVERABILITY.......................................................26 ------------ 8.14 THIRD PERSON.......................................................26 ------------ 8.15 U.S. CURRENCY......................................................26 ------------- 8.16 INDEMNIFICATION....................................................27 --------------- 8.17 SPOUSAL CONSENTS...................................................27 ---------------- 8.18 CERTAIN RECORDS....................................................27 --------------- 8.19 ARBITRATION........................................................27 -----------
Exhibits and Schedules - ---------------------- Schedule I - Parties Schedule II - Fair Market Value Calculation Schedule II-A - Sample Fair Market Value Calculation Schedule III - Special Management Rights Schedule III-A - Sample Special Management Rights Calculation Schedule IV - Peer Companies Schedule V - Factors Exhibit A - Adoption Agreement ii EX-99.3 5 SUBSCRIPTION AGREEMENT EXHIBIT 99.3 ================================================================================ SUBSCRIPTION AGREEMENT among CODA ACQUISITION, INC. and THE MANAGEMENT INVESTORS dated October 30, 1995 ================================================================================ TABLE OF CONTENTS
ARTICLE I CERTAIN TERMS............................................................. 1 1.1 Certain Terms................................................... 1 ------------- ARTICLE II TENDER OF COMPANY COMMON STOCK; OPTION AGREEMENT; SUBSCRIPTION ------------------------------ OF SHARES............................................................. 2 2.1 Contribution of Company Common Stock............................ 2 ------------------------------------ 2.2 Option Agreement................................................ 2 ---------------- 2.3 Subscription of Shares for Note................................. 2 ------------------------------- 2.4 Subscription of Shares for Cash................................. 3 ------------------------------- ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF MANAGEMENT INVESTOR.......... 3 3.1 Company Common Stock and Company Options........................ 3 ---------------------------------------- 3.2 Power and Authority; Enforceability............................. 3 ----------------------------------- 3.3 Stockholders Agreement.......................................... 3 ---------------------- 3.4 Investment Representations...................................... 4 -------------------------- 3.5 Additional Representations...................................... 4 -------------------------- 3.6 Equity Contribution and Financing............................... 4 --------------------------------- 3.7 Fees............................................................ 5 ---- ARTICLE IV MISCELLANEOUS............................................................. 5 4.1 Amendment; Waivers.............................................. 5 ------------------ 4.2 Assignment...................................................... 5 ---------- 4.3 Notices......................................................... 6 ------- 4.4 Counterparts.................................................... 6 ------------ 4.5 Headings........................................................ 7 -------- 4.6 Choice of Law................................................... 7 ------------- 4.7 Entire Agreement................................................ 7 ---------------- 4.8 Cumulative Rights............................................... 7 ----------------- 4.9 No Partnership.................................................. 7 -------------- 4.10 Number; Gender; Without Limitation.............................. 7 ---------------------------------- 4.11 Severability.................................................... 7 ------------ 4.12 Third Person.................................................... 7 ------------ 4.13 Arbitration..................................................... 7 ----------- 4.14 Termination..................................................... 8 ----------- 4.15 Expenses........................................................ 8 --------
Schedule I Participation Schedule Exhibit A Nonstatutory Stock Option Agreement Exhibit B Form of Promissory Note Exhibit C Form of Security Agreement Exhibit D Debt Term Sheet SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT (this "Agreement") is entered into as of October 30, 1995, among Coda Acquisition, Inc., a Delaware corporation ("Sub"), and the persons listed on Schedule I hereto (the "Management Investors"). ---------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, concurrently with the execution and delivery of this Agreement, Sub, Joint Energy Development Investments Limited Partnership, a Delaware limited partnership ("JEDI"), and Coda Energy, Inc., a Delaware corporation (the "Company"), are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Sub with and into the Company (the "Merger"). WHEREAS, the Management Investors are the owners and holders of (a) certain Company Common Stock (as defined in the Merger Agreement) and (b) the Specified Options and Specified Warrants (each as defined in the Merger Agreement). WHEREAS, each Management Investor desires to (a) contribute to Sub certain of the Company Common Stock owned by such Management Investor, to provide for the termination of the Specified Options and Specified Warrants owned by such Management Investor as of the Effective Time (as defined in the Merger Agreement), and/or to purchase shares of common stock of Sub ("Sub Common Stock") and (b) to enter into this Agreement, pursuant to which such Management Investor will (i) enter into an option agreement with Sub whereby the Management Investor will be granted options (the "Post-Merger Options") to acquire common stock of the Surviving Corporation (as defined in the Merger Agreement) and/or (ii) agree to contribute to Sub shares of Company Common Stock in exchange for shares of Sub Common Stock and/or (iii) subscribe for and purchase Sub Common Stock, which Sub Common Stock will be converted, pursuant to the Merger, into common stock of the Surviving Corporation. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I CERTAIN TERMS ------------- 1.1 CERTAIN TERMS. Capitalized terms used but not defined herein ------------- shall have the meanings given such terms in the Merger Agreement. ARTICLE II TENDER OF COMPANY COMMON STOCK; OPTION AGREEMENT; SUBSCRIPTION OF SHARES ---------------------------------------- 2.1 CONTRIBUTION OF COMPANY COMMON STOCK. Each Management Investor ------------------------------------ hereby agrees to contribute to Sub those shares of the Company Common Stock owned by such Management Investor, if any, described on Schedule I - Part C ------------------- attached hereto. Subject to the satisfaction of the conditions to the obligations of the parties to the Merger Agreement to effect the Merger or the waiver thereof by the applicable parties to the Merger Agreement in accordance therewith, such Company Common Stock shall be deemed to be contributed to Sub effective immediately prior to the Effective Time. At the Closing, and effective immediately prior to the Effective Time, Sub shall issue the shares of Sub Common Stock indicated on Schedule I - Part C to each Management Investor in ------------------- consideration for such Company Common Stock. 2.2 OPTION AGREEMENT. Each Management Investor agrees and consents, ---------------- with respect to the Specified Options and Specified Warrants that such Management Investor owns, if any, as described on Schedule I - Part A attached ------------------- hereto, not to exercise any such Specified Options or Specified Warrants prior to the Effective Time and that such Specified Options and Specified Warrants shall, as of the Effective Time, be canceled without exercise and without payment of consideration and shall cease to exist. At the Closing, Sub, the Company, and each of the applicable Management Investors shall enter into a Nonstatutory Stock Option Agreement in the form attached hereto as Exhibit A (the "Option Agreement") providing that each Management Investor listed on Schedule I attached hereto will have, from and after the Effective Time, the - ---------- right to acquire the number of shares of common stock, par value $.01 per share ("Post-Merger Common Stock"), of the Surviving Corporation specified on such Schedule I - Part A. - ------------------- 2.3 SUBSCRIPTION OF SHARES FOR NOTE. Subject to the satisfaction of ------------------------------- the conditions to the obligations of the parties to the Merger Agreement to effect the Merger or the waiver thereof by the applicable parties to the Merger Agreement in accordance therewith, (a) each Management Investor listed on Schedule I - Part B attached hereto hereby subscribes for and agrees to - ------------------- purchase, and Sub hereby agrees to sell to such Management Investor, the number of shares of Sub Common Stock set forth on such Schedule I - Part B for the ------------------- purchase price of $100.00 per share, (b) at the Closing, such Management Investor shall execute and deliver to Sub (i) a Promissory Note in the form attached hereto as Exhibit B in an original principal amount equal to the --------- product of the number of shares of Sub Common Stock being subscribed to by such Management Investor and the per-share purchase price (the "Promissory Note") and (ii) a Security Agreement in the form attached hereto as Exhibit C covering the --------- shares of Sub Common Stock being subscribed to by such Management Investor (the "Security Agreement"), with each of the Promissory Note and the Security Agreement being effective immediately prior to the Effective Time, and (c) at the Closing and effective immediately prior to the Effective Time, Sub shall issue the shares of Sub Common Stock being subscribed to by such Management Investor in the name of such Management Investor and shall retain the same as security for such Management Investor's obligations under the Promissory Note in accordance with the terms and conditions of the Security Agreement. -2- 2.4 SUBSCRIPTION OF SHARES FOR CASH. Subject to the satisfaction of ------------------------------- the conditions to the obligations of the parties to the Merger Agreement to effect the Merger or the waiver thereof by the applicable parties to the Merger Agreement in accordance therewith, (a) each Management Investor listed on Schedule I - Part D attached hereto hereby subscribes for and agrees to - ------------------- purchase, and Sub hereby agrees to sell to such Management Investor, the number of shares of Sub Common Stock set forth on such Schedule I - Part D for the cash ------------------- purchase price of $100.00 per share, (b) at the Closing, such Management Investor shall deliver to Sub cash (by check or wire transfer) in an amount equal to the product of the number of shares of Sub Common Stock being subscribed to by such Management Investor and the per-share purchase price, and (c) at the Closing and effective immediately prior to the Effective Time, Sub shall issue the shares of Sub Common Stock being subscribed to by such Management Investor in the name of such Management Investor and deliver same to him. ARTICLE III REPRESENTATIONS, WARRANTIES AND ------------------------------- COVENANTS OF MANAGEMENT INVESTOR -------------------------------- 3.1 COMPANY COMMON STOCK AND COMPANY OPTIONS. Each Management ---------------------------------------- Investor hereby represents and warrants to Sub that (a) the Company Common Stock, Specified Options, and Specified Warrants described on Schedule I, if ---------- any, as being owned by such Management Investor are held of record by such Management Investor, that such Company Common Stock is fully paid and nonassessable, and that, at the time same are contributed hereunder, such Management Investor will own such Company Common Stock, Specified Options and Specified Warrants free and clear of all encumbrances and (b) such Management Investor has not appointed or granted any proxy or power of attorney or entered into any voting agreement with respect to the Company Common Stock, if any, owned by such Management Investor. Each Management Investor shall not sell, assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of, or appoint or grant any proxy or power of attorney or enter into any voting agreement with respect to, any of the Company Common Stock owned by such Management Investor at any time prior to the Effective Time. 3.2 POWER AND AUTHORITY; ENFORCEABILITY. Each Management Investor ----------------------------------- hereby represents and warrants to Sub that (a) such Management Investor has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby and (b) this Agreement has been duly and validly executed and delivered by such Management Investor and constitutes the binding obligation thereof, enforceable against such Management Investor in accordance with its terms. 3.3 STOCKHOLDERS AGREEMENT. Concurrently with the execution hereof, ---------------------- each Management Investor and his or her spouse have executed the Stockholders Agreement dated as of the date hereof among Sub and the Management Investors (the "Stockholders Agreement"). Each Management Investor agrees and acknowledges that the Sub Common Stock, if any, being subscribed to hereunder by such Management Investor, the Post-Merger Common Stock issued in exchange therefor and the Post-Merger Common Stock issuable upon exercise of such Management Investor's options under such Management -3- Investor's Option Agreement, if any (collectively, the "Acquired Securities"), are in each case subject to the terms of the Stockholders Agreement. 3.4 INVESTMENT REPRESENTATIONS. Each Management Investor represents -------------------------- and warrants to Sub that (a) he is acquiring the Acquired Securities being acquired hereunder or under such Management Investor's Option Agreement without a view to the distribution thereof except as permitted by the Securities Act of 1933, as amended, and the General Rules and Regulations thereunder (the "Act"), (b) he has been advised that the Sub Common Stock has not been and the other Acquired Securities will not be registered under the Act, the Acquired Securities must be held indefinitely and such Management Investor must continue to bear the economic risk of the investment in the Acquired Securities unless they are subsequently registered under the Act or an exemption from such registration is available, and no public market for the Acquired Securities can be anticipated, (c) he is familiar with the business and financial condition, properties, operations and prospects of Sub and the Company and the terms and the effects of the Merger, (d) he has been given the opportunity to obtain any information or documents and to ask questions and receive answers about Sub and the Company and the business and prospects of Sub and the Company that he deems necessary to evaluate the merits and risks related to his investment in the Acquired Securities, including, without limitation, information, documents, questions and answers related to the Merger, and no representations concerning such matters or any other matters have been made to the Management Investor, (e) his financial condition is such that he can afford to bear the economic risk of holding the unregistered Acquired Securities for an indefinite period of time and he has adequate means for providing for his current needs and personal contingencies, and (f) his knowledge and experience in financial and business matters are such that he is capable of evaluating the merits and risks of his purchase of the Acquired Securities as contemplated by this Agreement. Each Management Investor acknowledges that this Agreement constitutes, and accordingly the Acquired Securities are to be issued pursuant to, either (i) a written compensatory or benefit plan satisfying the requirements of Rule 701 promulgated under the Act or (ii) another exemption from the registration requirements of federal and state securities laws. 3.5 ADDITIONAL REPRESENTATIONS. Each Management Investor hereby -------------------------- represents and warrants to Sub that such Management Investor has been represented by counsel in connection with the negotiation of this Agreement and such Management Investor's execution and delivery of this Agreement and that such Management Investor has discussed with such Management Investor's counsel the legal effect of this Agreement and the rights and obligations arising hereunder. Each Management Investor hereby acknowledges that neither Sub nor any other party to the Merger Agreement nor any of their affiliates or advisors has made any representation or warranty to the Management Investor concerning the tax effects of the transactions contemplated by this Agreement. Each Management Investor also represents and warrants to Sub that such Management Investor has reviewed and approved the form of Certificate of Incorporation for the Surviving Corporation attached to the Merger Agreement and acknowledges that the same are in form and substance acceptable to such Management Investor. 3.6 EQUITY CONTRIBUTION AND FINANCING. Each Management Investor --------------------------------- acknowledges that, subject to the consummation of the Merger, (a) JEDI will make a capital contribution to Sub at or prior to the Effective Time in the amount of $90 million in consideration for common stock of Sub that immediately after the Effective Time will represent 94.94% of the outstanding common -4- stock of the Surviving Corporation on a fully diluted basis, (b) JEDI will procure for Sub, or lend or cause an Affiliate of JEDI to lend to Sub, debt up to an aggregate principal amount of $100,000,000 on the terms and conditions specified in the term sheet attached hereto as Exhibit D (and such other terms --------- and conditions as are not inconsistent therewith), and (c) that other than the capital contributions referred to in (a) and the debt referred to in (b), JEDI has no obligation at any time prior to or after the Effective Time to contribute capital to, lend funds to, or otherwise invest any sums in Sub, the Company, or the Surviving Corporation except to the extent otherwise provided in the Merger Agreement. 3.7 FEES. Each Management Investor hereby acknowledges and agrees ---- that. subject to and after the consummation of the Merger and the Company's receipt of all of the amounts specified in Section 3.6, Sub has agreed to pay to ECT Securities Corp., an indirect wholly-owned subsidiary of Enron Corp., (a) a transaction fee in the amount of $1.8 million in connection with the Merger (based on capital contributions of not less than $90 million by Persons other than the Management Investors), (b) a fee as provided in Exhibit D regarding the placement of any subordinated debt placed to finance the transactions contemplated by the Merger Agreement or this Agreement upon the issuance of such debt, (c) a fee in the amount of up to 2% of the cash received by the Company from the grantee of any production payment entered into by the Company that is arranged or procured by ECT Securities Corp. at the closing of such transaction, and (d) such additional fees as are specified in Exhibit D attached hereto. --------- ARTICLE IV MISCELLANEOUS ------------- 4.1 AMENDMENT; WAIVERS. This Agreement may only be altered, ------------------ supplemented, amended or waived by the written consent of (a) Sub and (b) either (i) Douglas H. Miller and the other Management Investors who will receive at least one-third of the Fully-Diluted Common Stock (as defined in the Stockholders Agreement) to be issued to all Management Investors other than Douglas H. Miller pursuant to this Agreement and the Option Agreements or (ii) Management Investors other than Douglas H. Miller who will receive a majority of the Fully-Diluted Common Stock to be issued to all Management Investors other than Douglas H. Miller pursuant to this Agreement and the Option Agreements; provided, however, that in no event shall any amendment impose any additional material obligation on any party hereto without such party's written consent; provided further, however, that (A) any party hereto may (without the consent of any other Person) waive, in writing, any obligation owed to it hereunder by any other party hereto and (B) any party hereto may (without the consent of any other Person) waive, in writing, any right it has hereunder. Any waiver permitted hereunder may be made prospectively or retroactively. 4.2 ASSIGNMENT. The terms and conditions of this Agreement shall ---------- inure to the benefit of and be binding upon the parties hereto and their permitted successors and assigns; provided, however, that no party hereto shall have the right to assign this Agreement without the consent of the other parties hereto; and provided further that this Agreement will terminate as to any Management Investor if such Management Investor dies or ceases to be employed by the Company for any reason prior to the Effective Time, any Company Common Stock, contributed to Sub by such -5- Management Investor hereunder shall be returned to such Management Investor or, if applicable, the legal representative of such Management Investor, any Option Agreement executed by such Management Investor shall terminate, and neither Sub nor such Management Investor nor, if applicable, any of the heirs, successors, or legal representatives of such Management Investor shall have any further obligations to one another hereunder. 4.3 NOTICES. Any and all notices, designations, consents, offers, ------- acceptances, or other communications provided for herein (each a "Notice") shall be given in writing by personal delivery, overnight courier, telegram, or telecopy which shall be addressed, or sent, to the respective addresses or telecopy numbers as follows (or such other address or telecopy number as any party hereto may specify for itself by Notice given in accordance with this Section 4.3): Sub: c/o Enron Corp. 1400 Smith Houston, Texas 77002 Attention: Keith Power/Brenda McGee, Specialist - 28th Floor Telecopy No. 713-646-3602 Telephone No. 713-853-5259 with a copy to: Enron Corp. 1400 Smith Houston, Texas 77002 Attention: Tim Detmering - 29th Floor Telecopy No. 713-646-3750 Telephone No. 713-853-6973 Management Investors: To the addresses or telecopy numbers set forth in Schedule I hereto for each such Management Investor. ---------- All Notices shall be deemed effective, delivered and received (a) if given by personal delivery, when such Notice is personally delivered at the address specified above; (b) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (c) if given by overnight courier, on the business day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (d) if given by telegram, when such Notice is delivered at the address specified above. 4.4 COUNTERPARTS. This Agreement may be executed in two or more ------------ counterparts, each of which counterparts shall be deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. 4.5 HEADINGS. Headings contained in this Agreement are inserted -------- only as a matter of convenience and in no way define, limit, or extend the scope or intent of this Agreement or any provisions hereof. -6- 4.6 CHOICE OF LAW. This Agreement shall be governed by the internal ------------- laws of the State of Delaware without regard to the principles of conflicts of laws thereof. 4.7 ENTIRE AGREEMENT. This Agreement contains the entire ---------------- understanding of the parties hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. 4.8 CUMULATIVE RIGHTS. The rights of the parties hereto under this ----------------- Agreement are cumulative and in addition to all similar and other rights of the parties under other agreements. 4.9 NO PARTNERSHIP. No term or provision of this Agreement shall be -------------- construed to establish any relationship of partnership, agency or joint venture among the parties hereto. 4.10 NUMBER; GENDER; WITHOUT LIMITATION. Pronouns, wherever used in ---------------------------------- this Agreement, and of whatever gender, shall include Persons of every kind and character, and the singular shall include the plural whenever and as often as may be appropriate. Any reference herein to "including" and words of similar import refer to "including without limitation." 4.11 SEVERABILITY. In the event any one or more of the provisions ------------ contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which approximates as nearly as possible that of the invalid, illegal or unenforceable provisions. 4.12 THIRD PERSON. Nothing herein expressed or implied is intended ------------ or shall be construed to confer upon or to give any Person not a party hereto any rights or remedies under or by reason of this Agreement. 4.13 ARBITRATION. Any and all claims, demands, causes of action, ----------- disputes, controversies and other matters in question arising out of or relating to this Agreement, the alleged breach thereof, or in any way relating to the subject matter of this Agreement ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator, with all Management Investors party to the dispute considered to be one party, and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects -7- of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. The arbitrators shall have no authority to award punitive (including, without limitation, any exemplary damages, treble damages or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) under any circumstances that exceed, with respect to any Claim (regardless of the number of Persons asserting such Claim or the number of Persons against whom such Claim is asserted) the lesser of (i) the amount equal to the amount of actual damages awarded, if any and (ii) $500,000, regardless of whether such damages in excess of such amount may be available under applicable law or otherwise, the parties hereto hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any Claims. The arbitrators shall be entitled to award costs of the arbitration and attorney's fees as they deem appropriate. Prior to any Person instituting a Claim under this Agreement, such Person shall provide to the other party hereto a written notice specifying the nature and basis of the Claim. The Persons who are the subject of any Claim shall be given thirty (30) days to cure any breach before any Claim is filed. It is further agreed that prior to such Claims being submitted to the arbitrators on such Claims, the parties to the Claims shall attempt to resolve such Claims through non-binding mediation of such Claims. 4.14 TERMINATION. If the Merger Agreement is terminated in ----------- accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder; provided, however that Sub shall return to the Management Investors any Company Common Stock, Specified Options, or Specified Warrants tendered to it hereunder. 4.15 EXPENSES. Sub acknowledges that if the Merger is consummated, -------- promptly after request therefor, the Surviving Corporation shall pay or reimburse the reasonable fees and expenses of the attorneys and accountants for the Management Investors in respect of the transactions contemplated by this Agreement and the other agreements referenced in this Agreement. If the Merger is not consummated, Sub acknowledges that such fees and expenses shall be the responsibility of the Company. -8- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CODA ACQUISITION, INC. By:____________________________________________ Name: C. John Thompson Title: Vice-President MANAGEMENT INVESTORS: _______________________________________________ Randell A. Bodenhamer _______________________________________________ Joe I. Callaway _______________________________________________ J. David Choisser _______________________________________________ J. W. Freeman _______________________________________________ Roy G. Harney _______________________________________________ Grant W. Henderson _______________________________________________ Jarvis A. Hensley _______________________________________________ Chris A. Jackson -9- _______________________________________________ Jarl P. Johnson _______________________________________________ Douglas H. Miller _______________________________________________ Gary M. Nelson _______________________________________________ Gary R. Scoggins _______________________________________________ Claude A. Seaman _______________________________________________ Jay W. Spencer, III _______________________________________________ Scott E. Studdard -10- EXHIBIT A NONSTATUTORY STOCK OPTION AGREEMENT AGREEMENT made as of the ____ day of __________, 199_, between Coda Energy, Inc., a Delaware corporation (the "Company"), Coda Acquisition, Inc., a Delaware corporation ("Sub"), and ___________ ____________________________________________ ("Employee"). WHEREAS, pursuant to the option and/or warrant agreement or agreements identified on the attached Exhibit A (the "Specified Agreement," whether one or --------- more), the Company has heretofore granted to Employee one or more options and/or warrants (the "Specified Right," whether one or more) to purchase shares of common stock of the Company, par value $.02 per share ("Pre-Merger Stock"); and WHEREAS, pursuant to that certain Agreement and Plan of Merger (the "Merger Agreement") dated October 30, 1995, among the Company, Sub, and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership ("JEDI"), Sub has agreed, subject to certain conditions, to merge with and into the Company (the "Merger"), the Company will be the surviving corporation in the Merger, each share of Pre-Merger Stock will, subject to certain exceptions, be converted into the right to receive $8.00 per share, and each share of common stock of Sub will be converted into one share of common stock, par value $.01 per share, of the surviving corporation in the Merger ("Stock"); and WHEREAS, Sub, the Company and Employee desire to provide for the cancellation of the part of the Specified Right and Specified Agreement set forth under "Specified Options" on Exhibit A (the "Specified Options") upon the consummation of the Merger and the issuance in consideration therefore of a new option; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties hereto agree as follows: 1. CANCELLATION OF SPECIFIED RIGHT; ISSUANCE OF NEW OPTION. Upon the ------------------------------------------------------- effectiveness of the Merger (the "Effective Time"), the Specified Options shall be void and of no further force and effect and are hereby surrendered and relinquished by Employee and shall be canceled by the Company at the Effective Time. Subject to the cancellation of the Specified Options and the effectiveness of the Merger, Employee is hereby granted the right and option ("Option") to purchase all or any part of an aggregate of ______ shares of Stock (subject to adjustment as provided herein), on the terms and conditions set forth herein . This Option shall not be treated as an incentive stock option within the meaning of section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). Employee agrees that on and after the date hereof and prior to the earlier of the Effective Time or the termination of the Merger Agreement, Employee will not exercise, assign, or encumber the Specified Right or the Specified Agreement. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and shall have no force or effect. 2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to -------------- the exercise of this Option shall be $0.01 per share. 3. EXERCISE OF OPTION. Subject to the earlier expiration of this ------------------ Option as herein provided, this Option may be exercised, by written notice to the Company at its principal executive office addressed to the attention of its Chief Executive Officer, at any time and from time to time after the Effective Time. This Option may be exercised only while Employee remains an employee of the Company and will terminate and cease to be exercisable upon Employee's termination of employment with the Company, except that: (a) If Employee's employment with the Company terminates by reason of disability (within the meaning of section 22(e)(3) of the Code), this Option may be exercised by Employee (or Employee's estate or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Employee) at any time during the period of six months following such termination. (b) If Employee dies while in the employ of the Company, Employee's estate, or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Employee, may exercise this Option at any time during the period of six months following the date of Employee's death. (c) If Employee's employment with the Company terminates for any reason other than as described in (a) or (b) above, this Option may be exercised by Employee at any time during the period of three months following such termination, or by Employee's estate (or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Employee) during a period of six months following Employee's death if Employee dies during such three-month period. This Option shall not be exercisable in any event after the expiration of ten years from the date hereof. The purchase price of shares as to which this Option is exercised shall be paid in full at the time of exercise in cash (including check, bank draft or money order payable to the order of the Company). No fraction of a share of Stock shall be issued by the Company upon exercise of an Option or accepted by the Company in payment of the purchase price thereof; rather, the number of shares of Stock subject to this Option shall be rounded down to the nearest whole share. Unless and until a certificate or certificates representing such shares shall have been issued by the Company to Employee, Employee (or the person permitted to exercise this Option in the event of Employee's death) shall not be or have any of the rights or privileges of a stockholder of the Company with respect to shares acquirable upon an exercise of this Option. 4. RESTRICTIONS ON TRANSFERS; STOCKHOLDERS AGREEMENT. Except as ------------------------------------------------- otherwise provided in the Stockholders Agreement (as defined herein), this Option and all rights granted -2- hereunder shall not be transferable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or the rules thereunder, and shall be exercisable during Employee's lifetime only by Employee or Employee's guardian or legal representative. This Option and all shares of Stock acquired pursuant to an exercise of this Option shall be subject to the terms of that certain Stockholders Agreement dated October 30, 1995, among the Sub and certain of its stockholders, as the same may be amended or restated from time to time (the "Stockholders Agreement"). Employee agrees that, as a condition to acquiring Stock pursuant to an exercise of this Option, Employee (or the person permitted to exercise this Option in the event of Employee's death or incapacity), and the spouse, if any, of Employee will execute and deliver to the Company such documents and instruments as the Company, in its discretion, may require to evidence such person's agreement to be bound by the terms of the Stockholders Agreement. 5. WITHHOLDING OF TAX. To the extent that the exercise of this ------------------ Option or the disposition of shares of Stock acquired by exercise of this Option results in compensation income to Employee for federal or state income tax purposes and as a condition to the exercise of this Option, Employee shall deliver to the Company at the time of such exercise or disposition such amount of money as the Company may require to meet its withholding obligation under applicable tax laws or regulations. If Employee fails to do so and the Company nonetheless elects to permit such exercise, the Company is authorized to satisfy any such withholding requirement out of any cash or shares of Stock distributable to Employee upon such exercise and to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income (with Stock having such value for such purpose as shall be determined in accordance with the Stockholders Agreement). 6. STATUS OF STOCK. Employee understands that at the time of the --------------- execution of this Agreement the shares of Stock to be issued upon exercise of this Option have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities law, and that the Company does not currently intend to effect any such registration. Until the shares of Stock acquirable upon the exercise of the Option have been registered for issuance under the Act, the Company will not issue such shares unless the Company receives advice of legal counsel, who shall be satisfactory to the Company, to the effect that the proposed issuance of such shares to such Option holder may be made without registration under the Act. In the event exemption from registration under the Act is available upon an exercise of this Option, Employee (or the person permitted to exercise this Option in the event of Employee's death), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may require to assure compliance with applicable securities laws. Employee agrees that the shares of Stock which Employee may acquire by exercising this Option shall be acquired for investment without a view to distribution, within the meaning of the Act, and shall not be sold, transferred, assigned, pledged or hypothecated in the absence of an effective registration statement for the shares under the Act and applicable state securities laws or an applicable exemption from the registration requirements of the Act and any applicable state securities laws. Employee also agrees that the shares of Stock which Employee may acquire by exercising this Option will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable securities laws, whether federal or state. -3- In addition, Employee agrees (a) that the certificates representing the shares of Stock purchased under this Option may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (b) that the Company may refuse to register the transfer of the shares of Stock purchased under this Option on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (c) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under this Option. 7. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Employee ----------------------- shall be considered to be in the employment of the Company as long as Employee remains an employee of either the Company or subsidiary corporation (as defined in section 424 of the Code) of the Company, or a corporation or subsidiary of such corporation assuming or substituting a new option for this Option. 8. BINDING EFFECT. This Agreement shall be binding upon and inure to -------------- the benefit of any successors to the Company and all persons lawfully claiming under Employee. 9. RECAPITALIZATION OR REORGANIZATION. (a) The existence of the ---------------------------------- Option granted hereunder shall not affect in any way the right or power of the Board of Directors of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. (b) The shares with respect to which the Option is granted are shares of Stock as constituted immediately after the Effective Time, but if, and whenever, prior to the expiration of this Option, the Company shall effect a subdivision or consolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number of shares of Stock with respect to which this Option may thereafter be exercised (i) in the event of an increase in the number of outstanding shares shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per share shall be proportionately increased. (c) If the Company recapitalizes, reclassifies its capital stock, or otherwise changes its capital structure by way of merger or otherwise (a "recapitalization"), the number and class of shares of Stock covered by this Option shall be adjusted so that this Option shall thereafter cover the number and class of shares of stock and securities to which Employee would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the Employee had been the holder of record of the number of shares of Stock then covered by this Option. If (i) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company), (ii) the Company sells, leases or exchanges all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company), -4- or (iii) the Company is to be dissolved and liquidated, then the number and class of shares of Stock covered by this Option shall be adjusted so that this Option shall thereafter cover (in lieu of the right to acquire Stock) the number and class of shares of stock or other securities or property (including, without limitation, cash) to which Employee would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution, Employee had been the holder of record of the number of shares of Stock then covered by this Option. The above provisions of this Section 9(c) shall similarly apply to successive transactions of the foregoing type. (d) In the event that the Company declares a dividend upon the Stock or makes any other distribution in respect of the Stock (other than a stock dividend or distribution for which an adjustment is made pursuant to (b) above), then, thereafter, the Employee, upon exercise of this Option, shall receive the number of shares of Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock, or other securities and/or property which the Employee would have received if the Employee had exercised this Option prior to the dividend or distribution. (e) Except as hereinbefore expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to this Option or the purchase price per share. 10. LEGEND. THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, ------ RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 30, 1995, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. 11. GOVERNING LAW. This Agreement shall be governed by, and ------------- construed in accordance with, the laws of the State of Texas. 12. ARBITRATION. Any and all claims, demands, causes of action, ----------- disputes, controversies and other matters in question arising out of or relating to this Option, the alleged breach thereof, or in any way relating to the subject matter of this Option ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator, with all Management Investors (as defined in the Stockholders Agreement) party to the dispute considered -5- to be one party, and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. The arbitrators shall have no authority to award punitive (including, without limitation, any exemplary damages, treble damages or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) under any circumstances that exceed the lesser of (i) the amount equal to the amount of actual damages awarded, if any and (ii) $500,000, regardless of whether such damages in excess of such amount may be available under applicable law or otherwise, the parties hereto hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any Claims. The arbitrators shall be entitled to award costs of the arbitration and attorney's fees as they deem appropriate. Prior to the institution of a Claim under this Option by any person, such person shall provide to the other parties to this Option a written notice specifying the nature and basis of the Claim. The persons who are the subject of any Claim shall be given thirty (30) days to cure any breach before any Claim is filed. It is further agreed that prior to such Claims being submitted to the arbitrators on such Claims, the parties to the Claims shall attempt to resolve such Claims through non-binding mediation of such Claims. -6- IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Employee has executed this Agreement, all as of the day and year first above written. CODA ENERGY, INC. BY:______________________________________ NAME:____________________________________ TITLE:___________________________________ CODA ACQUISITION, INC. BY:_______________________________________ NAME:_____________________________________ TITLE:____________________________________ EMPLOYEE __________________________________________ NAME:_____________________________________ -7- EXHIBIT B LIMITED RECOURSE PROMISSORY NOTE $____________ ____________, 199__ For value received, the undersigned, [Name of Management Investor] ("Maker"), promises and agrees to pay, in the manner hereinafter provided, to the order of Coda Acquisition, Inc., a Delaware corporation ("Payee"), at 5735 Pineland Drive, Suite 300, Dallas, Texas 75231 or at such other place as Payee may specify by notice to Maker, in lawful money of the United States of America, the principal sum of ____________ Dollars (____________), together with interest on the unpaid principal balance from time to time outstanding hereunder from the date hereof to maturity at a rate of [Insert Mid-Term Applicable Federal Rate, annual compounding, for the calendar month in which this Note is executed] % per annum. Interest on this Promissory Note shall accrue at the rate specified above (compounded annually) and shall be payable from time to time when Payee, as employer of Maker, pays to Maker any cash bonus in addition to Maker's base salary. The amount of such payment shall be equal to the amount of such cash bonus less (i) the amount of income taxes payable by Maker on such bonus (which shall be deemed to be the product of the highest marginal rate (expressed as a fraction) applicable to individuals on the date such bonus is paid under the Internal Revenue Code of the United States, as amended from time to time, multiplied by the amount of such bonus), and (ii) other amounts legally required to be withheld by Payee from such bonus; provided that in no event shall the amount of such payment exceed the outstanding accrued interest as of the date the bonus is paid. The unpaid principal amount of this Promissory Note, together with all accrued and unpaid interest, is payable in full on _________, 200__ [fifth anniversary] (the "Maturity Date"). This Promissory Note may be prepaid at any time, in whole or in part, without penalty or premium. This Promissory Note is secured by and is entitled to the benefits of a Security Agreement dated as of the date of this Promissory Note covering certain common stock, par value $.01 per share, of Payee and the securities of Coda Energy, Inc., a Delaware corporation (the "Company"), into which such securities of Payee are to be converted as of the date hereof pursuant to a merger of Payee into the Company, with the Company being the surviving corporation, as well as certain additional shares of such common stock that may be acquired by Maker in accordance with the Stockholders Agreement (as hereinafter defined) upon a Trigger Event (as defined in the Stockholders Agreement). Upon any transfer, assignment, sale, or other disposition of any of such shares of common stock (other than a transfer under Section 4.2(b) or the second and third sentences of Sections 4.3(c) and 4.3(d) of the Stockholders Agreement dated as of October 30, 1995, among Maker, Payee, and certain other stockholders of Payee (the "Stockholders Agreement")), all proceeds of such transfer, assignment, sale, or disposition shall be paid to Payee as a mandatory prepayment on this Promissory Note, and, if Maker sells all or the remaining portion of such shares held by Maker, the entire outstanding principal amount of this Promissory Note, together with all accrued and unpaid interest, shall be immediately and mandatorily payable in full. If Payee is the transferee of such common stock in accordance with the Stockholders Agreement, the purchase price payable by Payee for such common stock will be credited against accrued and unpaid interest and outstanding principal under this Promissory Note. Each payment made on this Promissory Note will be credited first to payment of accrued interest and then to reduction of principal. If any payment due hereunder is not received by the due date specified above, the owner and holder of this Promissory Note shall provide written notice of such nonpayment to Maker by personal delivery, overnight courier, telegram or telecopy, which shall be addressed, or sent, to the respective addresses or telecopy numbers as provided on Schedule 1 hereto (or such other addresses or telecopy number as Maker may specify in writing). All notices shall be deemed effective, delivered and received (a) if given by personal delivery, when such notice is actually received at the address specified on Schedule 1 hereto; (b) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (c) if given by overnight courier, on the business day immediately following the day on which such notice is delivered to a reputable overnight courier service; or (d) if given by telegram, when such notice is actually received at the address specified on Schedule 1 hereto. If the payment is not received by the owner and holder of this Promissory Note by the end of the tenth business day following receipt of the notice, the owner and holder of this Promissory Note may, without any further notice or demand (both of which are expressly waived by Maker), declare the Promissory Note to be in default and declare the entire unpaid principal balance hereof and accrued interest at once due and payable. Except as otherwise provided herein, Maker and any and each co-maker, guarantor, accommodation party, endorser or other person liable for the payment or collection of this Promissory Note expressly waive demand and presentment for payment, notice of nonpayment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, notice of dishonor, bringing of suit, and diligence in taking any action to collect amounts called for hereunder and in the handling of property at any time existing as security in connection herewith, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder or in connection with any lien at any time had or existing as security for any amount called for hereunder. In the event default is made in the prompt payment of this Promissory Note when due or declared due, and the same is placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through probate, bankruptcy or other judicial proceedings, then Maker agrees and promises to pay, in addition to the principal and interest then owing, all costs of collection, including reasonable attorney's fees. -2- This is a limited recourse promissory note. Payee shall not be permitted to make demand upon Maker for the payment of any amounts due under this Promissory Note or file any claim or petition or otherwise institute any proceeding against Maker for the collection of any amounts due and owing under this Promissory Note (whether for the payment of interest or principal or costs of collection and attorney's fees) until Payee shall have exhausted all remedies available to it with respect to all collateral securing this Promissory Note pursuant to the Security Agreement or otherwise, including the sale or disposition of all such collateral and the application of the proceeds thereof to amounts due and owing under this Promissory Note. In no event shall Maker's liability under this Promissory Note for any deficiency due and owing on this Promissory Note (whether for the payment of interest or principal or costs of collection and attorney's fees) after the sale and disposition of all collateral securing this Promissory Note (pursuant to the Security Agreement or otherwise) exceed thirty-five percent (35%) of the original principal balance of this Promissory Note. It is the intention of Maker and Payee to conform strictly to usury laws applicable to Payee. Accordingly, if the transactions contemplated hereby would be usurious under applicable state or federal law, then, notwithstanding anything to the contrary in this Promissory Note or in any other agreement entered into in connection with or as security for the obligations of Maker under this Promissory Note or under any such agreement (the "Obligations"), it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to Payee that is contracted for, taken, reserved, charged or received under the Obligations, this Promissory Note or under any of such other agreements or otherwise in connection with the Obligations shall under no circumstances exceed the maximum amount allowed by such applicable law, (ii) in the event that the maturity of the Obligations is accelerated for any reason, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to Payee may never include more than such maximum amount, and (iii) excess interest, if any, provided for in this Promissory Note or otherwise shall be canceled automatically and, if theretofore paid, shall be credited by Payee on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by Payee to Maker). The right to accelerate the maturity of the Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Payee does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Payee for the use, forbearance or detention of sums included in the initial Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Obligations until payment in full so that the rate or amount of interest on account of the initial Obligations does not exceed the applicable usury ceiling, if any. To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to Payee for the purpose of determining the maximum rate of nonusurious interest allowed from time to time by applicable law, Payee hereby elects to determine the applicable rate ceiling under such Article by the indicated (weekly) rate ceiling from time to time in effect, subject to Payee's right subsequently to change such method in accordance with applicable law. This Promissory Note shall inure to the benefit of the successors, personal representatives, and assigns of Payee and shall be binding upon the successors, personal representatives, and assigns of Maker. -3- THE TERMS OF THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE PROVISIONS OF THE LAWS OF THE STATE OF TEXAS. Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of or relating to this Promissory Note, the alleged breach thereof, or in any way relating to the subject matter of this Promissory Note ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator, with all Management Investors (as defined in the Stockholders Agreement) party to the dispute considered to be one party, and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. The arbitrators shall have no authority to award punitive (including, without limitation, any exemplary damages, treble damages or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) under any circumstances that exceed, with respect to any Claim (regardless of the number of Persons asserting such Claim or the number of Persons against whom such Claim is asserted) the lesser of (i) the amount equal to the amount of actual damages awarded, if any and (ii) $500,000, regardless of whether such damages in excess of such amount may be available under applicable law or otherwise, the parties hereto hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any Claims. The arbitrators shall be entitled to award costs of the arbitration and attorney's fees as they deem appropriate. This Promissory Note has been executed and delivered as of the date first written above. ___________________________________ [Management Investor] -4- A:\NOTE. -5- EXHIBIT C SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") is made as of _________, 199_, between [Name of Management Investor] ("Pledgor"), and Coda Acquisition, Inc., a Delaware corporation with offices at 5735 Pineland Drive, Suite 300, Dallas, Texas 75231 ("Secured Party"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Secured Party, Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, and Coda Energy, Inc., a Delaware corporation (the "Company"), have entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Secured Party with and into the Company (the "Merger"), with the Company being the surviving corporation of the Merger. WHEREAS, Pledgor is acquiring shares of the $.01 par value common stock of Secured Party effective immediately prior to the Effective Time (as defined in the Merger Agreement), which common stock will be converted pursuant to the Merger into common stock of the Company as the survivor of the Merger. WHEREAS, in consideration for the issuance of such stock to Pledgor pursuant to a Subscription Agreement dated October 30, 1995 (the "Subscription Agreement"), Pledgor has executed and delivered to Secured Party a promissory note of even date herewith (together with all extensions for any period, renewals, rearrangements and/or increases thereof, the "Promissory Note") in the original principal amount set forth on Schedule I attached hereto, which ---------- Promissory Note is payable to the order of Secured Party with interest as provided therein. WHEREAS, Secured Party has agreed to the same upon certain terms and conditions, one of which is the execution and delivery by Pledgor of this Agreement, and Pledgor has agreed to enter into this Agreement. WHEREAS, upon the consummation of the Merger, the Company, as the surviving corporation of the Merger, shall be the Secured Party for all purposes hereof. NOW, THEREFORE, in order to secure the Obligations, as hereinafter defined, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured Party as follows: ARTICLE I SECURITY INTEREST ----------------- 1.1 PLEDGE. Pledgor hereby pledges, assigns and grants to Secured ------ Party a security interest in and right of set-off against the assets referred to in Section 1.2 (the "Collateral") to secure the prompt payment and performance of the Obligations and the performance by Pledgor of this Agreement. 1.2 COLLATERAL. The Collateral consists of the following types or ---------- items of property: (a) The number of shares of the $.01 par value common stock of Secured Party specified in Schedule I attached hereto, and the common stock of ---------- the Company into which such common stock will be converted pursuant to the Merger (collectively, the "Common Stock"). (b) All additional shares of the common stock of the Company received by Pledgor in connection with a Trigger Event, as defined in Stockholders Agreement (as hereinafter defined). (c) (i) The certificates or instruments, if any, representing such securities, (ii) all dividends (cash, stock or otherwise), cash, instruments, rights to subscribe, purchase or sell and all other rights and property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such securities, (iii) all replacements, additions to and substitutions for any of the property referred to in this Section 1.2, including, without limitation, claims against third parties, and (iv) the proceeds, interest, profits and other income of or on any of the property referred to in this Section 1.2. 1.3 TRANSFER OF COLLATERAL. All certificates or instruments ---------------------- representing or evidencing the Pledged Securities (as hereinafter defined) shall be delivered to and held pursuant hereto by Secured Party or a person or entity designated by Secured Party and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, or (in the case of either certificated or uncertificated securities) Secured Party shall have been provided with evidence that the Pledged Securities have been otherwise transferred to Secured Party in accordance with Section 8.301 of the Code, all in form and substance satisfactory to Secured Party. Notwithstanding the preceding sentence, at Secured Party's discretion, all Pledged Securities must be delivered or transferred in such manner as to permit Secured Party to be a "protected purchaser" to the extent of its security interest as provided in Section 8.303 of the Code. Secured Party shall have the right, at any time that an Event of Default (as defined in Section 6.1) has occurred and is continuing and without further notice to Pledgor, to transfer to or to register in the name of Secured Party or any of its nominees any or all of the Pledged Securities. In addition, Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Securities for certificates or instruments of smaller or larger denominations. -2- ARTICLE II DEFINITIONS ----------- 2.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms ------------------- defined above shall have the meanings respectively assigned to them. 2.2 CERTAIN DEFINITIONS. As used in this Agreement, the following ------------------- terms shall have the following meanings, unless the context otherwise requires: "AGREEMENT" means this Security Agreement, as the same may from time to time be amended or supplemented. "CODE" means the Uniform Commercial Code as presently in effect in the State of Texas, Business and Commerce Code, Chapters 1 through 9. Unless otherwise indicated by the context herein, all uncapitalized terms which are defined in the Code shall have their respective meanings as used in Chapters 8 and 9 of the Code. "EVENT OF DEFAULT" means any event specified in Section 6.1. "HIGHEST LAWFUL RATE" means the maximum rate of nonusurious interest allowed from time to time by applicable law. "OBLIGATIONS" means the obligations of the Pledgor under the Promissory Note, including, without limitation, all interest, charges, expenses, attorneys' or other fees and any other sums payable to or incurred by Secured Party in connection with the enforcement of Secured Party's rights and remedies hereunder or any other agreement with Pledgor. "PLEDGED SECURITIES" means all of the securities and other property (whether or not the same constitutes a "security" under the Code) referred to in Section 1.2. ARTICLE III REPRESENTATIONS AND WARRANTIES ------------------------------ In order to induce Secured Party to accept this Agreement, Pledgor represents and warrants to Secured Party (which representations and warranties will survive the creation and payment of the Obligations) that: 3.1 OWNERSHIP OF COLLATERAL; ENCUMBRANCES; VALID AND BINDING -------------------------------------------------------- AGREEMENT. Assuming that the Common Stock to be issued pursuant to the - --------- Subscription Agreement is duly and validly issued free and clear of all liens and other encumbrances, immediately after the consummation of the Merger, Pledgor shall be the legal and beneficial owner of the Collateral free and clear of any adverse claim, lien, security interest, option or other charge or encumbrance arising by, through or under Pledgor, except for the Stockholders Agreement and the security interest created by this Agreement, and Pledgor has full right, power and authority to pledge, assign and grant a -3- security interest in the Collateral to Secured Party. This Agreement constitutes a legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors' rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance. The execution, delivery and performance of this Agreement will not violate the terms of any contract, agreement, law, regulation, order, injunction, judgment, decree or writ to which Pledgor is subject and does not require the consent or approval of any other person or entity. 3.2 NO REQUIRED CONSENT. No authorization, consent, approval or ------------------- other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the due execution, delivery and performance by Pledgor of this Agreement, (ii) the grant by Pledgor of the security interest granted by this Agreement, (iii) the perfection of such security interest or (iv) the exercise by Secured Party of its rights and remedies under this Agreement. 3.3 FIRST PRIORITY SECURITY INTEREST. The pledge of Pledged -------------------------------- Securities pursuant to this Agreement creates a valid and perfected first priority security interest in the Collateral, secures payment of the Obligations, and is enforceable against Pledgor and all third parties. ARTICLE IV COVENANTS AND AGREEMENTS ------------------------ Pledgor will at all times comply with the covenants and agreements contained in this Article IV, from the date hereof and for so long as any part of the Obligations are outstanding. 4.1 SALE, DISPOSITION OR ENCUMBRANCE OF COLLATERAL. Pledgor will not ---------------------------------------------- in any way encumber any of the Collateral (or permit or suffer any of the Collateral to be encumbered) or sell, pledge, assign, lend or otherwise dispose of or transfer any of the Collateral to or in favor of any person or entity other than Secured Party except in accordance with the Stockholders Agreement dated as of October 30, 1995, among Pledgor, Secured Party, and certain other stockholders of Secured Party (the "Stockholders Agreement"). 4.2 DIVIDENDS OR DISTRIBUTIONS. So long as no Event of Default shall -------------------------- have occurred and be continuing, Pledgor shall be entitled to receive and retain any and all dividends and other distributions paid in respect of the Collateral, provided, however, that any and all (a) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for (including, without limitation, any certificate or share purchased or exchanged in connection with a tender offer or merger agreement), any Collateral, (b) dividends and other distributions paid or payable in cash in respect of any Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital or reclassification, and -4- (c) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Collateral, shall be, and shall be forthwith delivered to Secured Party to hold as, Collateral and shall, if received by Pledgor, be received in trust for the benefit of Secured Party, be segregated from the other property or funds of Pledgor, and be forthwith delivered to Secured Party as Collateral in the same form as so received (with any necessary endorsement); provided, however, that Pledgor shall in any event be entitled to receive and retain an amount equal to the amount paid on the Collateral less the amount of income taxes payable by Maker on such amount (which shall be deemed to be the product of the highest marginal rate (expressed as a fraction) applicable to individuals on the date such amount is paid under the Internal Revenue Code of the United States, as amended from time to time, multiplied by the amount so received on the Collateral. Without limiting the generality of the foregoing, upon any transfer, assignment, sale, or other disposition of any of the Collateral (other than a transfer under Section 4.2(b) or the second and third sentences of Sections 4.3(c) and 4.3(d) of the Stockholders Agreement), all proceeds of such transfer, assignment, sale, or disposition shall be paid to Secured Party as a mandatory prepayment on the Promissory Note, and, if Pledgor sells all or the remaining portion of the Collateral, the entire outstanding principal amount of the Promissory Note, together with all accrued and unpaid interest, shall be immediately and mandatorily paid in full. If Secured Party is the transferee of the Pledged Securities in accordance with the Stockholders Agreement, the purchase price payable by Secured Party for the Pledged Securities will be credited against the Obligations in accordance with the terms of the Promissory Note. 4.3 PAYMENT OF TAXES AND LIENS. Pledgor will pay prior to -------------------------- delinquency all taxes, charges, liens and assessments against the Collateral. 4.4 CERTAIN INFORMATION. Pledgor will promptly provide written ------------------- notice to Secured Party of all information reasonably requested which in any way relates to or affects the filing of any financing statement or other public notices or recordings, or the delivery and possession of items of Collateral for the purpose of perfecting a security interest in the Collateral. 4.5 PERFORMANCE OF OBLIGATIONS. Pledgor will promptly and properly -------------------------- perform all of its obligations under this Agreement and the Promissory Note. 4.6 REIMBURSEMENT OF EXPENSES. Except as provided in Section 6.3 ------------------------- hereof, Pledgor will pay to Secured Party all advances, charges, costs and expenses (including, without limitation, all costs and expenses of preparing for sale and selling, collecting or otherwise realizing upon the Collateral if an Event of Default occurs and all attorneys' fees, legal expenses and court costs) incurred by Secured Party in connection with the exercise of Secured Party's rights and remedies hereunder. All amounts for which Pledgor is liable pursuant to this Section 4.6 shall be due and payable by Pledgor to Secured Party upon demand, except as provided in Section 6.3. If Pledgor fails to make such payment upon demand (or if demand is not made due to an injunction or stay arising from bankruptcy or other proceedings) and Secured Party pays such amount, the same shall be due and payable by Pledgor to Secured Party, plus interest thereon from the date of Secured Party's demand (or from the date of Secured Party's payment if demand is not made due to such proceedings) at the Highest Lawful Rate. -5- 4.7 FURTHER ASSURANCES. Upon the request of Secured Party, Pledgor ------------------ shall (at Pledgor's expense) execute and deliver all such assignments, certificates, instruments, securities, financing statements, notifications to financial intermediaries, clearing corporations, issuers of securities or other third parties or other documents and give further assurances and do all other acts and things as Secured Party may reasonably request to perfect Secured Party's interest in the Collateral or to protect, enforce or otherwise effect Secured Party's rights and remedies hereunder. 4.8 STOCK POWERS. Pledgor shall furnish to Secured Party such stock ------------ powers and other instruments as may be required by Secured Party to assure the transferability of the Collateral when and as often as may be reasonably requested by Secured Party. 4.9 VOTING AND OTHER CONSENSUAL RIGHTS. Except to the extent ---------------------------------- otherwise provided in subsection 6.5(d), Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose. ARTICLE V RIGHTS, DUTIES AND POWERS OF SECURED PARTY ------------------------------------------ The following rights, duties and powers of Secured Party are applicable irrespective of whether an Event of Default occurs and is continuing: 5.1 NON-JUDICIAL ENFORCEMENT. Secured Party may enforce its rights ------------------------ hereunder without prior judicial process or judicial hearing, and to the extent permitted by law Pledgor expressly waives any and all legal rights which might otherwise require Secured Party to enforce its rights by judicial process. 5.2 DISCHARGE ENCUMBRANCES. Secured Party may, at its option if ---------------------- Pledgor has failed to do so after ten business days' notice from Secured Party, discharge any taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral. Pledgor agrees to reimburse Secured Party upon demand for any payment so made, plus interest thereon from the date of Secured Party's demand at the Highest Lawful Rate. 5.3 ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Secured ---------------- Party as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise in the event that an Event of Default has occurred and is continuing, from time to time in Secured Party's discretion, but at Pledgor's cost and expense and without notice to Pledgor, to take any action and to execute any assignment, certificate, financing statement, stock power, notification, document or instrument which Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any dividend, interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. 5.4 CUMULATIVE AND OTHER RIGHTS. The rights, powers and remedies of --------------------------- Secured Party hereunder are in addition to all rights, powers and remedies given by law or in equity. The exercise by Secured Party of any one or more of the rights, powers and remedies herein shall not be construed -6- as a waiver of any other rights, powers and remedies, including, without limitation, any other rights of set-off. If any of the Obligations are given in renewal, extension for any period or rearrangement, or applied toward the payment of debt secured by any lien, Secured Party shall be, and is hereby, subrogated to all the rights, titles, interests and liens securing the debt so renewed, extended, rearranged or paid. 5.5 DISCLAIMER OF CERTAIN DUTIES. The powers conferred upon Secured ---------------------------- Party by this Agreement are to protect its interest in the Collateral and shall not impose any duty upon Secured Party to exercise any such powers. Pledgor hereby agrees that Secured Party shall not be liable for, nor shall the indebtedness evidenced by the Obligations be diminished by, Secured Party's delay or failure to collect upon, foreclose, sell, take possession of or otherwise obtain value for the Collateral. 5.6 WAIVER OF NOTICE; DEMAND AND PRESENTMENT. Except as provided in ---------------------------------------- the Promissory Note, Pledgor hereby waives any demand, notice of default, notice of acceleration of the maturity of the Obligations, notice of intention to accelerate the maturity of the Obligations, presentment, protest and notice of dishonor as to any action taken by Secured Party in connection with this Agreement, or any instrument or document. 5.7 CUSTODY AND PRESERVATION OF THE COLLATERAL. Secured Party shall ------------------------------------------ be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which comparable secured parties accord comparable collateral, it being understood and agreed, however, that Secured Party shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against persons or entities with respect to any Collateral. ARTICLE VI EVENTS OF DEFAULT ----------------- 6.1 EVENTS. Any of the following events shall constitute an Event of ------ Default under this Agreement: (a) Payments. Pledgor defaults in any payment due and owing pursuant -------- to the terms of the Promissory Note and such default continues beyond the grace period provided therein; (b) Representations and Warranties. Any representation or warranty ------------------------------ made by Pledgor to Secured Party in this Agreement proves to have been incorrect in any material respect as of the date thereof; (c) Covenants. Default is made by Pledgor in the performance of any ---------- covenant or agreement contained in this Agreement and such default is not cured on or before the 20th business day after notice of such default from Secured Party to Pledgor; or -7- (d) Voluntary Proceedings. Pledgor shall commence a voluntary ---------------------- proceeding seeking liquidation, reorganization or other relief with respect to Pledgor or Pledgor's debts under any debtor relief law or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of Pledgor or a substantial part of Pledgor's property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against Pledgor or shall make a general assignment for the benefit of creditors or shall generally fail to pay Pledgor's debts as they become due or shall admit in writing Pledgor's inability to pay Pledgor's debts as they become due. (e) Involuntary Proceedings. An involuntary proceeding shall be ------------------------ commenced against Pledgor seeking liquidation, reorganization, or other relief with respect to Pledgor or Pledgor's debts under any debtor relief law or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official for Pledgor or a substantial part of Pledgor's property, and such involuntary proceeding (i) shall not have been duly contested within 30 days after the commencement of the proceeding or (ii), if duly contested within such 30 days, shall for any reason remain undismissed and unstayed for a period of 90 days after the commencement of the proceeding. 6.2 REMEDIES. Upon the occurrence and during the continuance of any -------- Event of Default and except as provided in Section 6.3, Secured Party may take any or all of the following actions without notice (except where expressly required below or by applicable law) or demand to Pledgor: (a) Declare all or part of the indebtedness pursuant to the Obligations immediately due and payable and enforce payment of the same by Pledgor or any Obligor. (b) Sell, in one or more sales and in one or more parcels, or otherwise dispose of any or all of the Collateral in any commercially reasonable manner as Secured Party may elect, in a public or private transaction, at any location as deemed reasonable by Secured Party either for cash or credit or for future delivery at such price as Secured Party may deem fair, and (unless prohibited by the Code, as adopted in any applicable jurisdiction) Secured Party may be the purchaser of any or all Collateral so sold and may apply upon the purchase price therefor any Obligations secured hereby. Without limiting the generality of the foregoing, Pledgor agrees that a sale by Secured Party to a stockholder of Secured Party for a price per share equal to the "Fair Market Value," as defined in the Stockholders Agreement, shall be deemed to be a commercially reasonable private sale. Any such sale or transfer by Secured Party either to itself or to any other person or entity shall be absolutely free from any claim of right by Pledgor, including any equity or right of redemption, stay or appraisal which Pledgor has or may have under any rule of law, regulation or statute now existing or hereafter adopted. Upon any such sale or transfer, Secured Party shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred. If Secured Party deems it advisable to do so, it may restrict the bidders or purchasers of any such sale or transfer to persons or entities who will represent and agree that they are purchasing the Collateral for their own account and not with the view to the distribution or resale of any of the Collateral. Secured Party may, at its discretion, provide for a public sale, and any such public sale shall be held at such time or times within ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. Secured Party shall not be obligated to make any sale pursuant to any such notice. Secured Party may, without notice or publication, adjourn any public or private sale by announcement at any time and place fixed for such sale, and such sale may be made at any -8- time or place to which the same may be so adjourned. In the event any sale or transfer hereunder is not completed or is defective in the opinion of Secured Party, such sale or transfer shall not exhaust the rights of Secured Party hereunder, and Secured Party shall have the right to cause one or more subsequent sales or transfers to be made hereunder. If only part of the Collateral is sold or transferred such that the Obligations remain outstanding (in whole or in part), Secured Party's rights and remedies hereunder shall not be exhausted, waived or modified, and Secured Party is specifically empowered to make one or more successive sales or transfers until all the Collateral shall be sold or transferred and all the Obligations are paid. In the event that Secured Party elects not to sell the Collateral, Secured Party retains its rights to dispose of or utilize the Collateral or any part or parts thereof in any manner authorized or permitted by law or in equity, and to apply the proceeds of the same towards payment of the Obligations. Each and every method of disposition of the Collateral described in this subsection shall constitute disposition in a commercially reasonable manner. (c) Apply proceeds of the disposition of the Collateral to the Obligations in any manner elected by Secured Party and permitted by the Code or otherwise permitted by law or in equity. Such application may include, without limitation, the reasonable attorneys' fees and legal expenses incurred by Secured Party. (d) Appoint any person or entity as agent to perform any act or acts necessary or incident to any sale or transfer by Secured Party of the Collateral. (e) Apply and set-off (i) any deposits of Pledgor now or hereafter held by Secured Party; (ii) all claims of Pledgor against Secured Party, now or hereafter existing; (iii) any other property, rights or interests of Pledgor which come into the possession or custody or under the control of Secured Party; and (iv) the proceeds of any of the foregoing as if the same were included in the Collateral. Secured Party agrees to notify Pledgor promptly after any such set-off or application; provided, however, the failure of Secured Party to give any notice shall not affect the validity of such set-off or application. (f) Exercise all other rights and remedies permitted by law or in equity. 6.3 LIABILITY FOR DEFICIENCY. Pledgor's liability for the ------------------------ Obligations is expressly limited in the manner provided in the Promissory Note and this Section 6.3. Secured Party shall not be permitted to make demand upon Pledgor for the payment or performance of any unperformed or unpaid Obligations or file any claim or petition or otherwise institute any proceeding against Pledgor for the collection or enforcement of any of the Obligations (whether unpaid interest or principal or costs of collection and attorneys fees) until Payee shall have exhausted all remedies available to it with respect to all Collateral, including the sale or disposition of all such Collateral in the manner provided in Section 6.2(b) hereof, and the application of the proceeds thereof to Obligations then due and owing. In no event shall Pledgor's liability for the payment of any deficiency due and owing on the Obligations after the sale and disposition of all Collateral exceed thirty-five percent (35%) of the original principal balance of the Promissory Note. 6.4 REASONABLE NOTICE. If any applicable provision of any law ----------------- requires Secured Party to give reasonable notice of any sale or disposition or other action, Pledgor hereby agrees that five days' prior written notice shall constitute reasonable notice thereof. Such notice, in the case of -9- public sale, shall state the time and place fixed for such sale and, in the case of private sale, the time after which such sale is to be made. 6.5 PLEDGED SECURITIES. Upon the occurrence and during the ------------------ continuance of an Event of Default: (a) All rights of Pledgor to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 4.2 shall be suspended, and the same shall thereupon become payable to Secured Party who shall thereupon have the sole right to receive and hold as Collateral such dividends and interest payments, but Secured Party shall have no duty to receive and hold such dividends and interest payments and shall not be responsible for any failure to do so or delay in so doing. (b) All dividends and interest payments which are received by Pledgor contrary to the provisions of this Section 6.5 shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of Pledgor and shall be forthwith paid over to Secured Party as Collateral in the same form as so received (with any necessary indorsement). (c) Secured Party may exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Securities as if it were the absolute owner thereof, including without limitation, the right to exchange at its discretion, any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other readjustment of any issuer of such Pledged Securities or upon the exercise by any such issuer or Secured Party of any right, privilege or option pertaining to any of the Pledged Securities, and in connection therewith, to deposit and deliver any and all of the Pledged Securities with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine, all without liability except to account for property actually received by it, but Secured Party shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing. (d) All rights of Pledgor to exercise the voting and other consensual rights which Pledgor would otherwise be entitled to exercise pursuant to Section 4.9 with respect to the Pledged Securities issued by such issuer shall thereupon become exercisable by Secured Party who shall thereupon have the sole right to exercise such voting and other consensual rights, but Secured Party shall have no duty to exercise any such voting or other consensual rights and shall not be responsible for any failure to do so or delay in so doing. ARTICLE VII MISCELLANEOUS PROVISIONS ------------------------ 7.1 AMENDMENT; WAIVERS. Secured Party's acceptance of partial or ------------------ delinquent payments or any forbearance, failure or delay by Secured Party in exercising any right, power or remedy hereunder shall not be deemed a waiver of any obligation of Pledgor or any Obligor, or of any right, power or remedy of Secured Party; and no partial exercise of any right, power or remedy shall preclude any other or further exercise thereof. Secured Party may remedy any Event of Default -10- hereunder or in connection with the Obligations without waiving the Event of Default so remedied. Pledgor hereby agrees that if Secured Party agrees to a waiver of any provision hereunder, or an exchange of or release of the Collateral, or the addition or release of any Obligor or other person or entity, any such action shall not constitute a waiver of any of Secured Party's other rights or of Pledgor's obligations hereunder. This Agreement may be amended only by an instrument in writing executed jointly by Pledgor and Secured Party and may be supplemented only by documents delivered or to be delivered in accordance with the express terms hereof. 7.2 NOTICES. Any and all notices, designations, consents, offers, ------- acceptances, or other communications provided for herein (each a "Notice") shall be given in writing by personal delivery, overnight courier, telegram, or telecopy which shall be addressed, or sent, to the respective addresses or telecopy numbers as follows (or such other address or telecopy number as any party hereto may specify for itself by Notice given in accordance with this Section 7.2): Secured Party: c/o Enron Corp. 1400 Smith Houston, Texas 77002 Attention: Keith Power/Brenda McGee, Specialist - 28th Floor Telecopy No. 713-646-3602 Telephone No. 713-853-5259 With a copy to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Chief Financial Officer Telecopy No. 214-265-4777 Telephone No. 214-265-4751 Pledgor: To the address or telecopy number set forth in Schedule I hereto. ---------- All Notices shall be deemed effective, delivered and received (i) if given by personal delivery, when such Notice is personally delivered at the address specified above; (ii) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (iii) if given by overnight courier, on the business day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (iv) if given by telegram, when such Notice is delivered at the address specified above. 7.3 COPY AS FINANCING STATEMENT. A photocopy or other reproduction --------------------------- of this Agreement may be delivered by Pledgor or Secured Party to any financial intermediary or other third party for the purpose of transferring or perfecting any or all of the Pledged Securities to Secured Party or its designee or assignee. 7.4 POSSESSION OF COLLATERAL. Secured Party shall be deemed to have ------------------------ possession of any Collateral in transit to it or set apart for it (or, in either case, any of its agents, affiliates or correspondents). -11- 7.5 REDELIVERY OF COLLATERAL. If any sale or transfer of Collateral ------------------------ by Secured Party results in full satisfaction of the Obligations, and after such sale or transfer and discharge there remains a surplus of proceeds, Secured Party will deliver to Pledgor such excess proceeds within five business days after the Secured Party's receipt of such surplus proceeds; provided, however, that Secured Party shall not be liable for any interest, cost or expense in connection with any delay in delivering such proceeds to Pledgor. 7.6 INTEREST. It is the intention of the parties hereto to conform -------- strictly to usury laws applicable to Secured Party. Accordingly, if the transactions contemplated hereby would be usurious under applicable state or federal law, then, notwithstanding anything to the contrary in this Agreement or in any other agreement entered into in connection with or as security for the Obligations, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to Secured Party that is contracted for, taken, reserved, charged or received under the Obligations, this Agreement or under any of such other agreements or otherwise in connection with the Obligations shall under no circumstances exceed the maximum amount allowed by such applicable law, (ii) in the event that the maturity of the Obligations is accelerated for any reason, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to Secured Party may never include more than such maximum amount, and (iii) excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically and, if theretofore paid, shall be credited by Secured Party on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by Secured Party to Pledgor). The right to accelerate the maturity of the Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Secured Party does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Secured Party for the use, forbearance or detention of sums included in the initial Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Obligations until payment in full so that the rate or amount of interest on account of the initial Obligations does not exceed the applicable usury ceiling, if any. To the extent that Article 5069- 1.04 of the Texas Revised Civil Statutes is relevant to Secured Party for the purpose of determining the Highest Lawful Rate, Secured Party hereby elects to determine the applicable rate ceiling under such Article by the indicated (weekly) rate ceiling from time to time in effect, subject to Secured Party's right subsequently to change such method in accordance with applicable law. 7.7 COUNTERPARTS. This Agreement may be executed in two or more ------------ counterparts, each of which counterparts shall be deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. 7.8 HEADINGS. Headings contained in this Agreement are inserted only -------- as a matter of convenience and in no way define, limit, or extend the scope or intent of this Agreement or any provisions hereof. 7.9 CHOICE OF LAW. This Agreement and the security interest granted ------------- hereby shall be governed by the internal laws of the State of Texas without regard to the principles of conflicts of laws thereof (except to the extent that the laws of any other jurisdiction govern the perfection and priority of the security interests granted hereby). -12- 7.10 CONTINUING SECURITY AGREEMENT. ----------------------------- (a) Except as may be expressly applicable pursuant to Section 9.505 of the Code, no action taken or omission to act by Secured Party hereunder, including, without limitation, any exercise of voting or consensual rights pursuant to Section 4.9 or any other action taken or inaction pursuant to Section 6.2, shall be deemed to constitute a retention of the Collateral in satisfaction of the Obligations or otherwise to be in full satisfaction of the Obligations, and, subject to Section 6.3, the Obligations shall remain in full force and effect, until Secured Party shall have applied payments (including, without limitation, collections from Collateral) towards the Obligations in the full amount then outstanding or until such subsequent time as is hereinafter provided in subsection (c) below. (b) To the extent that any payments on the Obligations or proceeds of the Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other person or entity under any bankruptcy law, common law or equitable cause, then to such extent the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received by Secured Party, and Secured Party's security interests, rights, powers and remedies hereunder shall continue in full force and effect. In such event, this Agreement shall be automatically reinstated if it shall theretofore have been terminated pursuant to Section 7.11. 7.11 TERMINATION. The grant of a security interest hereunder and all ----------- of Secured Party's rights, powers and remedies in connection therewith shall remain in full force and effect until the complete payment of the Obligations whereupon Secured Party will release, reassign and transfer the Collateral to Pledgor and declare this Agreement to be of no further force or effect. Notwithstanding the foregoing, the reimbursement and indemnification provisions of Section 4.6 and the provisions of subsection 7.10(b) shall survive the termination of this Agreement. 7.12 NUMBER; GENDER; WITHOUT LIMITATION. Pronouns, wherever used in ---------------------------------- this Agreement, and of whatever gender, shall include persons of every kind and character, and the singular shall include the plural whenever and as often as may be appropriate. Any reference herein to "including" and words of similar import refer to "including without limitation." 7.13 SEVERABILITY. In the event any one or more of the provisions ------------ contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which approximates as nearly as possible that of the invalid, illegal or unenforceable provisions. 7.14 THIRD PERSON. Nothing herein expressed or implied is intended ------------ or shall be construed to confer upon or to give any Person not a party hereto any rights or remedies under or by reason of this Agreement. -13- 7.15 EFFECTIVENESS. This Agreement becomes effective upon the ------------- execution hereof by Pledgor and delivery of the same to Secured Party, and it is not necessary for Secured Party to execute any acceptance hereof or otherwise signify or express its acceptance hereof. 7.16 ARBITRATION. Any and all claims, demands, causes of action, ----------- disputes, controversies and other matters in question arising out of or relating to this Agreement, the alleged breach thereof, or in any way relating to the subject matter of this Agreement ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator, with all Management Investors (as defined in the Stockholders Agreement) party to the dispute considered to be one party, and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Either party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. The arbitrators shall have no authority to award punitive (including, without limitation, any exemplary damages, treble damages or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) under any circumstances that exceed, with respect to any Claim (regardless of the number of Persons asserting such Claim or the number of Persons against whom such Claim is asserted) the lesser of (i) the amount equal to the amount of actual damages awarded, if any and (ii) $500,000, regardless of whether such damages in excess of such amount may be available under applicable law or otherwise, the parties hereto hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any Claims. The arbitrators shall be entitled to award costs of the arbitration and attorney's fees as they deem appropriate. PLEDGOR: _______________________________________________ [Management Investor] A:\SECURITY. -14- EXHIBIT D Draft Summary of Terms October 30, 1995 Page 1 JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP ("JEDI") SUMMARY OF TERMS SENIOR SUBORDINATED LOAN Borrower Coda Energy, Inc. (the "Company") Lender JEDI or its affiliates or designees Structure Senior Subordinated Loan (the "Loan") Amount $100,000,000 Term 7 years Security Unsecured, general corporate obligation Interest Rate Borrower may elect to borrow at the Floating Rate for an initial period of not more than six months; anytime during the floating rate period, Borrower may elect to lock-in the Fixed Rate for the remaining term of the Loan. Interest payable semi-annually in arrears. Floating Rate Monthly LIBOR + 425 bps per annum Fixed Rate Comparable treasuries + 625 bps Debt Service Interest only until maturity Voluntary Prepayment Prepayable without penalty until the Fixed Rate is locked in; prepayable thereafter subject to breakage costs on any interest rate swaps entered into by Lender to hedge the Fixed Rate; any prepayment to be applied first to interest then to principal Mandatory Payment Entire principal due at maturity Fee 200 bp payable to ECT Securities Corp. at closing. ECT Securities Corp. will pay or reimburse the Borrower for any fees for the subsequent placement of the Senior Subordinated Notes (other than normal legal and transaction expenses) issued to refinance the Loan. Draft Summary of Terms October 30, 1995 Page 2 Lender may change the fee structure so long as there is no adverse economic or financial impact to the Borrower from the change in fee structure. Convenants Standard and customary affirmative and negative covenants to include: Limitation on Indebtedness Other than Permitted Indebtedness the Company will not incur any additional debt or issue redeemable stock (other than common stock or common stock equivalents provided for in the Shareholders Agreement) unless pro forma Adjusted Consolidated Net Tangible Assets (Adjusted CNTA) (greater than or equal to) 125% of pro forma Indebtedness, and pro forma Fixed Charge Coverage Ratio (greater than or equal to) 2.0 to 1.0. Adjusted CNTA means the sum of (1) pretax SEC PV 10 of proved reserves (excluding reserves required to be delivered under volumetric or dollar denominated production payments); (2) costs of any oil and gas properties not included in (1); (3) net working capital; (4) greater of book or appraised value of other tangible assets; less (1) minority ---- interests: (2) gas balancing liabilities; and (3) tangible assets of non-recourse subsidiaries. Fixed Charge Coverage Ratio means the ratio of (a) the sum of (1) net income; (2) net interest expense; (3) net income tax expense; and (4) non-cash charges deducted in computing net income; less any deferred revenues attributable to volumetric production ---- payments, to (b) interest expense (to exclude any interest expense attributable to dollar denominated production payments), all in accordance with GAAP. Indebtedness will exclude any volumetric or dollar denominated production payments, any non-recourse debt, and any deferred compensation expense accrued as a result of the Special Management Rights, stock options or stock repurchase rights. Permitted Indebtedness to include: The Loan The senior bank credit facility in place as of the closing of the Loan (as amended from time to time) Inter-company debt Non-recourse debt Commodity hedging arrangements Interest rate hedging arrangements Refinancing indebtedness Letters of credit in the ordinary course of business not to exceed 10% of Adjusted CNTA Other Indebtedness not to exceed $15 million Draft Summary of Terms October 30, 1995 Page 3 Maintenance of Adjusted Consolidated Net Tangible Assets On and after the first anniversary of the closing of the Loan, a requirement for the Company to maintain the ratio of Adjusted CNTA to Indebtedness at (greater than or equal to) 1.1 to 1.0. Indebtedness to exclude any volumetric or dollar denominated production payments, any non-recourse debt, and any deferred compensation expense accrued as a result of the Special Management Rights, stock options or stock repurchase rights. Test to be conducted quarterly. If requirement is not met for four consecutive tests, Borrower is obligated to prepay enough of the Indebtedness to cause the ratio to equal or exceed 1.1 to 1.0. Limitation on Disposition of Proceeds from Asset Sales Consideration at least equal to fair market value and in cash and cash equivalents or oil and gas properties if such properties do not represent consideration of more than $15 million unless Lender consents in writing. Within 1 year, proceeds not required to pay down Senior Indebtedness may be reinvested in oil and gas assets. Proceeds not used to repay Senior Indebtedness nor reinvested in oil and gas assets ("Excess Proceeds") within 1 year will be used to prepay the Loan if the aggregate amount of the Excess Proceeds is greater than or equal to $5 million. Limitation on Merger, Consolidation and Asset Sales Permitted as long as (i) the Company is the surviving entity, or the surviving entity is a corporation organized under the laws of the U.S. and assumes the obligation of the Loan under a supplemental loan agreement; (ii) no default has occurred or is continuing; (iii) the Company can incur $1 of Indebtedness pursuant to "Limitation on Additional Indebtedness" above or the surviving entity has a net worth equal to or greater than the net worth of the Company immediately prior to the transaction. Provided, however, in the event the Company is not the surviving entity, Lender must consent, in its sole discretion, to the transaction. Sale/Leaseback Transaction Allowed if attributable debt could be incurred under "Limitation on Indebtedness". Restricted Payments Other than as provided for in the Stockholder's Agreement, no Restricted Payments will be permitted. Draft Summary of Terms October 30, 1995 Page 4 Limitation on Liens Only senior debt liens, purchase money liens, and margin related liens allowed. Other Standard Affirmative and Negative Covenants, to include: Limitation on issuance and sales of subsidiary stock Limitation on transactions with affiliates Subsidiary guarantees Change of control Limitation on guarantees of indebtedness by subsidiaries Limitation on dividends and other payment restrictions affecting restricted subsidiaries Limitation on conduct of business Limitation on investments Reports Events of Default Standard Events of Default, to include: Failure to pay principal or interest when due Breach of any of the representations, warranties, covenants or other provisions of the definitive agreements Bankruptcy, insolvency, material judgments, etc. Cross default to other material documents, and Other defaults as warranted Representations and Warranties Standard Representations and Warranties, to include: Corporate existence and qualification Corporate and governmental authorization Financial statements and condition Environmental, ERISA, and other regulatory matters Compliance with laws Labor matters No material litigation Taxes Ownership and control Title to property generally No material misstatements or omissions Draft Summary of Terms October 30, 1995 Page 5 EXPENSES: All reasonable legal fees and expenses, professional fees and other transaction costs shall be borne by Borrower whether or not contemplated transaction closes. THIS SUMMARY OF TERMS IS NOT COMPLETE, IS FOR DISCUSSION PURPOSES ONLY AND DOES NOT CREATE, AND IS NOT INTENDED TO CREATE, A BINDING OR ENFORCEABLE CONTRACT AMONG ANY OF THE PARTIES OR ANY DUTY ON ANY PERSON TO NEGOTIATE TOWARD A BINDING CONTRACT. THIS SUMMARY MAY NOT BE RELIED UPON BY ANY PERSON AS A BASIS FOR A CONTRACT BY ESTOPPEL OR OTHERWISE. EX-99.4 6 BUSINESS OPPORTUNITY AGREEMENT EXHIBIT 99.4 BUSINESS OPPORTUNITY AGREEMENT THIS BUSINESS OPPORTUNITY AGREEMENT (this "Agreement"), dated as of October 30, 1995, is by and among Enron Capital & Trade Resources Corp., a Delaware corporation ("ECT"), Coda Acquisition, Inc., a Delaware corporation ("Sub"), Joint Energy Development Investments Limited Partnership, a Delaware limited partnership ("JEDI"), and each of the individuals listed on the signature page hereto (the "Management Investors"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Coda Energy, Inc., a Delaware corporation ("Coda"), and ECT are parties to a letter of understanding dated August 23, 1995 relating to a proposed merger of Sub into Coda (the "Merger") pursuant to which Coda will be the surviving corporation, the holders of all outstanding shares of Common Stock of Coda immediately prior to the Merger will receive cash for such shares, and ECT or its designee will own a controlling interest in Coda following the Merger; and WHEREAS, JEDI is an Affiliate (as defined below) of ECT, and ECT has agreed with JEDI that it will make certain investments ("Qualified Investments") through JEDI, but ECT has no obligation to make other investments ("Excluded Investments") through JEDI; and WHEREAS, although it has no obligation to do so, ECT has offered to JEDI the opportunity to be its designee that will own a controlling interest in Coda following the Merger, and JEDI has accepted such offer and, in connection therewith, has designated such interest as a Qualified Investment rather than an Excluded Investment; and WHEREAS, JEDI expects to derive significant benefits from its ownership interest in Coda following the Merger; and WHEREAS, in contemplation of and in connection with the Merger, Sub proposes to enter into subscription agreements with each Management Investor, employment agreements with certain Management Investors, a Stockholders Agreement (as defined below) with JEDI and each Management Investor and other arrangements that the parties hereto believe to be beneficial to Coda, the Management Investors and JEDI following the Merger, such agreements and arrangements to be executed simultaneously with the execution of this Agreement and effective upon consummation of the Merger; and WHEREAS, the Management Investors expect to derive significant benefits from the Merger and from their employment relationship with, and ownership interests in, Coda following the Merger; and WHEREAS, ECT is a wholly-owned subsidiary of Enron Corp., a Delaware corporation ("Enron"), and Enron owns controlling interests in a number of other entities (Enron, ECT and any other Affiliate of Enron other than Coda being referred to herein individually as an "Enron Entity" and collectively as "Enron Entities"); and WHEREAS, in order for the Merger to occur, ECT and other Enron Entities will be required to take certain actions, including the execution of definitive agreements relating to the Merger, the approval of the terms of the subscription agreements, employment agreements, Stockholders Agreement and other arrangements between Coda and the Management Investors following the Merger and the furnishing of cash necessary to permit the Merger consideration to be paid to the holders of outstanding Common Stock of Coda; and WHEREAS, Enron Entities own interests in a number of corporations, partnerships and other entities engaged in energy-related businesses and intend to acquire from time to time additional interests in such Persons (as hereinafter defined) or in other Persons; and WHEREAS, Enron Entities may owe fiduciary or contractual duties to other Enron Entities and to owners of interests in other Enron Entities or to other Persons; and WHEREAS, upon consummation of the Merger, Enron Entities may owe fiduciary or contractual duties to Coda, its stockholders and other Persons, and Coda may owe fiduciary or contractual duties to its stockholders and other Persons; and WHEREAS, in the event an Enron Entity or Coda were to breach any such duty, it could be held liable for damages in a legal action brought either directly on behalf of the Person to whom such duty is owed or derivatively on behalf of such Person by its stockholders, partners or other owners; and WHEREAS, duties that an Enron Entity or Coda may owe to another Person may include, under certain circumstances, the duty not to take advantage of a Business Opportunity (as hereinafter defined) without first offering to such other Person the opportunity to take advantage of such Business Opportunity; and WHEREAS, under the laws applicable to fiduciary duties, in the absence of this Agreement there could arise circumstances in which an Enron Entity has, or may be alleged to have, conflicting duties to offer a Business Opportunity to more than one Person; and WHEREAS, Enron Entities from time to time purchase properties or entities and engage in lending or other activities that may result in the acquisition of interests in properties or entities, including the acquisition of production payments, royalty interests and other interests in energy properties, and among the Enron Entities is ECT Securities Corp., which is a registered broker-dealer that arranges transactions in securities for others and may in the future engage in securities underwriting activities; and WHEREAS, ECT is unwilling to take the actions required of it in order for the Merger to occur without assurances from the Management Investors and JEDI that Enron Entities will be permitted to continue to conduct their business following the Merger without undue risk of liability or damage to business relationships with customers; and but for this Agreement ECT would be unwilling to take such actions because of the unacceptable risk of liability to ECT and other Enron Entities resulting from uncertainties regarding the duties owed by them and conflicts between duties owed to Coda and duties owed to other Persons; and -2- WHEREAS, the parties hereto desire to provide for more certainty regarding the circumstances in which an Enron Entity has a duty to offer a Business Opportunity to Coda, to provide for other agreements intended to permit Enron Entities to continue to conduct their business activities without undue risk of liability to Coda or its stockholders, including the Management Investors, following the Merger or undue risk of damage to the Enron Entities' business relationships and to enter into other agreements aimed at providing, to the extent practicable, more certainty regarding the duties of Enron Entities and Coda; and WHEREAS, ECT, in offering to JEDI the opportunity to be its designee that will own a controlling interest in Coda following the Merger and in taking other actions it is required to take or cause to be taken in order for the Merger to occur, has relied on the fact that this Agreement would be executed and in the future will rely on this Agreement and the commitments herein made by Coda, the Management Investors and JEDI; and ECT and other Enron Entities that are beneficiaries of this Agreement will, in taking the steps required of them to cause or permit the Merger to occur and in continuing to conduct their business following the Merger, rely on this Agreement and the commitments herein made by Coda, the Management Investors and JEDI; and WHEREAS, in order to induce ECT and other Enron Entities to enter into, or to cause other Enron Entities to enter into, definitive agreements relating to the Merger (including subscription agreements, the Stockholders Agreement and, in the case of certain Management Investors, employment agreements), to enable ECT and other Enron Entities to take the other actions required to be taken by them in order for the Merger to be consummated, to provide more certainty regarding the duties of the parties to this Agreement to each other following the Merger, to permit the Enron Entities to comply with their fiduciary and contractual duties and to avoid undue risk of litigation, the parties hereto desire to enter into this Agreement; and each party agrees that this Agreement is a material inducement to the other parties hereto to enter into the agreements relating to the Merger and to consummate the Merger; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. When used herein the following terms ------------------- shall have the meanings indicated: "AFFILIATE" of a Person means any Person controlling, controlled by, or under common control with such Person, with "control" and its correlative terms meaning the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person. For the purposes of this Agreement, control shall include the possession, directly or indirectly, through one or more intermediaries, of (A) in the case of a corporation, 50% or more of the outstanding voting securities thereof; (B) in the case of a limited liability company, partnership, limited partnership or venture, the right to 50% or more of the distributions therefrom (including liquidating distributions); and (C) in the case of any other Person, 50% or more of the economic or beneficial interest therein. For the purposes of this -3- Agreement, control shall also include serving as manager or general partner of a Person or performing similar functions for a Person. "BUSINESS OPPORTUNITY" means any opportunity for a Person (a) to enter into any transaction pursuant to which such Person would acquire (whether by purchase, lease, or other transaction), own, invest in, finance, lend funds to, contribute capital to, manage, operate or otherwise participate in any Person, assets or transaction or (b) to act as a broker, finder, financial adviser or investment banker with respect to any such transaction by any other Person. In no event, however, will the opportunity to market oil or gas produced by Coda or other Persons from properties in which Coda has an interest constitute a Business Opportunity, and such term shall exclude the acquisition of equipment and supplies in the ordinary course of Coda's oil and gas exploration, development and production business. "CODA" means Coda and all Affiliates of Coda in which Coda owns an interest, directly or indirectly, unless the context otherwise requires. "PERSON" means any natural person, corporation, limited partnership, limited liability company, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity. "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of even date herewith among Sub, JEDI and the Management Investors. SECTION 2. OPTION RELATING TO ENRON PROJECTS. (a) Sub hereby grants to --------------------------------- ECT an option (the "Enron Project Option") on those Business Opportunities that Coda desires to pursue, but with respect to which, at the time Coda first notifies ECT that Coda desires to pursue such Business Opportunity, an Enron Entity has already taken and plans to continue to take Significant Steps (as defined in Section 2(c)) to pursue a Business Opportunity involving the same entity or the same or substantially the same properties (an "Enron Project"); provided, however, that the Enron Project Option is exercisable only if the pursuit of such Business Opportunity by Coda would (in ECT's reasonable judgment made in good faith) conflict with or make significantly more difficult the efforts by an Enron Entity to pursue such Enron Project. (b) If ECT is entitled to exercise the Enron Project Option and does so, then an Enron Entity may pursue the Business Opportunity to the exclusion of Coda or may otherwise pursue the Enron Project, in which case Coda will refrain from pursuing such Business Opportunity, unless and until ECT informs Coda that the Enron Entity has ceased its efforts to pursue such Business Opportunity. Upon exercise of the Enron Project Option, an Enron Entity that elects to pursue an Enron Project is not required to do so on terms that are identical to the terms of the Business Opportunity that Coda proposed to pursue. (c) "Significant Steps" means the commitment of significant human or financial resources in pursuit of a Business Opportunity including, but not be limited to, the commitment of significant engineering, financial, legal, accounting or other resources (including in-house resources) to the process of evaluating the property or entity that is the subject of the Business Opportunity, the signing of a letter of intent or memorandum of understanding, or the exchange -4- of proposals or negotiations with management of an entity that is the subject of the Business Opportunity or that owns the property that is the subject of the Business Opportunity. An Enron Entity shall not be deemed to have taken Significant Steps if its commitment has been limited to the review and preliminary evaluation of periodic reports filed with the Securities and Exchange Commission or other publicly available information and/or a review and preliminary evaluation of an offering circular, private placement memorandum or similar offering materials prepared for use by multiple parties that may consider such Business Opportunity. (d) The parties hereby stipulate that ECT has taken Significant Steps with respect to Enron Projects involving entities listed in the document entitled "Enron Projects List" dated the date hereof and delivered by ECT to the Representatives and to the General Counsel of Coda. The parties agree that ECT is not required to disclose the Enron Projects List to Management Investors other than the Representatives and the General Counsel of Coda. SECTION 3. ECT CONSENT REQUIRED IN CERTAIN EVENTS. Sub agrees that Coda -------------------------------------- will not pursue a Business Opportunity without the prior consent of ECT if: (a) An Enron Entity (other than Enron Oil & Gas Company) has a lending relationship or a significant ownership or similar relationship with any property or entity (including Affiliates of such entity) that is the subject of the Business Opportunity or an investment banking relationship with any such entity; or (b) An entity (including Affiliates of such entity) that is the subject of the Business Opportunity or whose properties are so subject is listed in the document entitled "ECT Business Opportunity Restricted List" dated the date hereof and delivered by ECT to Coda and the Management Investors; or (c) An entity (including Affiliates of such entity) that is the subject of the Business Opportunity or whose properties are so subject is a party to a contract with an Enron Entity that is material to Enron and its subsidiaries considered as a whole. Relationships of the type referred to in Section 3(a) include the ownership of a production payment burdening such property or any property owned by such entity, a royalty or overriding royalty interest burdening such property or any property owned by such entity, a loan secured by such property to such entity or guaranteed by such entity, a joint ownership interest in such property or an equity interest in such entity (other than a less than 5% interest in a class of publicly traded securities). No lending relationship of the type referred to in Section 3(a) will be deemed to exist unless there is an outstanding unpaid balance on a loan or an outstanding loan commitment. An investment banking relationship of the type referred to in Section 3(a) will include an arrangement pursuant to which ECT Securities Corp. is performing underwriting or brokerage services for such entity. ECT may from time to time amend the ECT Business Opportunity Restricted List, provided that no entity may be added to the list unless an Enron Entity has a relationship with it of the type described in Section 3(a). SECTION 4. AGREEMENT THAT ENRON ENTITIES DO NOT HAVE TO OFFER CERTAIN ---------------------------------------------------------- BUSINESS OPPORTUNITIES TO CODA. (a) Sub, the Management Investors and JEDI - ------------------------------ agree that any Business -5- Opportunity developed by an Enron Entity is not required to be offered to Coda and may be pursued by such Enron Entity or another Enron Entity (and hereby waive the right to claim that any such Business Opportunity should be offered to Coda) if such Business Opportunity has any one or more of the following characteristics: (i) less than 35% of the aggregate estimated investment in the Business Opportunity is attributable, directly or indirectly, to mineral interests in oil and gas properties located within five miles of any oil or gas field that includes properties that are owned by Coda and that account for more than 5% of the book value of total assets of Coda and its subsidiaries on a consolidated basis; and (ii) the Business Opportunity consists of the acquisition of publicly traded securities constituting less than 10% of a class of outstanding securities, provided that the acquisition thereof is effected for the purpose of investment or for trading purposes and not for the purpose of obtaining control of the issuer or of any of its assets; and (iii) the Business Opportunity is developed by Enron Oil & Gas Company ("EOG"); and (iv) the Business Opportunity is developed by an Enron Entity other than EOG, unless more than 50% by value of the assets that are the subject of, or owned by the entity that is the subject of, the Business Opportunity are devoted to the businesses of exploring for oil and gas, developing oil and gas reserves upon discovery thereof, operating oil and gas properties, producing oil and gas from such properties and realizing value from the sale of production from such properties (the "E&P Business"). (b) for purposes of the foregoing, the E&P Business does not include the following businesses, and assets employed in the following activities shall not be considered to be part of the E&P Business for purposes of determining whether the 50% test in Section 4(a)(iv) is met: (i) acquisition or development of coal bed methane projects; (ii) acquiring or developing mineral prospects other than those involving the production of hydrocarbons or involving the production of sulphur or other minerals produced in association with hydrocarbons; (iii) acquisition or development of geothermal projects or prospects; (iv) acquisition or development of integrated projects in which a significant portion of the projects' capital expenditures must be spent on infrastructure, such as transportation facilities, or in which the economic success of the exploration, development and production activities depends on the development of a large cogeneration facility, liquefied natural gas facility, processing facility, manufacturing plant or other facility requiring significant capital investment by the party conducting the business (as opposed to third parties); -6- (v) manufacturing or drilling and production services for third parties, including, without limitation, manufacturing of oilfield equipment, production of drilling fluids, contract landman services, contract drilling services, oilfield rental tool services, fishing services, mud services, well evaluation services, workover services, contract operator services, supply or crew transportation services or any other services of the type typically contracted for by oil and gas exploration, development and production companies; (vi) oil or gas transportation or storage business, including the ownership or operation of gathering systems, transmission pipelines, compressor stations, barges, storage facilities or related facilities (but excluding the acquisition and ownership of equipment and supplies of the type normally acquired by exploration, development and production companies in connection with their activities on oil and gas leases); (vii) gas processing, fractionation of natural gas liquids, chemical manufacturing or similar businesses (but excluding field separation operations); (viii) the business of trading in energy price swaps, options, futures contracts or other derivative products (except to hedge its own price risk), the business of making unsecured loans or loans secured by oil and gas or other properties, the business of acquiring production payments or conducting other activities that may enable oil and gas companies or other companies to obtain funds for financing their businesses, or the business of conducting other activities designed to assist oil and gas companies in making acquisitions; or (ix) the business of marketing oil and gas produced by third parties or otherwise purchasing and reselling or exchanging oil and gas for a profit. Nothing in this Section 4 shall be deemed to constitute an agreement by Sub that Coda will not acquire any business that conducts non-E&P Business activities. SECTION 5. PURSUIT OF BUSINESS OPPORTUNITIES BY ENRON ENTITIES IN CERTAIN -------------------------------------------------------------- EVENTS. Sub agrees that Enron Entities may continue to conduct their business - ------ in the ordinary course, even if doing so may have a competitive impact on Coda. In that connection, Sub recognizes that ECT and other Enron Entities will continue to engage in oil and gas marketing activities, that ECT may continue to engage in financing of other entities or in furnishing services in connection therewith (including financing of or services in connection with Business Opportunities pursued by others in competition with Coda) and that ECT may acquire other Persons engaged in oil and gas exploration and production. Sub, JEDI and the Management Investors hereby consent to such activities, even if they have competitive impact on Coda. SECTION 6. CONSENTS BY STOCKHOLDERS OF CODA. At any time, ECT or Coda -------------------------------- may request that any stockholder of Coda furnish to ECT or Coda a consent in writing to any action or inaction by any Enron Entity or Coda that ECT or Coda believes such Enron Entity or Coda is entitled under Section 2, 3, 4 or 5 of this Agreement to take or refrain from taking. In the event a stockholder of Coda fails or refuses to furnish the consent, ECT or Coda, as the case may be, -7- shall have the right to submit the matter to arbitration. If a stockholder of Coda furnishes such consent, such consent will also contain an agreement by such stockholder that, in the absence of a material misstatement or omission by ECT or Coda in connection with its request for such consent, he or she will not thereafter claim that the action or inaction covered by such consent is a breach of this Agreement or any fiduciary or other duty owed by ECT or any other Enron Entity to Coda or to such stockholder or by Coda or its Board of Directors to such stockholder. Nothing herein shall be deemed to require ECT or Coda to submit any matter to arbitration. SECTION 7. ARBITRATION. ----------- (a) Agreement to Arbitrate. Any and all claims, demands, causes of ---------------------- action, disputes, controversies and other matters in question arising out of or relating to any provision of Sections 2, 3, 4, 5, 6, 8(c), 8(e) or 8(m) of this Agreement or the alleged breach thereof ("Claims"), even though some or all of such Claims allegedly are extracontractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved and decided exclusively by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. Any arbitration initiated hereunder involving a matter with respect to which ECT or Coda has requested a consent under Section 6 must be initiated within six months following ECT's or Coda's first request for such consent. (b) Procedural Matters. The arbitration proceeding shall be conducted in ------------------ Dallas, Texas. The arbitration shall be before a panel of three arbitrators. Each party to such dispute shall select one arbitrator (with all Management Investors party to the dispute considered to be one party) and the two arbitrators selected by the parties shall select the third arbitrator. The arbitrators are authorized to issue subpoenas for depositions and other discovery mechanisms, as well as trial subpoenas, in accordance with the Federal Rules of Civil Procedure. Any party may initiate a proceeding in the appropriate United States District Court to enforce this provision. This agreement to arbitrate shall be enforceable in either federal or state court. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. (c) Amounts Awarded. The arbitrators may award such damages as they deem --------------- appropriate, except that the arbitrators shall have no authority under any circumstances to award punitive (including, without limitation, any exemplary damages, treble damages or any other penalty or punitive type of damages), consequential, incidental or indirect damages (in tort, contract or otherwise) that exceed, with respect to any Claim (regardless of the number of Persons asserting such Claim or the number of Persons against whom such Claim is asserted), the lesser of (i) the amount equal to the amount of actual damages awarded, if any, and (ii) $500,000, regardless of whether such damages may be available under applicable law or otherwise, the -8- parties hereby waiving their right, if any, to recover such damages in excess of such amount in connection with any such Claim. (d) Costs. The arbitrators shall be entitled to award costs of the ----- arbitration and attorney's fees as they deem appropriate, except that in the event an arbitration is initiated regarding a Claim involving a matter with respect to which ECT or Coda requested a consent pursuant to Section 6 and the Claimant failed or refused to furnish such consent, the arbitrator shall award costs of the arbitration and attorney's fees to the prevailing party in the arbitration. (e) Prior Notice. Prior to the institution of a Claim under this ------------ Agreement by any Person, such Person shall provide to Coda and all other Parties to this Agreement a written notice specifying the nature and basis of the Claim. The Persons who are the subject of any Claim shall be given thirty (30) days to cure any breach before any Claim is filed. SECTION 8. MISCELLANEOUS. ------------- (a) Contracts and Agreements. Each of Sub and ECT agrees not to, and Sub ------------------------- agrees that following the Merger Coda will not, enter into any contracts or agreements that will prevent it from performing its duties and obligations hereunder or prevent the other parties to this Agreement from realizing the benefits hereof. Notwithstanding the foregoing provisions of this Section 8(a), in the event that (x) Coda or ECT, as the case may be, has made reasonable efforts to persuade a third party that proposes to make a Business Opportunity available to agree to contract terms that will permit Coda or ECT to perform in full its obligations hereunder, (y) such third party is unwilling to agree to contract terms that will permit Coda or ECT to perform in full its obligations hereunder, and (z) such third party will not make such Business Opportunity available unless ECT, another Enron Entity or Coda, as the case may be, enters into a contract with terms that will not or may not permit Coda or ECT, as the case may be, to perform in full its obligations hereunder, then ECT, such other Enron Entity or Coda, as the case may be, may enter into such contract (and the entering into such contract shall not be a breach hereof). In such case, the obligations of the parties to this Agreement shall be subject to the terms of such contract. (b) Third Party Beneficiaries This Agreement is also intended for the ------------------------- benefit of each member of the Board of Directors of Coda and each Enron Entity, each of which will be considered a third party beneficiary of this Agreement. (c) Confidentiality. The provisions of this Agreement and all information --------------- regarding Business Opportunities, Enron Projects and entities listed on the ECT Business Opportunity Restricted List, and all other information exchanged by the parties pursuant to this Agreement, shall not be disclosed by any party to this Agreement unless otherwise publicly disclosed and except as otherwise required by law. The Representatives and the General Counsel of Coda will keep confidential any information supplied to them by ECT under this Agreement and will not disclose it to other Persons, including other Management Investors, except that (i) they may disclose it to any employee of Coda if in their reasonable judgment such employee has the need to know such information in order to discharge his or her duties as an employee and (ii) they may disclose it to any Management Investor if in their reasonable judgment such Management Investor has a need to know such information in connection with a decision to grant or withhold -9- a consent pursuant to Section 6. Except as provided in the preceding sentence, the Representatives will keep confidential the Enron Projects List and the ECT Business Opportunity Restricted List, and in that connection they will not, without the prior written consent of ECT, disclose the contents of either list to any other Management Investor. The confidentiality obligations of any Management Investor under this Agreement shall expire on the first anniversary of the date on which such Management Investor ceases to be an employee of Coda, except that in any event no Management Investor shall disclose any information covered by a confidentiality agreement to which any Enron Entity or Coda is a party if such disclosure would constitute a breach of such confidentiality agreement. (d) Amendment; Waivers. This Agreement may only be altered, supplemented, ------------------ amended or waived by the written consent of each party hereto; provided that a majority of Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl Johnson (the "Representatives") may take any action on behalf of all Management Investors with respect to any matter with respect to which all Management Investors are similarly situated. Notwithstanding the foregoing, the Representatives will not have any authority to grant, on behalf of any other Management Investor, any consent and waiver requested by ECT or Coda pursuant to Section 6 or an arbitration with respect thereto. All Management Investors will be deemed to be similarly situated with respect to the receipt of the Enron Projects List under Section 2 and the receipt of the ECT Business Opportunity Restricted List under Section 3. (e) Assignment. The terms and conditions of this Agreement shall inure to ---------- the benefit of and be binding upon the parties hereto and their permitted successors and assigns; provided, however, that no party hereto shall have the right to assign this Agreement without the consent of the other parties hereto. JEDI and each Management Investor agrees that it will not assign its shares of capital stock of Coda or any portion thereof to any Person unless it obtains from such Person an agreement to be bound by this Agreement. Sub agrees that Coda will not issue any additional shares of capital stock of Coda to any Person unless it obtains from such Person an agreement to be bound by this Agreement and an agreement that such Person will not assign its shares of capital stock of Coda or any portion thereof to any other Person unless it obtains from such Person an agreement to be bound by this Agreement. -10- (f) Notices. Any and all notices, designations, consents, offers, ------- acceptances, or other communications provided for herein (each a "Notice") shall be given in writing by personal delivery, overnight courier, telegram, or telecopy which shall be addressed, or sent, to the respective addresses or telecopy numbers as follows (or such other address or telecopy number as any party hereto may specify for itself by Notice given in accordance with this Section 8(f)): ECT: Enron Capital & Trade Resources Corp. 1400 Smith Houston, Texas 77002 Attention: Keith Power/Brenda McGee, Specialist - 28th Floor Telecopy No. 713-646-3602 Telephone No. 713-853-5259 Sub: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Chief Financial Officer Telecopy No. 214-265-4777 Telephone No. 214-265-4751 The Representatives: Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl Johnson Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Management Investors: c/o Mr. Doug Miller, Mr. Grant Henderson and Mr. Jarl Johnson Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 All Notices shall be deemed effective, delivered and received (a) if given by personal delivery, when such Notice is personally delivered at the address specified above; (b) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (c) if given by overnight courier, on the business day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (d) if given by telegram, when such Notice is delivered at the address specified above. (g) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which counterparts shall be deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. (h) Choice of Law. This Agreement shall be governed by the internal laws ------------- of the State of Texas without regard to the principles of conflicts of laws thereof. -11- (i) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. (j) No Partnership. No term or provision of this Agreement shall be -------------- construed to establish any relationship of partnership, agency or joint venture among the parties hereto. (k) Invalidity. In the event that any one or more of the provisions ---------- contained in this Agreement is, for any reason, held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement. (l) Contractual Obligations. Nothing herein shall require any Enron Entity ----------------------- or Coda to fail to perform any contractual obligation to which it is subject, including any obligation under any standstill agreement or confidentiality agreement with any entity that may be the subject of a Business Opportunity. (m) Effectiveness of this Agreement. This Agreement is effective upon ------------------------------- consummation of the Merger, except that the obligations in Sections 8(a) and 8(c) shall be effective immediately. This Agreement will terminate upon the occurrence of a Trigger Event (as defined in the Stockholders Agreement). Sub agrees that Coda will not effect a public offering of its common stock or engage in any other transaction that will result in public ownership of its common stock unless subsequent to the offering Enron Entities will own less than 50% of the outstanding common stock of Coda or unless the parties reach agreement on the terms and conditions of a business opportunity agreement that is appropriate for a company with publicly traded common stock, that is satisfactory to the underwriters, if any, and that permits ECT and other Enron Entities to continue to operate their businesses without undue risk of liability. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. ENRON CAPITAL & TRADE RESOURCES CORP. By:___________________________________________ Name:_________________________________________ Title:________________________________________ CODA ACQUISITION, INC. By:___________________________________________ Name: C.John Thompson Title: Vice President -12- JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP By: ENRON CAPITAL MANAGEMENT LIMITED PARTNERSHIP, as General Partner By: ENRON CAPITAL CORP., as General Partner By:________________________________________ Name: C. John Thompson Title: Agent and Attorney-in-Fact MANAGEMENT INVESTORS: ___________________________________________ Randell A. Bodenhamer ___________________________________________ Joe I. Callaway ___________________________________________ J. David Choisser ___________________________________________ J. W. Freeman ___________________________________________ Roy G. Harney ___________________________________________ Grant W. Henderson ___________________________________________ Jarvis A. Hensley ___________________________________________ Chris A. Jackson -13- ___________________________________________ Jarl P. Johnson ___________________________________________ Douglas H. Miller ___________________________________________ Gary M. Nelson ___________________________________________ Gary R. Scoggins ___________________________________________ Claude A. Seaman ___________________________________________ Jay W. Spencer, III ___________________________________________ Scott E. Studdard EX-99.5 7 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.5 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and Randell A. Bodenhamer an individual currently residing at 3320 Bermuda Drive, Sand Springs, Oklahoma 74063 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2. Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4. In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor -Page 1- to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. 1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7. Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1. Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2. Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3. While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. 2.4. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board -Page 2- of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to the management committee (or, if there is no management committee, the highest applicable level of management) of Employer for determination. If Employee disagrees with the decision reached by Employer, the dispute will be limited to whether the management committee (or, if there is no management committee, the highest applicable level of management) of Employer reached its decision in good faith; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.3. Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4. If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. -Page 4- 3.6. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.8. Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1. Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evalua tions, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. -Page 5- 5.2. Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3. All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Em ployer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. -Page 6- 5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until six (6) months after the date of termination of the employment relationship. These non-competition obligations shall not be applicable in the event of an Involuntary Termination. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. -Page 7- 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. 7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as -Page 8- to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 7.7. This Agreement shall be binding upon and inure to the benefit of Employer and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer. 7.8. This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Employer and the term and termination of such relationship. However, nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Employer. 7.9. Termination. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 RANDELL A. BODENHAMER ___________________________________ This 30th day of October, 1995 -Page 9- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND RANDELL A. BODENHAMER -------------------------------------------------------- Employee Name: Randell A. Bodenhamer Term: Five (5) Years after the Effective Time Position: Vice President - Land Location: Dallas, Texas Reporting Relationship: Chief Operating Officer Monthly Base Salary: $12,083.33 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 RANDELL A. BODENHAMER ___________________________________ This 30th day of October, 1995 -Page 10- EX-99.6 8 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.6 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and J. William Freeman an individual currently residing at 1639 Handley, Dallas, Texas 75208 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2. Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4. In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. 1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7. Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1. Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2. Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3. While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. 2.4. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board -Page 2- of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to the management committee (or, if there is no management committee, the highest applicable level of management) of Employer for determination. If Employee disagrees with the decision reached by Employer, the dispute will be limited to whether the management committee (or, if there is no management committee, the highest applicable level of management) of Employer reached its decision in good faith; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.2 Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3 Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4 If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employ ment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. -Page 4- 3.6 Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7 Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.8 Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1 Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpreta tions, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. -Page 5- 5.2 Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3 All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4 If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Em ployer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. -Page 6- 5.5 Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until six (6) months after the date of termination of the employment relationship. These non-competition obligations shall not be applicable in the event of an Involuntary Termination. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. -Page 7- 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. 7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, -Page 8- association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 7.7. This Agreement shall be binding upon and inure to the benefit of Employer and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer. 7.8. This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Employer and the term and termination of such relationship. However, nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Employer. 7.9. Termination. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 J. WILLIAM FREEMAN ___________________________________ This 30th day of October, 1995 -Page 9- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND J. WILLIAM FREEMAN ----------------------------------------------------- Employee Name: J. William Freeman Term: Five (5) Years after the Effective Time Position: Vice President - Engineering Location: Dallas, Texas Reporting Relationship: Chief Operating Officer Monthly Base Salary: $14,166.67 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 J. WILLIAM FREEMAN ___________________________________ This 30th day of October, 1995 -Page 10- EX-99.7 9 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.7 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and Grant W. Henderson, an individual currently residing at 9802 Windy Terrace, Dallas, Texas 75231 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2. Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4. In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. 1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7. Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1. Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2. Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3. While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. 2.4. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees -Page 2- generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.2. Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4. If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. -Page 4- 3.6. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.),, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement.. 3.8. Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1. Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evalua tions, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. -Page 5- 5.2. Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3. All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Em ployer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. -Page 6- 5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until six (6) months after the date of termination of the employment relationship. These non-competition obligations shall not be applicable in the event of an Involuntary Termination. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to -Page 7- Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. -Page 8- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND GRANT W. HENDERSON ----------------------------------------------------- Employee Name: Grant W. Henderson Term: Five (5) years after the Effective Time Position: President and Chief Financial Officer, with the powers and duties for such offices set forth in Article V of the Bylaws of the Employer as in effect immediately after the Effective Time Location: Dallas, Texas Reporting Relationship: Board of Directors Monthly Base Salary: $18,750.00 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 GRANT W. HENDERSON ___________________________________ This 30th day of October, 1995 -Page 9- EX-99.8 10 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.8 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and Jarl P. Johnson, an individual currently residing at 9627 S. Indianapolis, Tulsa, Oklahoma 74137 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2. Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4. In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. 1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7. Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1. Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2. Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3. While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. -Page 2- 2.4. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.2. Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4. If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, -Page 4- Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. 3.6. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.8. Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1. Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evalua tions, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps -Page 5- and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. 5.2. Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3. All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is -Page 6- neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. 5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until six (6) months after the date of termination of the employment relationship. These non-competition obligations shall not be applicable in the event of an Involuntary Termination. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer -Page 7- shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, -Page 8- the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. 7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 7.7. This Agreement shall be binding upon and inure to the benefit of Employer and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer. 7.8. This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Employer and the term and termination of such relationship. However, nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Employer. 7.9. Termination. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder. -Page 9- IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 JARL P. JOHNSON ___________________________________ This 30th day of October, 1995 -Page 10- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND JARL P. JOHNSON -------------------------------------------------- Employee Name: Jarl P. Johnson Term: Three (3) years after the Effective Time Position: Vice Chairman of the Board and Chief Operating Officer, with the powers and duties for such offices set forth in Article V of the Bylaws of the Employer as in effect immediately after the Effective Time Location: Dallas, Texas Reporting Relationship: Board of Directors Monthly Base Salary: $20,833.33 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 JARL P. JOHNSON ___________________________________ This 30th day of October, 1995 -Page 11- EX-99.9 11 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.9 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and Douglas H. Miller, an individual currently residing at 7147 Joyce Way, Dallas, Texas 75225 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2. Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4. In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. 1.5. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7. Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1. Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2. Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3. While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. 2.4. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee -Page 2- benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.2. Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4. If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. -Page 4- 3.6. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.8. Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1. Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evalua tions, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. -Page 5- 5.2. Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3. All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Em ployer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. -Page 6- 5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until two (2) years after the date of termination of the employment relationship. If the employment relationship is terminated under Section 3.1(iv), or by Employer under Section 3.1(ii), or by Employee under circumstances that constitute an Involuntary Termination of the employment relationship, these non-competition obligations shall extend until one (1) year after the date of termination of the employment relationship. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a -Page 7- breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. -Page 8- 7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 7.7. This Agreement shall be binding upon and inure to the benefit of Employer and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer. 7.8. This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Employer and the term and termination of such relationship. However, nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Employer. 7.9. Termination. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 DOUGLAS H. MILLER ___________________________________ This 30th day of October, 1995 -Page 9- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND DOUGLAS H. MILLER ---------------------------------------------------- Employee Name: Douglas H. Miller Term: Five (5) years after the Effective Time Position: Chairman of the Board and Chief Executive Officer, with the powers and duties for such offices set forth in Article V of the Bylaws of the Employer as in effect immediately after the Effective Time. Location: Dallas, Texas Reporting Relationship: Board of Directors Monthly Base Salary: $29,166.67 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 DOUGLAS H. MILLER ___________________________________ This 30th day of October, 1995 -Page 10- EX-99.10 12 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 99.10 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), including the attached Exhibit "A," is entered into between Coda Acquisition, Inc. ("Employer"), and J. W. Spencer, III an individual currently residing at 7727 Lone Moor Circle, Dallas, Texas 75248 ("Employee"), to be effective as of the Effective Date (as hereinafter defined). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Agreement, Employer, Coda Energy, Inc., a Delaware corporation ("Coda"), and Joint Energy Development Investments Limited Partnership, a Delaware limited partnership, are entering into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Employer with and into Coda (the "Merger"). WHEREAS, Employer is desirous of having Coda, as the surviving corporation of the Merger, continue to employ Employee, effective as of the date on which the "Effective Time," as defined in the Merger Agreement, occurs (the "Effective Date"), pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering into such employment relationship pursuant to such terms and conditions and for such consideration. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES: 1.1 Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until the date set forth on Exhibit "A" (the "Term"), subject to the terms and conditions of this Agreement. 1.2 Employee initially shall be employed in the position set forth on Exhibit A. Employer may not assign Employee to a new position or relocate Employee, without Employee's prior consent. Employer may not materially modify Employee's duties and responsibilities without Employee's prior consent, which shall not be unreasonably withheld, provided that notwithstanding the foregoing, Employer may assign such additional or different duties and services appropriate to Employee's position which Employee from time to time may be reasonably directed to perform by Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time. 1.3 Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that requires any significant portion of Employee's business time. 1.4 In connection with Employee's employment by Employer, Employer shall endeavor to provide Employee access to such confidential information pertaining to the business and services of Employer as is appropriate for Employee's employment responsibilities. Employer also shall endeavor to provide to Employee the opportunity to develop business relationships with those of Employer's clients and potential clients that are appropriate for Employee's employment responsibilities. -Page 1- 1.5 Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would injure Employer's business, its interests, or its reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or its affiliates, or upon discovery there of, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel any facts that might involve such a conflict of interest that has not been approved by Employer's Board of Directors. 1.6 Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests that constitute a "conflict of interest." Moreover, Employer and Employee recognize there are many borderline situa tions. In some instances, full disclosure of facts by the Employee to Employer's General Counsel may be all that is necessary to enable Employer or its affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employer reserves the right to take such action as, in its judgment, will end the conflict. 1.7 Any potential conflict of interest existing prior to the execution of this Agreement shall be disclosed to Employer prior to execution. Employer agrees that such disclosed potential conflicts of interest are not conflicts of interest pursuant to Section 1.5 or 1.6 absent a material change in such action or interest. ARTICLE 2: COMPENSATION AND BENEFITS: 2.1 Employee's base salary during the Term shall be not less than the amount set forth under the heading "Monthly Base Salary" on Exhibit A (as such salary amount may be increased from time to time (the "Base Salary")), which shall be paid in semimonthly installments in accordance with Employer's standard payroll practice. 2.2 Employee shall be eligible to participate in any incentive compensation program of Employer. 2.3 While employed by Employer (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs. 2.4 Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be -Page 2- secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer. 2.5 Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION: 3.1. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the good faith determination by the Employer's management committee (or, if there is no management committee, the highest applicable level of management) of Employer that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee under his or her employment agreement with the Employer [b] Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; [c] Employee's involvement in a conflict of interest as referenced in Sections 1.5- 1.6 for which Employer makes a determination to terminate the employment of Employee; or [d] Employee's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to the management committee (or, if there is no management committee, the highest applicable level of management) of Employer for determination. If Employee disagrees with the decision reached by Employer, the dispute will be limited to whether the management committee (or, if there is no management committee, the highest applicable level of management) of Employer reached its decision in good faith; (ii) for any other reason whatsoever, with or without cause, in the sole discretion of the management committee (or, if there is no management committee, the highest applicable level of management) of Employer; (iii) upon Employee's death; or (iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7. -Page 3- 3.2 Notwithstanding any other provisions of this Agreement except Section 7.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (i) a material breach by Employer of any material provision of this Agreement which remains uncorrected for 30 days following written notice of such breach by Employee to Employer (a breach of Section 1.2 shall be conclusively deemed a material breach of this Agreement); or (ii) for any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(i); the effect of such termination is specified in Sectin 3.5. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement dated October 30, 1995 among Coda Acquisition, Inc. and the persons listed on the signature pages thereto, including Employee (the "Stockholders Agreement"). Employee shall be entitled to pro rata salary through the date of such termination plus any other payments generallly available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.4 If Employee's employment hereunder shall be terminated by Employer for Cause prior to expiration of the Term, all future compensation to whcih Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination, except as may otherwise be provided in the Stockholders Agreement. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive the Base Salary as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement, and Employee shall continue to have his rights under the Stockholders Agreement in accordance with the terms and provisions thereof. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its affiliates, and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action. -Page 4- 3.6 Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.7 Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his or her pro rata Base Salary through the date of such termination plus any other payments generally available to other departing employees of Employer (e.g., unused vacation, personal days, etc.), but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid to Employee at the date of such termination, except as may otherwise be provided in the Stockholders Agreement. 3.8 Termination of employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION: 4.1 Should Employee remain employed by Employer beyond the expiration of the Term specified on Exhibit "A," such employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termina tion, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination. Nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS: 5.1 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) and that relate to Employer's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpreta tions, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Employer. -Page 5- 5.2 Employee acknowledges that the business of Employer and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or its affiliates use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer or its affiliates in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his or her employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's confidential business information and trade secrets. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 5 by Employee, and Employer shall be entitled to enforce the provisions of this Article 5 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Employer, including the recovery of damages from Employee and his or her agents involved in such breach. 5.3 All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee's employment by Employer which contain or disclose confidential business information or trade secrets of Employer or its affiliates shall be and remain the property of Employer or its affiliates, as the case may be. Upon termination of Employee's employment by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer. 5.4 If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Em ployer's business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's premises or otherwise), Employee shall disclose such work to Employer. Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer shall be the author of the work. If such work is neither prepared by the Employee within the scope of his or her employment nor a work specially ordered and then not deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein. -Page 6- 5.5 Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer and its nominee, at any time, in the protection of Employer's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or its nominee and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS: 6.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; or (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer. If the employment relationship is terminated by Employer for cause under Section 3.1(i) or upon a Voluntary Termination of the employment relationship by Employee prior to the expiration of the Term, these non-competition obligations shall extend until six (6) months after the date of termination of the employment relationship. These non-competition obligations shall not be applicable in the event of an Involuntary Termination. 6.2 Until five (5) years after termination of the employment relationship, Employee shall not induce any employee of Employer or any of its affiliates to terminate his or her employment with Employer or its affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. 6.3 Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.5 for the remainder of the Term upon Involuntary Termination) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. -Page 7- 6.4 It is expressly understood and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Employer. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: MISCELLANEOUS: 7.1 For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, is controlled by Employer. 7.2 For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Employer, to: Coda Energy, Inc. 5735 Pineland Drive, Suite 300 Dallas, Texas 75231 Attention: Corporate Secretary If to Employee, to the address shown on the first page hereof. Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 7.3 This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of this Agreement to the laws of another State or country. 7.4 No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 7.5 If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Sections 5.2, Article 5, or Section 6.1, and if the dispute cannot be settled through direct discussions, then Employer and Employee agree first to endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other pro ceeding or forum. Thereafter, if either party to this Agreement brings legal action to enforce the terms of this Agreement, the party who prevails in such legal action, whether plaintiff or defendant, in addition to the remedy or relief obtained in such legal action shall be entitled to recover its, his, or her expenses incurred in connection with such legal action, including, without limitation, costs of Court and attorneys fees. 7.6 It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as -Page 8- to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 7.7 This Agreement shall be binding upon and inure to the benefit of Employer and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer. 7.8 This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Employer and the term and termination of such relationship. However, nothing herein precludes Employee from participating in any severance program or policy instituted by the Employer under which Employee is otherwise eligible. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Employer. 7.9 Termination. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall terminate and the parties hereto shall have no further obligations to any other party hereunder. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 J.W. SPENCER, III ___________________________________ This 30th day of October, 1995 -Page 9- EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN CODA ACQUISITION, INC. AND J. W. SPENCER, III ----------------------------------------------------- Employee Name: J.W. Spencer, III Term: Three (3) Years after the Effective Time Position: Vice President - Operations Location: Dallas, Texas Reporting Relationship: Chief Operating Officer Monthly Base Salary: $14,166.67 CODA ACQUISITION, INC. By:_________________________________ C. John Thompson Vice President This 30th day of October, 1995 J.W. SPENCER, III ___________________________________ This 30th day of October, 1995 -Page 10- EX-99.11 13 AGREEMENT TO PROVIDE SCHEDULES EXHIBIT 99.11 Coda Energy, Inc. hereby agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request. -----END PRIVACY-ENHANCED MESSAGE-----