-----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, L/pmplduaeEa6hkBsuVUm7vpXO9nsrdXlNMQsz5aOrzdehofpAnAngBmoRei++N/ 9OBiDGV+bOVTlr3ntiiGjQ== 0000930661-96-001540.txt : 19961113 0000930661-96-001540.hdr.sgml : 19961113 ACCESSION NUMBER: 0000930661-96-001540 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10955 FILM NUMBER: 96658307 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 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended SEPTEMBER 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-10955 CODA ENERGY, INC. (Exact name of registrant as specified in its charter) Delaware 75-1842480 (State of incorporation) (IRS Employer Identification No.) 5735 Pineland Dr., Suite 300, Dallas, Texas 75231 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (214) 692-1800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 Par Value 913,611 Shares Outstanding at November 1, 1996 PART I - FINANCIAL INFORMATION FINANCIAL STATEMENTS CODA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS ------ (in thousands)
Pre Merger Post Merger ------------ ------------- September 30, December 31, 1996 1995 (Unaudited) ------------ ------------- Current Assets: Cash and cash equivalents $ 4,604 $ 9,134 Accounts receivable - revenue 10,598 11,317 Accounts receivable - joint interest 2,463 2,260 and other 2,206 1,616 -------- -------- Other current assets 19,871 24,327 -------- -------- 81 738 Amounts due from stockholders -------- -------- Oil and gas properties (full cost accounting method): Proved oil and gas properties 226,650 251,653 Unproved oil and gas properties --- 1,000 Less accumulated depletion, depreciation and amortization 56,042 15,105 -------- -------- 170,608 237,548 -------- -------- Gas plants and gathering systems 38,068 33,838 Less accumulated depreciation 4,082 1,645 -------- -------- 33,986 32,193 -------- -------- Other properties, net 2,142 4,140 -------- -------- Other assets 2,376 3,831 -------- -------- $229,064 $302,777 ======== ========
See Notes to Consolidated Financial Statements 1 CODA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ (in thousands, except per share amounts)
Pre Merger Post Merger ------------ ------------- September 30, December 31, 1996 1995 (Unaudited) ------------ ------------- Current liabilities: Current maturities of long-term debt and notes payable $ 453 $ 120 Accounts payable - trade 7,252 7,557 Accounts payable - revenue and other 3,394 4,450 Accrued interest 342 6,387 Income taxes payable 128 384 -------- -------- 11,569 18,898 -------- -------- Long-term debt - less current maturities 123,907 68,496 -------- -------- 10 1/2% Senior Subordinated Notes --- 110,000 -------- -------- Deferred income taxes 14,400 42,748 -------- -------- Commitments and contingent liabilities 15% cumulative redeemable preferred stock, 40 shares of $.01 par value authorized; 20 shares issued and outstanding at September 30, 1996 --- 20,000 -------- -------- Common shareholders' equity of management, subject to put and call rights --- 4,560 Less related notes receivable --- (937) -------- -------- --- 3,623 -------- -------- Other common shareholders' equity: Common stock 442 9 Additional paid-in capital 68,671 89,991 Retained earnings (deficit) 10,075 (50,988) -------- -------- 79,188 39,012 -------- -------- $229,064 $302,777 ======== ========
See Notes to Consolidated Financial Statements 2 CODA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands)
Pre Merger Post Merger --------------- --------------- Three Months Nine Months Three Months Pro Forma Nine Ended Ended 47 Days Ended Ended 227 Days Ended Months Ended September 30, September 30, February 16, September 30, September 30, September 30, 1995 1995 1996 1996 1996 1996 --------------- --------------- --------------- --------------- ---------------- ---------------- Revenues: Oil and gas sales $14,296 $44,840 $ 8,079 $19,229 $ 47,632 $55,711 Gas gathering and processing 8,709 25,722 5,322 10,956 26,294 31,616 Other income 287 783 168 718 1,386 1,554 ------- ------- ------- ------- -------- ------- 23,292 71,345 13,569 30,903 75,312 88,881 ------- ------- ------- ------- -------- ------- Costs and expenses: Oil and gas production 6,665 20,045 3,607 8,080 20,181 23,788 Gas gathering and processing 7,650 21,935 4,567 9,208 21,836 26,403 Depletion, depreciation and amortization 4,711 14,555 2,583 6,929 17,439 20,838 General and administrative 898 2,361 320 437 1,313 1,633 Interest 2,126 6.330 1,102 4,195 10,595 12,808 Stock option compensation --- --- 3,199 --- --- --- Writedown of oil and gas properties --- --- --- --- 83,305 --- ------- ------- ------- ------- -------- ------- 22,050 65,226 15,378 28,849 154,669 85,470 ------- ------- ------- ------- -------- ------- Income (loss) before income taxes 1,242 6,119 (1,809) 2,054 (79,357) 3,411 Income tax expense (benefit) 444 2,202 (511) 853 (28,369) 1,543 ------- ------- ------- ------- -------- ------- Net income (loss) 798 3,917 (1,298) 1,201 (50,988) 1,868 Preferred stock dividend requirements --- --- --- 792 1,898 2,306 ------- ------ ------ ------- -------- -------- Net income (loss) available for common stockholders $ 798 $3,917 $(1,298) $ 409 $(52,886) $ (438) ======= ====== ======= ======= ======== ========
See Notes to Consolidated Financial Statements 3 CODA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
Pre Merger Post Merger ------------------ -------------- Nine Months Ended 47 Days Ended 227 Days Ended September 30, February 16, September 30, 1995 1996 1996 ---------------- ------------- -------------- Cash flows from operating activities: Net income (loss) $ 3,917 $ (1,298) $ (50,988) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depletion, depreciation and amortization 14,555 2,583 17,439 Writedown of oil and gas properties --- --- 83,305 Deferred income tax expense (benefit) 1,930 (511) (28,745) Stock option compensation --- 3,199 --- Other 455 6 (284) Effect of changes in: Accounts receivable (853) 3,386 (3,902) Other current assets (553) (63) (171) Accounts payable and other current liabilities (755) (4,166) 10,793 ---------- ------- --------- Net cash provided by operating activities 18,696 3,136 27,447 ---------- ------- --------- Cash flows from investing activities: Additions to oil and gas properties (19,498) (1,717) (7,697) Proceeds from sale of assets 4,984 110 1,381 Purchase of Coda by JEDI, net of $740 cash acquired --- --- (179,373) Gas plant and gathering systems and other property additions (8,305) (114) (323) Investment in marketable equity securities (573) --- --- Payments received on amounts due from stockholders 1,294 130 124 Loan to stockholder --- --- (738) Other 110 --- (40) ----------- ------- --------- Net cash used by investing activities (21,988) (1,591) (186,666) ----------- ------- --------- Cash flows from financing activities: Proceeds from bank borrowings 14,400 --- 2,000 Proceeds from issuance of subordinated debt --- --- 210,000 Proceeds from issuances of common and preferred stock --- --- 110,000 Repayment of bank borrowings and subordinated debt (11,521) (5,019) (152,890) Proceeds from exercise of options and warrants 674 --- --- Repurchases of common stock (2,125) --- --- Financing costs (161) (390) (783) ----------- ------- --------- Net cash provided (used) by financing activities 1,267 (5,409) 168,353 ----------- ------- --------- Increase (decrease) in cash (2,025) (3,864) 9,134 Cash at beginning of period 6,474 4,604 --- ---------- ------- --------- Cash at end of period $ 4,449 $ 740 $ 9,134 ========== ======= ========= Supplemental cash flow information: Interest paid $ 6,812 $ 1,544 $ 5,719 ========== ======= ========= Income taxes paid $ 500 $ --- $ 120 ========== ======= =========
See Notes to Consolidated Financial Statements 4 CODA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited, in thousands)
15% Cumulative Common Stockholders' Other Common Redeemable Equity of Management, Stockholders' Preferred Stock Subject to Put and Call Rights Equity ----------------------- --------------------------------- ------------------------- Additional Retained Notes Par Paid-in Earnings Shares Amount Shares Amount Receivable Shares Value Capital (Deficit) ------ ------ ------ ------ ---------- ------ ----- ---------- --------- Pre Merger: Balances at December 31, 1995 22,089 $ 442 $ 68,671 $ 10,075 Stock option compensation 3,199 Net loss for the period January 1, 1996 through February 16, 1996 (1,298) ------ ------ ------ ------ --------- ------ ----- -------- -------- Balances at February 16, 1996 -- -- -- -- -- 22,089 $ 442 $ 71,870 $ 8,777 ====== ====== ====== ====== ========= ====== ===== ======== ======== Post Merger: Transactions related to the merger: Common stock issued to management investors in exchange for common stock, options, warrants, notes receivable and cash 14 $4,560 ($937) Common stock issued to JEDI for cash 900 $ 9 $ 89,991 Preferred stock issued to JEDI for cash 20 $20,000 Net loss for the period from February 17, 1996 through September 30, 1996 $(50,988) ------ ------- ------ ------ --------- ------ ----- -------- -------- Balances at September 30, 1996 20 $20,000 14 $4,560 $ (937) 900 $ 9 $ 89,991 $(50,988) ====== ======= ====== ====== ========= ====== ===== ======== ========
See Notes to Consolidated Financial Statements 5 CODA ENERGY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. THE MERGER On February 16, 1996, pursuant to an Agreement and Plan of Merger dated as of October 30, 1995 (as amended, the "Merger Agreement"), by and among Coda Energy, Inc. ("Coda" or together with its subsidiaries the "Company"), Joint Energy Development Investments Limited Partnership ("JEDI"), which is an affiliate of Enron Capital & Trade Resources Corp. ("ECT"), and Coda Acquisition, Inc. ("CAI"), which was a subsidiary of JEDI, JEDI acquired Coda through a merger (the "Merger") at a price of $7.75 per share in cash (for an aggregate purchase price of approximately $176.2 million). Concurrently with the execution of the Merger Agreement, JEDI and CAI entered into certain agreements with members of the Company's management (the "Management Group"), providing for a continuing role of management in the Company after the Merger. Following consummation of the Merger, the Management Group owns approximately 5% of Coda's common stock on a fully-diluted basis. JEDI owns the remaining 95%. The sources and uses of funds related to financing the Merger were as follows: SOURCES OF FUNDS (in millions)
Credit Agreement $ 95.0 JEDI Debt(l) 100.0 Redeemable Preferred Stock issued to JEDI 20.0 Common Stock issued to JEDI 90.0 ------ Total $305.0 ======
USES OF FUNDS (in millions)
Payments to Coda stockholders, warrantholders and optionholders $176.2 Repayment of former credit facility and other indebtedness 122.7 Merger costs and other expenses 6.1 ------ Total $305.0 ======
(1) Represents indebtedness incurred by CAI and assumed by Coda to fund a portion of the consideration paid in the Merger. The Merger has been accounted for using the purchase method of accounting. As such, JEDI's cost of acquiring the Company has been allocated to the assets and liabilities acquired based on estimated fair values. As a result, the Company's financial position and operating results subsequent to the date of the Merger reflect a new basis of accounting and are not comparable to prior periods. The allocation of JEDI's purchase price to the assets and liabilities of the Company resulted in a significant increase in the carrying value of the Company's oil and gas properties. Under the full cost method of accounting, the carrying value of oil and gas properties (net of related deferred taxes) is generally not 6 permitted to exceed the sum of the present value (10% discount rate) of estimated future net cash flows (after tax) from proved reserves, based on current prices and costs, plus the lower of cost or estimated fair value of unproved properties (the "cost center ceiling"). Based upon the allocation of JEDI's purchase price and estimated proved reserves and product prices in effect at the date of the Merger, the purchase price allocated to oil and gas properties would be in excess of the cost center ceiling by approximately $83.3 million ($53.3 million net of related deferred taxes). The resulting writedown is a non-cash charge and has been included in the results of operations for the 227 days ended September 30, 1996. 2. ACCOUNTING AND REPORTING POLICIES The consolidated financial statements include the accounts of Coda, its majority-owned subsidiaries and its pro rata share of the assets, liabilities and operations of oil and gas partnerships and joint ventures. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior years' amounts to conform to the current year presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1995, reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the financial position as of September 30, 1996, and the results of operations and cash flows for the periods ended September 30, 1995, February 16, 1996 and September 30, 1996. The results for the periods ended September 30, 1996, are not necessarily indicative of results for a full year. Fees from overhead charges billed to working interest owners, including the Company, of $4.1 million, $848,000 and $5.7 million for the periods ended September 30, 1995, February 16, 1996 and September 30, 1996, respectively, have been classified as a reduction of general and administrative expenses in the accompanying consolidated statements of operations. 3. PRO FORMA INFORMATION The pro forma statement of operations information was prepared as if the Merger and the sale of the Notes (Note 6) had occurred on January 1, 1996. The pro forma information does not purport to represent the results of operations which would have occurred had such transactions been consummated on January 1, 1996 or for any future period. The pro forma information was prepared by combining the two 1996 periods and giving effect to the following adjustments: (i) To adjust depletion, depreciation, and amortization to reflect JEDI's purchase price allocated to property and equipment. (ii) To adjust interest expense to give effect to the net reduction of approximately $37.0 million under the Company's credit facility and repayment of a note payable to an officer of the Company, partially offset by an increase in the interest rate on borrowings under the new credit facility of .25%. (iii) To record interest on the Notes at an interest rate of 10 1/2%. (iv) To record amortization of the issuance cost of the Notes over the term such debt is expected to be outstanding (10 years). (v) To adjust the Writedown of oil and gas properties and stock option compensation to eliminate these non-recurring charges related to the Merger. 7 (vi) To adjust the provision for income taxes for the change in financial taxable income resulting from the above adjustments. (vii) To record the cumulative dividend requirements of the redeemable preferred stock issued to JEDI. 4. CREDIT AGREEMENT On February 14, 1996, the Company entered into a credit agreement with NationsBank of Texas, N.A. ("NationsBank"), as lender and as agent, and additional lenders named therein (the "Credit Agreement"). The Credit Agreement is guaranteed by all of Coda's subsidiaries and provides for a revolving credit facility in an amount up to $250.0 million. The borrowing base is subject to redetermination: (i) semiannually, (ii) upon the sale of Taurus and (iii) upon issuance of public subordinated debt in an amount greater than $100.0 million. The lenders under the Credit Agreement agreed to waive their right to redetermine the borrowing base with respect to the issuance of the Notes. The borrowing base was redetermined effective July 1, 1996 and remained at $115.0 million. At September 30, 1996, $68.0 million was outstanding under the Credit Agreement and $47.0 million was available for borrowing thereunder. The Credit Agreement is unsecured. The Company has provided the lenders with first lien deeds of trust on its oil and natural gas assets which will not become effective, and the lenders have agreed not to file, unless (i) 80% of any outstanding borrowings in excess of the borrowing base is not repaid within a 90 day period, (ii) cash collateral securing a hedge transaction exceeds 20% of the borrowing base or (iii) an event of default or a material adverse event, as defined in the Credit Agreement, occurs. So long as no default (as defined in the Credit Agreement) is continuing, the Company has the option of having all or any portion of the amount borrowed under the Credit Agreement be the subject of one of the following interest rates: (i) NationsBank's prime rate, (ii) the CD Rate plus 1 1/4% to 1 5/8% based upon the ratio of outstanding debt to the available borrowing base and (iii) LIBOR plus 1 1/4% to 1 5/8% based upon the ratio of outstanding debt to the available borrowing base. The Company must also pay a commitment fee of between 0.375% to 0.425% on the unused portion of the credit facility. The Credit Agreement contains various restrictive covenants, including limitations on the granting of liens, restrictions on the issuance of additional debt, restrictions on investments, a requirement to maintain positive working capital, and restrictions on dividends and stock repurchases. The Credit Agreement also contains requirements that JEDI or certain affiliates of JEDI must continue to own a majority of the outstanding equity of Coda and must have the ability to elect the majority of the Board of Directors and that certain members of management maintain specified levels of equity ownership in Coda and continue their employment with the Company. The Credit Agreement matures on February 16, 2001. On August 1, 1996, the Company entered into the First Amendment to Credit Agreement (the "First Amendment") which in general reduced the Company's interest rate. The First Amendment provides the Company the option of having all or any portion of the amount borrowed under the Credit Agreement be the subject of one of the following interest rates: (i) NationsBank's prime rate, (ii) the CD Rate plus 1% to 1 1/2% based upon the ratio of outstanding debt to the available borrowing base and (iii) LIBOR plus 1% to 1 1/2% based upon the ratio of outstanding debt to the available borrowing base. The Company must also pay a commitment fee of between 0.30% to 0.425% on the unused portion of the credit facility. 5. LONG-TERM DEBT The Company's 12% Senior Subordinated Debentures due 2000 (the "Debentures") bear interest at 12% per annum, payable semiannually. On March 28, 1996, the Company gave notice of redemption, prior to 8 maturity, to each of the record holders of the outstanding Debentures. On May 1, 1996, the Company deposited with the trustee of the Debentures funds sufficient to redeem the Debentures at a redemption price of 100.0% of the principal amount of the Debentures plus accrued and unpaid interest thereon, and thereafter interest on the Debentures ceased to accrue. 6. 10 1/2% SENIOR SUBORDINATED NOTES On March 18, 1996, the Company completed the sale of $110 million principal amount of 10 1/2% Senior Subordinated Notes due 2006 (the "Notes"). The proceeds of the Notes were used to fully repay the JEDI debt assumed in the Merger and to partially repay bank debt. The Notes bear interest at an annual rate of 10 1/2% payable semiannually in arrears on April 1 and October 1 of each year. The Notes are general, unsecured obligations of the Company, are subordinated in right of payment to all Senior Debt (as defined in the Indenture governing the Notes) of Coda, and are senior in right of payment to all future subordinated debt of the Company. The claims of the holders of the Notes are subordinated to Senior Debt, which, as of September 30, 1996, was $68.6 million. The Notes were issued pursuant to an Indenture, which contains certain covenants that, among other things, limit the ability of Coda and its Restricted Subsidiaries (as defined in the Indenture) to incur additional indebtedness and issue Disqualified Stock (as defined in the Indenture), pay dividends, make distributions, make investments, make certain other restricted payments, enter into certain transactions with affiliates, dispose of certain assets, incur liens securing pari passu or subordinated indebtedness of Coda and engage in mergers and consolidations. The Notes are not redeemable at Coda's option prior to April 1, 2001. After April 1, 2001, the Notes will be subject to redemption at the option of Coda, in whole or in part, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest thereon to the applicable redemption date. In addition, until March 12, 1999, up to $27.5 million in aggregate principal amount of Notes are redeemable, at the option of Coda on any one or more occasions from the net proceeds of an offering of common equity of Coda, at a price of 110.5% of the aggregate principal amount of the Notes, together with accrued and unpaid interest thereon to the date of the redemption; provided, however, that at least $82.5 million in aggregate principal amount of Notes must remain outstanding immediately after the occurrence of such redemption; provided, further, that any such redemption shall occur within 75 days of the date of the closing of such offering of common equity. In the event of a Change of Control (as defined in the Indenture), holders of the Notes will have the right to require Coda to repurchase their Notes, in whole or in part, at a price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of repurchase. The Indenture requires that, prior to such a repurchase but in any event within 90 days of such Change of Control, Coda must either repay all Senior Debt or obtain any required consent to such repurchase. Coda's payment obligations under the Notes are fully, unconditionally and jointly and severally guaranteed on a senior subordinated basis by all of Coda's current subsidiaries and future Restricted Subsidiaries. Such guarantees are subordinated to the guarantees of Senior Debt issued by the Guarantors (as defined in the Indenture) under the Credit Agreement and to other guarantees of Senior Debt issued in the future. All of Coda's current subsidiaries are wholly owned. There are currently no contractual restrictions on distributions from the Guarantors to Coda. 9 Separate financial statements and other disclosures concerning the Guarantors are not presented because management has determined they are not material to investors. The combined condensed financial information of Coda's current subsidiaries, the Guarantors, is as follows:
September 30, 1996 ---------------- Current assets $ 5,873 Oil and gas properties, net 54,032 Gas plants and gathering systems, net 31,857 Other properties, net, and other assets 1,321 -------- Total assets $ 93,083 ======== Current liabilities $ 6,259 Intercompany payables 39,324 Deferred income taxes 17,424 Stockholder's equity 30,076 -------- Total liabilities and stockholder's equity $ 93,083 ========
Pre Merger Post Merger --------------- -------------- 47 Days Ended 227 Days Ended February 16, September 30, 1996 1996 --------------- -------------- Revenues: Oil and gas sales $2,529 $ 17,443 Gas gathering and processing 5,322 26,294 Other income 2 156 ------ -------- 7,853 43,893 Costs and expenses: Oil and gas production 843 4,758 Gas gathering and processing 4,567 21,836 Depletion, depreciation and amortization 1,039 6,924 General and administrative 435 2,229 Interest 460 1,881 Writedown of oil and gas properties --- 19,159 ------ -------- 7,344 56,787 ------ -------- Income (loss) before income taxes 509 (12,894) Income tax expense (benefit) 277 (4,488) ------ -------- Net income (loss) $ 232 $ (8,406) ====== ========
10 7. PREFERRED STOCK Under Coda's Restated Certificate of Incorporation, the Board of Directors is authorized to issue up to 40,000 shares of preferred stock, par value $0.01 per share. All 40,000 shares of preferred stock are designated as "15% Cumulative Preferred Stock." The holders of each share of Preferred Stock are entitled to receive, when and as declared by the Board of Directors, cumulative preferential dividends, at the rate of $150.00 per share per annum. There are currently 20,000 shares of Preferred Stock issued and outstanding. Shares of Preferred Stock in excess of such 20,000 shares shall be issuable only for the purpose of paying dividends on the Preferred Stock. As of September 30, 1996, the Preferred Stock had accumulated approximately $1.9 million in preferred dividends which had not been declared by the Board of Directors. As long as any shares of Preferred Stock are outstanding, no dividends whatsoever, whether paid in cash, stock or otherwise (except for dividends paid in shares of common stock, either in the form of a stock split or stock dividend), may be paid or declared, nor may any distribution be made, on any common stock to the holders of such stock, unless certain conditions are met. Coda's Restated Certificate of Incorporation requires that Coda redeem all the issued and outstanding shares of Preferred Stock at a redemption price of $1,000 per share, plus all accrued and unpaid dividends (including undeclared dividends) to the date of redemption, if Coda has sufficient funds legally available for such redemption and if such redemption would not violate or conflict with any loan agreement, credit agreement, note agreement, indenture or other agreement relating to indebtedness to which Coda is a party, on or before the fifth business day after the earliest to occur of the following: (i) the closing of the sale by Coda of Taurus Energy Corp. and (ii) a Trigger Event, as such term is defined in the Stockholders Agreement (Note 9). The Preferred Stock may be redeemed by Coda at its option, as a whole or in part, to the extent Coda shall have funds legally available for such redemption, at any time or from time to time at a redemption price of $1,000 per share, plus all accrued and unpaid dividends (including undeclared dividends) to the date of redemption. Such redemption, whether required or optional, is restricted by the Credit Agreement and the Indenture. Upon the complete liquidation, dissolution, or winding up of Coda, whether voluntarily or involuntarily, the holders of Preferred Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of Coda but before any distribution is made to the holders of any common stock, to be paid $1,000 per share plus all accrued and unpaid dividends (including undeclared dividends), and shall not be entitled to any further payment. Except as otherwise provided herein or required by law, the holders of shares of Preferred Stock are not entitled to vote on any matters to be voted on by the stockholders of Coda; provided, however, that so long as any shares of the Preferred Stock are outstanding, Coda shall not, without the written consent or the affirmative vote of holders of at least a majority of the total number of shares of Preferred Stock then outstanding and voting as a class, (i) amend its Restated Certificate of Incorporation or Bylaws or (ii) authorize the merger (whether or not Coda is a surviving corporation in such merger) of Coda, in each case, if such amendment or merger would alter, change or abolish the powers, preference or rights of the Preferred Stock so as to affect the holders of the Preferred Stock adversely. 11 8. COMMON STOCK At December 31, 1995, the Company had 40.0 million shares of $.02 par value common stock authorized with 22.1 million shares issued and outstanding. At September 30, 1996, the Company had 1.0 million shares of $.01 par value common stock authorized with 14,000 shares issued to management subject to put and call rights and 900,000 issued to JEDI for a total of 914,000 shares issued and outstanding. 9. RELATED PARTY TRANSACTIONS Subscription Agreement CAI entered into a Subscription Agreement dated as of October 30, 1995, as amended by Amendment No. 1 to Subscription Agreement dated as of January 10, 1996, with members of the Management Group (as amended, the "Subscription Agreement") which provided for the acquisition by such persons of CAI common stock and the grant to them of nonqualified stock options to purchase shares of post-Merger common stock (the "Replacement Options") of Coda. Under the Subscription Agreement, each member of the Management Group who acquired CAI common stock paid $100 per share for shares thereof, which is the same price per share paid by JEDI for the remaining shares of CAI common stock. Under the Subscription Agreement, the Management Group acquired CAI common stock immediately prior to the effective time of the Merger in exchange for varying combinations of (i) proceeds from limited recourse promissory notes payable to CAI in the aggregate principal amount of $937,300 (the "Promissory Notes"), (ii) Coda common stock, which was valued for this purpose at $7.75 per share, and (iii) cash. The CAI common stock so acquired was not registered under the Securities Act or any state securities laws and did not have the benefit of any registration rights, but was subject to the Stockholders Agreement described below. By virtue of the Merger, each share of CAI common stock was converted into one share of Coda common stock. The Promissory Notes are due on February 16, 2001, bear interest at 5.61 % per annum, are secured by the common stock purchased with the proceeds thereof and certain rights of the maker under the Stockholders Agreement, and provide that in no event will an individual maker's liability thereunder for any deficiency on his respective Promissory Note (after the sale and disposition of all collateral securing same) exceed 35% of the original principal balance of the Promissory Note. The Subscription Agreement provided that the Specified Options (representing certain options to purchase common stock held by certain members of the Management Group) and Specified Warrants (representing certain warrants to purchase common stock held by certain members of the Management Group) would not be exercised prior to the effective time of the Merger and would, as of the effective time, be canceled without exercise and without payment of consideration. Concurrently, the Management Group entered into Nonstatutory Stock Option Agreements governing the Replacement Options that provided for the right for a period of 10 years from and after the effective time of the Merger to purchase shares of post-Merger Coda common stock for $0.01 per share. However, the Replacement Options may only be exercised while the holder remains an employee of the Company and for a limited period of time thereafter. The number of shares of Coda common stock underlying the Replacement Options each member of the Management Group received is based on the amount of cash the holder would have received if his Specified Options or Specified Warrants had been converted into cash in the Merger on the same basis as other outstanding options and warrants to purchase common stock were converted, divided by the $100 per share purchase price paid by JEDI and the other Management Group members for their shares of CAI common stock. Thus, if the Replacement Options 12 are exercised, the holders will have effectively paid the same purchase price per share as JEDI and the Management Group paid for their shares of common stock of Coda. In connection with the issuance of the Replacement Options, the Company recognized stock option compensation expense of approximately $3.2 million representing the total amount of cash the holders of the Specified Options and Specified Warrants would have received if such options and warrants had been converted to cash in the Merger. Stockholders Agreement CAI, JEDI and the Management Group entered into a Stockholders Agreement dated as of October 30, 1995, as amended by Amendment No. l to Stockholders Agreement dated as of January 10, 1996 (as amended, the "Stockholders Agreement"), which provides generally that all parties, including JEDI and the Management Group, (i) have rights of first refusal to acquire additional shares of common stock of Coda that may be issued by Coda and (ii) are restricted from transferring their Coda common stock. Coda has a right to match any third party offer to purchase shares of Coda common stock from any stockholder, and, in the event that Coda does not purchase those shares, the other stockholders may have a right to include a pro rata portion of their Coda common stock in the transaction. The Stockholders Agreement provides that, if the employment of a member of the Management Group terminates for any reason (including death or disability) other 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 Coda) or his termination by Coda for cause, then Coda shall have a right to purchase such member's shares of Coda common stock at a purchase price to be determined from time to time by Coda pursuant to a formula that values the shares on the basis of a comparison of the discretionary cash flow and EBITDA (as defined therein) of the Company and a group of peer companies. The Stockholders Agreement also provides that, if the employment of a member of the Management Group terminates for any reason other than voluntary termination or termination of such member for cause, then such member shall have the right to require Coda to purchase such member's shares of Coda common stock based on the previously described formula. The purchase price under the formula will vary depending on the financial performance of the Company and the group of peer companies. The Stockholders Agreement provides that each member of the Management Group shall have the right (the "Special Management Rights") to receive from JEDI, upon the occurrence of certain events (generally an initial public offering, a business combination with another person or the liquidation of Coda) (each, a "Trigger Event"), an amount, which is payable in cash or additional shares of Coda common stock depending upon the cause of the Trigger Event, designed to result in the Management Group receiving in connection with the Trigger Event one-third of the proceeds, attributable to the shares of Coda common stock purchased by JEDI, above the amount of proceeds necessary for JEDI to achieve an internal annual rate of return on that investment of 15%. The individual member's interest in such Special Management Rights is proportional to such member's ownership of the fully diluted common stock of Coda. The Stockholders Agreement also provides that if the employment of a member of the Management Group terminates, 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 of the Merger, Coda will establish an employee benefit plan for the benefit of its employees who are not members of the Management Group and will contribute to the plan 1,900 shares of Coda common stock. Furthermore, pursuant to the Stockholders Agreement, 4% of the Special Management Rights will be allocated thereto. The Stockholders Agreement will terminate and no party thereto will have any further obligations or rights thereunder upon the earliest to occur of (i) the termination of the Merger Agreement in accordance with 13 its terms, (ii) October 30, 2005, (iii) the date on which an initial public offering of Coda common stock or any business transaction involving Coda whereby Coda common stock becomes a publicly traded security is consummated, (iv) the date of the dissolution, liquidation or winding-up of Coda and (v) the date of the delivery to Coda of a written termination notice executed by certain parties to the Stockholders Agreement. Enron Enron Corp. ("Enron") is the parent of ECT and accordingly may be deemed to control indirectly both JEDI and the Company. Enron and certain of its subsidiaries and other affiliates collectively participate in nearly all phases of the oil and natural gas industry and are, therefore, competitors of the Company. In addition, ECT and JEDI have provided, and may in the future provide, and ECT Securities Corp. has assisted, and may in the future assist, in arranging, financing to non-affiliated participants in the oil and natural gas industry who are or may become competitors of the Company. Because of these various conflicting interests, ECT, the Company, JEDI and the Management Group have entered into the Business Opportunity Agreement which is intended to make it clear that Enron and its affiliates have no duty to make business opportunities available to the Company in most circumstances. The Business Opportunity Agreement also provides that ECT and its affiliates may pursue certain business opportunities to the exclusion of the Company. The Business Opportunity Agreement may limit the business opportunities available to the Company. In addition, pursuant to the Business Opportunity Agreement there may be circumstances in which the Company will offer business opportunities to certain affiliates of Enron. If an Enron affiliate is offered such an opportunity and decides to pursue it, the Company may be unable to pursue it. 10. NOTE RECEIVABLE FROM STOCKHOLDER During August 1996, Douglas H. Miller ("Miller"), the Company's Chief Executive Officer and Chairman of the Board of Directors, received $738,000 pursuant to a Limited Recourse Promissory Note in the original principal amount of $1,188,000 (the "Miller Note"). The Miller Note bears interest at 6.74% per annum with final maturity on February 16, 2001, and provides that in no event will Miller's liability thereunder (after the sale and disposition of all collateral securing same) exceed 35% of the original principal balance of the Miller Note. In connection with the execution of the Miller Note, the Company and Miller entered into an amendment of the agreement governing the Replacement Options which prohibits the exercise of the option until all amounts due under the Miller Note have been paid in full. 11. HEDGING TRANSACTIONS The following table sets forth the barrels and weighted average NYMEX prices hedged under various swap agreements entered into as of September 30, 1996.
Periods Covered Barrels Hedged Weighted Average Price --------------- -------------- ----------------------- Three months ending December 31, 1996 135,000 $18.97 Year ending December 31, 1997 735,000 $19.13
As of September 30, 1996 the Company has open positions for sold call options covering 25,000 Bbls of oil per month at an option price of $20.00 per Bbl for the period from October 1996 to August 1997. During the periods ended February 16, 1996 and September 30, 1996 the Company's oil revenues were decreased by $14,000 and approximately $2.0 million, respectively, as a result of hedging transactions. 14 In connection with two swaps beginning January 1, 1997 covering 10,000 barrels per month and 15,000 barrels per month at a strike price of $19.41 and $19.00, respectively, which expire September 30, 1997 and December 31, 1997, respectively, the Company granted the counterparty a one day option at the expiration of the swap to extend the swap for an additional twelve months. 12. SALE OF TAURUS On August 13, 1996, Coda entered into a letter of intent with respect to the possible sale of all of the issued and outstanding capital stock of its wholly owned subsidiary, Taurus Energy Corp. ("Taurus"), to EXCO Resources, Inc. ("EXCO"), a publicly held Texas corporation. The letter of intent is currently terminable by either party upon written notice to the other party without further obligation thereunder. There can be no assurance that Coda and EXCO will reach an agreement regarding the sale of Taurus or that, if such agreement is reached, the sale will be consummated. Coda is continuing discussions with EXCO and is studying other alternatives for maximizing the value of its investment in Taurus. 15 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- The Company is an independent energy company principally engaged in the acquisition and exploitation of producing oil and natural gas properties. The Company also owns and operates natural gas processing and liquids extraction facilities and natural gas gathering systems. Coda seeks to acquire properties whose predominant economic value is attributable to proved producing reserves and to enhance that value through control of operations, reduction of costs and development of properties. The Company's principal strategy is to increase oil and natural gas reserves and cash flow by selectively acquiring and exploiting producing oil and natural gas properties, especially those properties with enhanced recovery and other lower risk development potential. Coda's exploitation efforts include, where appropriate, the drilling of lower risk development wells, the initiation of secondary recovery projects, the renegotiation of marketing agreements and the reduction of drilling, completion and lifting costs. Cost savings may be principally achieved through reductions in field staff and the more effective utilization of field facilities and equipment by virtue of geographic concentration. The Company expects to continue its efforts to acquire additional oil and natural gas properties. Future acquisitions, if any, would necessitate, in most cases, borrowing additional funds under the Company's credit facility. The ability to borrow such funds is dependent upon the Company's borrowing base from time to time and the effect upon the borrowing base under the Credit Agreement. On February 16, 1996, pursuant to an Agreement and Plan of Merger dated as of October 30, 1995 (as amended, the "Merger Agreement"), by and among Coda, Joint Energy Development Investments Limited Partnership ("JEDI"), which is an affiliate of Enron Capital & Trade Resources Corp. ("ECT"), and Coda Acquisition, Inc. ("CAI"), which was a subsidiary of JEDI, JEDI acquired Coda through a merger (the "Merger") at a price of $7.75 per share in cash (for an aggregate purchase price of approximately $176.2 million). The Merger has been accounted for using the purchase method of accounting. As such, JEDI's cost of acquiring Coda has been allocated to the assets and liabilities acquired based on estimated fair values. As a result, the Company's financial position and operating results subsequent to the date of the Merger will reflect a new basis of accounting and are not comparable to prior periods. RESULTS OF OPERATIONS The following table sets forth certain operating data regarding the production and sales volumes, average sales prices, and costs associated with the Company's oil and gas operations and gas gathering and processing operations for the periods indicated. 16
Pre Merger Post Merger ------------------ ------------- Three Pro Forma Nine 47 Days Months 227 Days Nine Months Three Months Ended Months Ended Ended Ended Ended Ended September 30, September 30, February 16, September 30, September 30, September 30, 1995 1995 1996 1996 1996 1996 ------------------ ------------- ------------ ------------- ------------- -------------- OIL AND GAS OPERATING DATA: Net production: Oil (MBbls) Gas (MMcf) 768 2,323 408 840 2,147 2,555 907 3,295 500 1,012 2,390 2,890 Average sales price: Oil (per Bbl) $ 16.83 $ 17.16 $17.57 $ 20.46 $ 19.90 $ 19.53 Gas (per Mcf) $ 1.51 $ 1.51 $ 1.82 $ 2.01 $ 2.05 $ 2.01 Average production cost per BOE $ 7.25 $ 6.98 $ 7.33 $ 8.01 $ 7.93 $ 7.83 GAS GATHERING AND PROCESSING OPERATING DATA: Sales: Gas sales (MMBTU) 3,238 9,602 1,555 3,154 7,633 9,188 Gas sales average price $ 1.55 $ 1.54 $ 2.24 $ 2.21 $ 2.20 $ 2.21 Natural gas liquids sales (Mgallons) 13,984 39,947 5,868 10,982 27,844 33,712 Natural gas liquids average price $ .2635 $ .2745 $.3173 $ .3641 $ .3403 $ .3363 Costs and expenses (in thousands): Gas purchases $ 6,595 $18,983 $3,760 $ 8,231 $19,615 $23,675 Plant operating expenses $ 1,055 $ 2,952 $ 506 $ 1,088 $ 2,552 $ 3,058
Comparison of the nine months ended September 30, 1995 and 1996 The unaudited pro forma combined information was prepared as if the Merger and the issuance of $110.0 million of 10 1/2% Senior Subordinated Notes (the "Notes") had occurred on January 1, 1996. The unaudited pro forma information was prepared by combining the two 1996 periods and giving effect to adjustments affecting (i) depletion, depreciation and amortization, (ii) interest expense, (iii) income taxes and (iv) certain other costs resulting from the Merger as more fully outlined in the Notes to Consolidated Financial Statements. The comparisons below compare the unaudited pro forma combined information to historical information for 1995. Oil and gas sales for the nine months ended September 30, 1996, increased 24% to approximately $55.7 million from approximately $44.8 million in the comparable period in 1995 primarily due to a 10% increase in oil production and an increase of $2.37 per barrel and $.50 per Mcf in the average sales price of oil and gas, respectively. The increase in production is a result of the acquisition of producing oil and gas properties in the fourth quarter of 1995, the Company's development drilling program and favorable responses from certain of 17 the Company's waterflood units. This increase was partially offset by a 12% decrease in gas production due primarily to sales of properties and natural production declines. During the nine months ended September 30, 1996, 90% of oil and gas sales was attributable to oil production. Oil and gas prices remain unpredictable. See "- Changes in Prices and Hedging Activities" below. Gas gathering and processing revenues for the nine months ended September 30, 1996 increased 23% to approximately $31.6 million from approximately $25.7 million in the comparable period in 1995 primarily due to a 44% and a 23% increase in the average sales price for natural gas and natural gas liquids, respectively. This increase was partially offset by a 16% decrease in natural gas liquids volumes due to reduced plant throughput volumes as a result of the termination of a gas purchase contract in January 1996 and production declines. Other income for the nine months ended September 30, 1996 increased 98% to approximately $1.6 million from approximately $783,000 for the same period in 1995 primarily due to an increase in interest income of $329,000 from the investment of higher available cash balances and gains on sales of marketable securities of $255,000. Oil and gas production expenses (including production taxes) for the nine months ended September 30, 1996 increased 19% to approximately $23.8 million from approximately $20.0 million for the same period in 1995, reflecting the effects of the increased production from the properties acquired in 1995 and from new wells drilled. Oil and gas production expenses for the nine months ended September 30, 1996 were $7.83 per Boe and are expected to remain near this level for the remainder of the year. Gas gathering and processing expenses for the nine months ended September 30, 1996 increased 20% to approximately $26.4 million from approximately $21.9 million in the comparable period in 1995 due primarily to an increase in the purchase price paid to producers. Gas gathering and processing purchases usually fluctuate in ratio with gas gathering and processing revenues. Pro forma depletion, depreciation and amortization expense for the nine months ended September 30, 1996, increased 43% to approximately $20.8 million from approximately $14.6 million for the historical period in 1995 reflecting the increase in the carrying value of the Company's assets as a result of the Merger, the increase in oil production from acquisitions in 1995 and property development. Oil and gas depletion, depreciation and amortization expense increased from $4.35 per Boe for the nine months ended September 30, 1995, to $5.94 per Boe on a pro forma basis for the nine months ended September 30, 1996. The Company anticipates that the depletion, depreciation and amortization rate per Boe will be approximately $5.94 for 1996 absent significant additional acquisitions. General and administrative expenses for the nine months ended September 30, 1996 decreased 31% to approximately $1.6 million from approximately $2.4 million in the comparable period in 1995. This is primarily due to increased overhead charges billed to working interest owners on the properties acquired in 1995, being partially offset by additional employees needed as a result of acquisitions of oil and gas properties. The Company expects base general and administrative expenses, net of overhead recoveries, to remain near this level, absent significant additional acquisitions. Pro forma interest expense for the nine months ended September 30, 1996 increased 102% to approximately $12.8 million from approximately $6.3 million for the historical period in 1995, primarily due to increases in outstanding debt levels as a result of the Merger which reduced the Company's bank debt, but added $110.0 million of senior subordinated debt bearing interest at 10 1/2% . Also contributing to the increase were amounts borrowed during 1995 to fund development drilling and property acquisitions. 18 The historical results of operations for the period ended February 16, 1996, include approximately $3.2 million of stock option compensation expense as a result of the replacement of certain outstanding options and warrants with new options subject to a lower exercise price. The historical results for the period ended September 30, 1996 include a writedown of oil and gas properties of approximately $83.3 million to the full cost pool ceiling based on product prices at the date of the Merger. Pro forma net income for the nine months ended September 30, 1996, was approximately $1.9 million compared to approximately $3.9 million for the historical period in 1995. This decrease resulted primarily from increases in depletion, depreciation and amortization and interest expense as a result of the Merger partially offset by an increase in oil production and higher oil and natural gas prices. CHANGES IN PRICES AND HEDGING ACTIVITIES Annual average oil and natural gas prices have fluctuated significantly over the past three years. The Company's weighted average oil price per Bbl during 1995 and at December 31, 1995, was $17.08 and $18.31, respectively. For the nine months ended September 30, 1996, the Company averaged $1.65 per barrel less (including an oil hedging price decrease of $.78 per barrel) and $.32 per Mcf less for its oil and natural gas sales, respectively, than the average NYMEX prices for the same period. On October 31, 1996, the NYMEX closing price for the near month for oil and natural gas was $23.35 per barrel and $2.73 per Mcf, respectively. Pursuant to the loan agreements with Diamond Energy Operating Company's ("Diamond," a subsidiary of Coda) former primary lender, Diamond entered into an agreement with a refining and marketing company to sell a fixed number of barrels attributable to its share of production of liquid hydrocarbons from certain formerly secured properties at a price of $15.25 per barrel. The effect of this contract was to lower the Company's 1995 and first nine months of 1996 oil revenues by approximately $642,000 ($.41 per barrel) and $123,000 ($.05 per barrel), respectively. The commitment under this agreement was fulfilled during February 1996. In an effort to reduce the effects of the volatility of the price of oil and natural gas on the Company's operations, management has adopted a policy of hedging oil and natural gas prices through the use of commodity futures, options, and swap agreements whenever market prices are in excess of the prices anticipated in the Company's operating budget and profit plan. While the use of these hedging arrangements limits the downside risk of adverse price movements, it may also limit future gains from favorable movements. All hedging is accomplished pursuant to exchange-traded contract or master swap agreements based upon standard forms. The Company addresses market risk by selecting instruments whose value fluctuations correlate strongly with the underlying commodity being hedged. Credit risk related to hedging activities, which is minimal, is managed by requiring minimum credit standards for courterparties, periodic settlements and mark-to-market valuations. The Company has not historically been required to provide any significant amount of collateral in connection with its hedging activities. The following table sets forth the barrels and weighted average NYMEX prices hedged under various swap agreements entered into as of September 30, 1996.
Periods Covered Barrels Hedged Weighted Average Price --------------- --------------- ---------------------- Three months ending December 31, 1996 135,000 $18.97 Year ending December 31, 1997 735,000 $19.13
19 As of September 30, 1996, the Company has open positions for sold call options covering 25,000 Bbls of oil per month at an option price of $20.00 per Bbl for the period from October 1996 to August 1997. In the event of a significant increase in the future NYMEX oil prices above the swap price for the periods covered by the swap, the Company may be required to utilize cash to fund margin accounts. During the nine months ended September 30, 1995 the Company's oil revenues were increased by $194,000 as a result of hedging transactions. During the periods ended February 16, 1996 and September 30, 1996 the Company's oil revenues were decreased by $14,000 and $2.0 million, respectively, as a result of hedging transactions. In connection with two swaps beginning January 1, 1997 covering 10,000 barrels per month and 15,000 barrels per month at a strike price of $19.41 and $19.00, respectively, which expire September 30, 1997 and December 31, 1997, respectively, the Company granted the counterparty a one day option at the expiration of the swap to extend the swap for an additional twelve months. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company had cash and cash equivalents aggregating approximately $9.1 million and working capital of approximately $5.4 million. Cash provided by operating activities for the nine months ended September 30, 1996 increased to approximately $30.6 million compared to $18.7 million for the comparable period in 1995 due primarily to an increase in oil production and an oil price increase partially offset by an increase in interest expense. An increase in accrued interest accounts for $6.0 million of the increase in cash provided by operating activities. Excluding the impact of the Merger, cash flows used in investing activities decreased from $22.0 million for the nine months ended September 30, 1995 to $8.9 million for the comparable period in 1996, as a result of a higher level of additions to property and equipment in 1995. Investing activities in 1996 also include the impact of the purchase of Coda by JEDI. Cash flows provided by financing activities increased to $162.9 million for the nine months ended September 30, 1996 from $1.3 million for the comparable period in 1995, primarily due to financing transactions related to the Merger. See " --The Merger" below. The Company has two principal operating sources of cash: (i) net oil and gas sales from its oil and gas properties and (ii) net margins earned from gas gathering and processing operations. The Company expects to continue its efforts to acquire additional oil and gas properties. Future acquisitions, if any, would necessitate, in most cases, borrowing additional funds under the Credit Agreement. The ability to borrow such funds is dependent upon the Company's borrowing base from time to time and the effect upon the borrowing base of the properties to be acquired. The Company from time to time solicits bids for selected portions of its existing oil and natural gas properties which it believes are no longer suitable for its business strategy. Sales of properties in the past three years have not been material and no substantial sales of oil and gas properties are currently under consideration. On August 13, 1996, Coda entered into a letter of intent with respect to the possible sale of all of the issued and outstanding capital stock of its wholly owned subsidiary, Taurus Energy Corp. ("Taurus"), to EXCO Resources, Inc. ("EXCO"), a publicly held Texas corporation. The letter of intent is currently terminable by either party upon written notice to the other party without further obligation thereunder. There can be no assurance that Coda and EXCO will reach an agreement regarding the sale of Taurus or that, if such agreement is reached, the sale will be consummated. Coda is continuing discussions with EXCO and is studying other alternatives for maximizing the value of its investment in Taurus. 20 The Company has development drilling programs designed for all its major operating areas. The Company has a revised capital spending budget of approximately $15 million in 1996, excluding property acquisitions, but is not contractually committed to expend these funds. During the first nine months of 1996, the Company incurred approximately $7.4 million of these costs. In addition, the Company is continuing to evaluate oil and natural gas properties for future acquisitions. Historically, the Company has used the public equity market (i) to raise cash to fund acquisitions or repay indebtedness incurred for acquisitions and (ii) as a medium of exchange for other companies' capital stock or assets in connection with acquisitions. As a result of being 95% owned by JEDI (on a fully diluted basis), the Company does not expect to utilize the public equity market to finance acquisitions in the near term. Accordingly, any material expenditures in connection with acquisitions would require borrowing under the Company's credit facility or from other sources. There can be no assurance that such funds will be available to the Company. Furthermore, the Company's ability to borrow in the future is subject to restrictions imposed by the Company's credit facility and the Indenture as more fully described below. The Merger On February 16, 1996, the Company completed the Merger. The Merger has been accounted for using the purchase method of accounting. As such, JEDI's cost of acquiring Coda was allocated to the assets and liabilities acquired using estimated fair values. As a result, the Company's financial position and operating results subsequent to the date of the Merger reflect a new basis of accounting and are not comparable to prior periods. Concurrently with the execution of the Merger Agreement, JEDI and CAI entered into certain agreements with the Management Group providing for a continuing role of management in the Company after the Merger. The sources and uses of funds related to financing the Merger were as follows: SOURCES OF FUNDS (in millions)
Credit Agreement $ 95.0 JEDI Debt(l) 100.0 Redeemable Preferred Stock issued to JEDI 20.0 Common Stock issued to JEDI 90.0 ------ Total $305.0 ======
USES OF FUNDS (in millions)
Payments to Coda stockholders, warrantholders and optionholders $176.2 Repayment of former credit facility and other indebtedness 122.7 Merger costs and other expenses 6.1 ------ Total $305.0 ======
(1) Represents indebtedness incurred by CAI and assumed by Coda to fund a portion of the consideration paid in the Merger. The Company incurred substantial indebtedness in connection with the Merger and is highly leveraged. As of September 30, 1996, the Company had total indebtedness of approximately $178.6 million and stockholders' equity (including preferred stock) of approximately $62.6 million. Based upon the Company's 21 current level of operations and anticipated growth, management of the Company believes that available cash, together with available borrowings under the Credit Agreement will be adequate to meet the Company's anticipated future requirements for working capital, capital expenditures and scheduled payments of principal of, and interest on, its indebtedness, including the Notes. There can be no assurance that such anticipated growth will be realized, that the Company's business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable the Company to service its indebtedness, including the Notes, or make necessary capital expenditures. In addition, the Company anticipates that it is likely to find it necessary to refinance a portion of the principal amount of the Notes at or prior to their maturity. However, there can be no assurance that the Company will be able to obtain financing to complete a refinancing of the Notes. Credit Agreement On February 14, 1996, the Company entered into a credit agreement with NationsBank of Texas, N.A. ("NationsBank"), as lender and as agent, and additional lenders named therein (the "Credit Agreement"). The Credit Agreement is guaranteed by all of Coda's subsidiaries and provides for a revolving credit facility in an amount up to $250.0 million. The borrowing base is subject to redetermination: (i) semiannually, (ii) upon the sale of Taurus and (iii) upon issuance of public subordinated debt in an amount greater than $100.0 million. The lenders under the Credit Agreement have agreed to waive their right to redetermine the borrowing base with respect to the issuance of the Notes. The borrowing base was redetermined effective July 1, 1996 and remained at $115.0 million. At September 30, 1996, $68.0 million was outstanding under the Credit Agreement and $47.0 million was available for borrowing thereunder. The Credit Agreement is unsecured. The Company has provided the lenders with first lien deeds of trust on its oil and natural gas assets which will not become effective, and the lenders have agreed not to file, unless (i) 80% of any outstanding borrowings in excess of the borrowing base is not repaid within a 90 day period, (ii) cash collateral securing a hedge transaction exceeds 20% of the borrowing base or (iii) an event of default or a material adverse event, as defined in the Credit Agreement, occurs. So long as no default (as defined in the Credit Agreement) is continuing, the Company has the option of having all or any portion of the amount borrowed under the Credit Agreement be the subject of one of the following interest rates: (i) NationsBank's prime rate, (ii) the CD Rate plus 1 1/4% to 1 5/8% based upon the ratio of outstanding debt to the available borrowing base and (iii) LIBOR plus 1 1/4% to 1 5/8% based upon the ratio of outstanding debt to the available borrowing base. The Company must also pay a commitment fee of between 0.375% to 0.425% on the unused portion of the credit facility. The Credit Agreement contains various restrictive covenants, including limitations on the granting of liens, restrictions on the issuance of additional debt, restrictions on investments, a requirement to maintain positive working capital, and restrictions on dividends and stock repurchases. The Credit Agreement also contains requirements that JEDI or certain affiliates of JEDI must continue to own a majority of the outstanding equity of Coda and must have the ability to elect the majority of the Board of Directors and that certain members of management maintain specified levels of equity ownership in Coda and continue their employment with the Company. The Credit Agreement matures on February 16, 2001. On August 1, 1996, the Company entered into the First Amendment to Credit Agreement (the "First Amendment") which in general reduced the Company's interest rate. The first amendment provides the Company the option of having all or any portion of the amount borrowed under the Credit Agreement be the subject of one of the following interest rates: (i) NationsBank's prime rate, (ii) the CD Rate plus 1% to 1 1/2% based upon the ratio of outstanding debt to the available borrowing base and (iii) LIBOR plus 1% to 1 1/2% 22 based upon the ratio of outstanding debt to the available borrowing base. The Company must also pay a commitment fee of between 0.30% to 0.425% on the unused portion of the credit facility. 10-1/2% Senior Subordinated Notes On March 18, 1996, the Company completed the sale of $110 million principal amount of 10 1/2% Senior Subordinated Notes due 2006 (the "Notes"). The proceeds of the Notes were used to fully repay the JEDI debt assumed in the Merger and to partially repay bank debt. The Notes bear interest at an annual rate of 10 1/2% payable semiannually in arrears on April 1 and October 1 of each year. The Notes are general, unsecured obligations of the Company, are subordinated in right of payment to all Senior Debt (as defined in the Indenture governing the Notes) of Coda, and are senior in right of payment to all future subordinated debt of the Company. The claims of the holders of the Notes are subordinated to Senior Debt, which, as of September 30, 1996, was $68.6 million. Coda's payment obligations under the Notes are fully, unconditionally and jointly and severally guaranteed on a senior subordinated basis by all of Coda's current subsidiaries and future Restricted Subsidiaries (as defined in the Indenture). Such guarantees are subordinated to the guarantees of Senior Debt issued by the Guarantors under the Credit Agreement and to other guarantees of Senior Debt issued in the future. All of Coda's current subsidiaries are wholly owned. There are currently no contractual restrictions on distributions from the Guarantors to Coda. The Notes were issued pursuant to an Indenture, which contains certain covenants that, among other things, limit the ability of Coda and its Restricted Subsidiaries to incur additional indebtedness and issue Disqualified Stock (as defined in the Indenture), pay dividends, make distributions, make investments, make certain other restricted payments, enter into certain transactions with affiliates, dispose of certain assets, incur liens securing pari passu or subordinated indebtedness of Coda and engage in mergers and consolidations. The Notes are not redeemable at Coda's option prior to April 1, 2001. After April 1, 2001, the Notes will be subject to redemption at the option of Coda, in whole or in part, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest thereon to the applicable redemption date. In addition, until March 12, 1999, up to $27.5 million in aggregate principal amount of Notes are redeemable, at the option of Coda on any one or more occasions from the net proceeds of an offering of common equity of Coda, at a price of 110.5% of the aggregate principal amount of the Notes, together with accrued and unpaid interest thereon to the date of the redemption; provided, however, that at least $82.5 million in aggregate principal amount of Notes must remain outstanding immediately after the occurrence of such redemption; provided, further, that any such redemption shall occur within 75 days of the date of the closing of such offering of common equity. In the event of a Change of Control (as defined in the Indenture), holders of the Notes will have the right to require Coda to repurchase their Notes, in whole or in part, at a price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of repurchase. The Indenture requires that, prior to such a repurchase but in any event within 90 days of such Change of Control, Coda must either repay all Senior Debt or obtain any required consent to such repurchase. Other Long-Term Debt The Company's 12% Senior Subordinated Debentures due 2000 (the "Debentures") bear interest at 12% per annum, payable semiannually. On March 28, 1996, the Company gave notice of redemption, prior to maturity, to each of the record holders of the outstanding Debentures. On May 1, 1996, the Company deposited with 23 the trustee of the Debentures funds sufficient to redeem the outstanding Debentures at a redemption price of 100.0% of the principal amount of the Debentures plus accrued and unpaid interest thereon, and thereafter interest on the Debentures ceased to accrue. 15% Cumulative Preferred Stock Coda's Restated Certificate of Incorporation authorizes the issuance of up to 40,000 shares of Preferred Stock. In conjunction with the Merger, Coda issued 20,000 shares of Preferred Stock to JEDI for $20.0 million in cash. Shares of Preferred Stock in excess of such 20,000 shares shall be issuable only for the purpose of paying dividends on the Preferred Stock. The holders of each share of Preferred Stock are entitled to receive, when and as declared by the Board of Directors, cumulative preferential dividends, at the rate of $150.00 per share per annum. The payment of Preferred Stock dividends in cash is restricted by the Credit Agreement and the Indenture. As of September 30, 1996, the Preferred Stock had accumulated approximately $1.9 million in preferred dividends which had not been declared by the Board of Directors. As long as any shares of Preferred Stock are outstanding, no dividends whatsoever, whether paid in cash, stock or otherwise (except for dividends paid in shares of common stock, either in the form of a stock split or stock dividend), may be paid or declared, nor may any distribution be made, on any common stock of Coda to the holders of such stock, unless certain conditions are met. Coda's Restated Certificate of Incorporation requires that Coda redeem all the issued and outstanding shares of Preferred Stock at a redemption price of $1,000 per share, plus all accrued and unpaid dividends (including undeclared dividends) to the date of redemption, if Coda has sufficient funds legally available for such redemption and if such redemption would not violate or conflict with any loan agreement, credit agreement, note agreement, indenture or other agreement relating to indebtedness to which Coda is a party, on or before the fifth business day after the earliest to occur of the following: (i) the closing of the sale by Coda of Taurus Energy Corp. and (ii) a Trigger Event, as such term is defined in the Stockholders Agreement. The Preferred Stock may be redeemed by Coda at its option, as a whole or in part, to the extent Coda shall have funds legally available for such redemption, at any time or from time to time at a redemption price of $1,000 per share, plus all accrued and unpaid dividends (including undeclared dividends) to the date of redemption. Such redemption, whether required or optional, is restricted by the Credit Agreement and the Indenture. Enron Enron Corp. ("Enron") is the parent of ECT and accordingly may be deemed to control indirectly both JEDI and the Company. Enron and certain of its subsidiaries and other affiliates collectively participate in nearly all phases of the oil and natural gas industry and are, therefore, competitors of the Company. In addition, ECT and JEDI have provided, and may in the future provide, and ECT Securities Corp. has assisted, and may in the future assist, in arranging financing to non-affiliated participants in the oil and natural gas industry who are or may become competitors of the Company. Because of these various conflicting interests, ECT, the Company, JEDI and the Management Group have entered into the Business Opportunity Agreement which is intended to make it clear that Enron and its affiliates have no duty to make business opportunities available to the Company in most circumstances. The Business Opportunity Agreement also provides that ECT and its affiliates may pursue certain business opportunities to the exclusion of the Company. The Business Opportunity Agreement may limit the business opportunities available to the Company. In addition, pursuant to the Business Opportunity Agreement there may be circumstances in which the Company will offer business opportunities to certain affiliates of Enron. If an Enron affiliate is offered such an opportunity and decides to pursue it, the Company may be unable to pursue it. 24 PART II - OTHER INFORMATION Item 5. OTHER INFORMATION ----------------- Effective July 16, 1996, the Company consummated the exchange of $110 million in aggregate principal amount of its Series B Senior Subordinated Notes Due 2006 (the "Exchange Notes") for $110 million in aggregate principal amount of its Series A Senior Subordinated Notes Due 2006 (the "Private Notes"). The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the Exchange Notes bear the Series B designation, (ii) the Exchange Notes have been registered under the Securities Act of 1933, as amended, and, therefore, the Exchange Notes do not bear legends restricting the transfer thereof, and (iii) holders of the Exchange Notes are not entitled to certain rights that holders of the Private Notes had under that certain Registration Rights Agreement. The Exchange Notes evidence the same indebtedness as the Private Notes (which they replace) and were issued under, and are entitled to the benefits of, the same indenture. On August 13, 1996, Coda entered into a letter of intent with respect to the possible sale of all of the issued and outstanding capital stock of its wholly owned subsidiary, Taurus Energy Corp. ("Taurus"), to EXCO Resources, Inc. ("EXCO"), a publicly held Texas corporation. The letter of intent is currently terminable by either party upon written notice to the other party without further obligation thereunder. There can be no assurance that Coda and EXCO will reach an agreement regarding the sale of Taurus or that, if such agreement is reached, the sale will be consummated. Coda is continuing discussions with EXCO and is studying other alternatives for maximizing the value of its investment in Taurus. Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (A) Exhibits 2.1 Agreement and Plan of Merger, by and among Coda, Joint Energy Development Investments Limited Partnership and Coda Acquisition, Inc. dated as of October 30, 1995 filed as Exhibit 2.1 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 2.2 Agreement of Coda to provide schedules to the Agreement and Plan of Merger (Exhibit 2.1) omitted pursuant to Item 6.01 (b)(2) of Regulation S-K filed as Exhibit 2.2 to Coda's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995, and incorporated by reference herein. 2.3 Amendment to Agreement and Plan of Merger dated as of December 22, 1995 filed as Exhibit 2.1 to Coda's Current Report on Form 8-K dated December 22, 1995, and incorporated by reference herein. 2.4 Second Amendment to Agreement and Plan of Merger dated as of January 10, 1996 filed as Exhibit 2.1 to Coda's Current Report on Form 8-K dated January 10, 1996, and incorporated by reference herein. 2.5 Agreement of Coda to provide schedules and exhibits to Second Amendment to Agreement and Plan of Merger (Exhibit 2.4) and to provide schedules to Amendment No. 1 to Subscription Agreement (Exhibit 10.17) and Amendment No. 1 to Stockholders Agreement (Exhibit 10.18) 25 filed as Exhibit 99.4 to Coda's Current Report on Form 8-K dated January 10, 1996, and incorporated by reference herein. 3.1 Restated Certificate of Incorporation of Coda filed as Exhibit 3.1 to the Company's Registration Statement on Form S-4 filed April 9, 1996 (Registration No 333-2375, the "1996 Form S-4") and incorporated by reference herein. 3.2 Amended and Restated Bylaws of Coda filed as Exhibit 3.2 to the 1996 Form S-4 and incorporated by reference herein. 3.3 Certificate of Incorporation of Diamond Energy Operating Company, as amended, filed as Exhibit 3.3 to the 1996 Form S-4 and incorporated by reference herein. 3.4 Bylaws of Diamond Energy Operating Company, as amended, filed as Exhibit 3.4 to the 1996 Form S-4 and incorporated by reference herein. 3.5 Articles of Incorporation of Taurus Energy Corp., as amended, filed as Exhibit 3.5 to the 1996 Form S-4 and incorporated by reference herein. 3.6 Bylaws of Taurus Energy Corp., as amended, filed as Exhibit 3.6 to the 1996 Form S-4 and incorporated by reference herein. 3.7 Articles of Incorporation of Electra Resources, Inc. filed as Exhibit 3.7 to the 1996 Form S-4 and incorporated by reference herein. 3.8 Bylaws of Electra Resources, Inc. filed as Exhibit 3.8 to the 1996 Form S-4 and incorporated by reference herein. 4.1 Indenture, dated as of March 18, 1996, among Coda, the Guarantors and Texas Commerce Bank National Association, as trustee, relating to $110,000,000 aggregate principal amount of 10 1/2% Series A and Series B Senior Subordinated Notes due 2006 filed as Exhibit 4.1 to the 1996 Form S-4 and incorporated by reference herein. 4.2 Registration Rights Agreement, dated as of March 18, 1996, among Coda, the Guarantors and the Initial Purchasers filed as Exhibit 4.2 to the 1996 Form S-4 and incorporated by reference herein. 4.3 Purchase Agreement, dated as of March 12, 1996, among Coda, the Guarantors and the Initial Purchasers filed as Exhibit 4.3 to the 1996 Form S-4 and incorporated by reference herein. 4.4 Indenture between Coda and Texas American Bank Dallas, as Trustee, dated September 1, 1985, as amended, governing Coda's 12% Senior Subordinated Debentures due 2000 filed as Exhibit 4.3 to Coda's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the " 1994 10-K"), and incorporated by reference herein. 4.5 Credit Agreement, dated February 14, 1996, among the Company, NationsBank of Texas, N.A., individually and as agent ("NationsBank"), and additional lenders named therein, filed as Exhibit 4.5 to the 1996 Form S-4 and incorporated by reference herein. 26 4.6 Promissory Note dated February 14, 1996, in the original principal amount of $87,500,000.00, executed by Coda, payable to NationsBank of Texas, N.A. filed as Exhibit 4.6 to the 1996 Form S-4 and incorporated by reference herein. 4.7 Promissory Note dated February 14, 1996, in the original principal amount of $37,500,000.00, executed by Coda, payable to Bank One, Texas, N.A. filed as Exhibit 4.7 to the 1996 Form S-4 and incorporated by reference herein. 4.8 Promissory Note dated February 14, 1996, in the original principal amount of $75,000,000.00, executed by Coda, payable to Texas Commerce Bank National Association filed as Exhibit 4.8 to the 1996 Form S-4 and incorporated by reference herein. 4.9 Promissory Note dated February 14, 1996, in the original principal amount of $50,000,000.00, executed by Coda, payable to the First National Bank of Boston filed as Exhibit 4.9 to the 1996 Form S-4 and incorporated by reference herein. 4.10 Specimen Certificate of Series A 10 1/2% Senior Subordinated Notes due 2006 (the "Private Notes") (included in Exhibit 4.1 hereto), filed as Exhibit 4.10 to the 1996 Form S-4 and incorporated by reference herein. 4.11 Specimen Certificate of Series B 10 1/2% Senior Subordinated Notes due 2006 (the "Exchange Notes") (included in Exhibit 4.1 hereto), filed as Exhibit 4.11 to the 1996 Form S-4 and incorporated by reference herein. 4.12 First Supplement to Indenture dated as of April 25, 1996 filed as Exhibit 4.12 the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (the "June 1996 10-Q") and incorporated by reference herein amending the Indenture filed as Exhibit 4.1 above, 4.13* First Amendment to Credit Agreement, dated August 1, 1996, among the Company, NationsBank and additional lenders named therein, amending the Credit Agreement filed as Exhibit 4.5 above. 10.1 Form of Indemnification Agreement entered into between Coda and each of its directors and officers filed as Exhibit 10.1 to the 1994 10-K, and incorporated by reference herein. 10.2 List of directors and officers that have entered into Indemnification Agreements with Coda filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995, and incorporated by reference herein. 10.3 Agreement and Plan of Merger, entered into as of April 29, 1994 among Coda, Alliance Natural Gas, Inc., Taurus Energy Corp., and the shareholders of Taurus Energy Corp. more particularly identified therein, filed as Exhibit 2.1 to Coda's Current Report on Form 8-K dated April 29, 1994, as amended by Form 8-K/A No. 1, dated September 14, 1994 and Form 8-K/A No. 2, dated August 17, 1994, and incorporated by reference herein. 27 10.4 Agreement and Plan of Merger, dated September 11, 1994, among Coda, DEO Acquisition Corp., DA Acquisition Corp. and Diamond, filed as Exhibit 2.1 to Coda's Registration Statement on Form S-4, dated July 13, 1994 (No. 33-81532) (the "1994 Form S-4"), and incorporated by reference herein. 10.5 Agreement of Coda to provide schedules to Agreement and Plan of Merger (Exhibit 10.6) omitted pursuant to Item 6.01 (b)(2) of Regulation S-K, and filed as Exhibit 2.4 to the 1994 Form S-4, and incorporated by reference herein . 10.6 Form of First Amendment to the Agreement and Plan of Merger dated as of September 11, 1994 by and among Coda, DEO Acquisition Corp., DA Acquisition Corp. and Diamond, filed as Exhibit 2.5 to the 1994 Form S- 4 and incorporated by reference herein. 10.7 Stockholders Agreement dated October 30, 1995 filed as Exhibit 99.2 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.8 Subscription Agreement among Coda Acquisition, Inc. and The Management Investors dated October 30, 1995 filed as Exhibit 99.3 to Coda's Current Report on Form S-K dated October 30, 1995, and incorporated by reference herein. 10.9 Agreement of Coda to provide schedules to Stockholders Agreement (Exhibit 10.7) and to Subscription Agreement (Exhibit 10.8) filed as Exhibit 99.11 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.10 Business Opportunity Agreement dated as of October 30, 1995 filed as Exhibit 99.4 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.11 Executive Employment Agreement between Coda Acquisition, Inc. and Randell A. Bodenhamer filed as Exhibit 99.5 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.12 Executive Employment Agreement between Coda Acquisition, Inc. and J. William Freeman filed as Exhibit 99.6 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.13 Executive Employment Agreement between Coda Acquisition, Inc. and Grant W. Henderson filed as Exhibit 99.7 to Coda's Current Report on Form 8-K dated October 30, 1995 and incorporated by reference herein. 10.14 Executive Employment Agreement between Coda Acquisition, Inc. and Jarl P. Johnson filed as Exhibit 99.8 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.15 Executive Employment Agreement between Coda Acquisition, Inc. and Douglas H. Miller filed as Exhibit 99.9 to Coda's Current Report on Form S-K dated October 30, 1995, and incorporated by reference herein. 28 10.16 Executive Employment Agreement between Coda Acquisition, Inc. and J.W. Spencer, III filed as Exhibit 99.10 to Coda's Current Report on Form 8- K dated October 30, 1995, and incorporated by reference herein. 10.17 Amendment No. 1 to Subscription Agreement dated as of January 10, 1996 filed as Exhibit 99.2 to Coda's Current Report on Form S-K dated January 10, 1996, and incorporated by reference herein. 10.18 Amendment No. 1 to Stockholders Agreement dated as of January 10, 1996 filed as Exhibit 99.3 to Coda's Current Report on Form 8-K dated January 10, 1996, and incorporated by reference herein. 10.19 Credit Agreement, dated February 14, 1996, among the Company, NationsBank of Texas, N.A., individually and as agent, and additional lenders named therein filed as Exhibit 4.5 above. 10.20 Promissory Note dated February 14, 1996, in the original principal amount of $87,500,000.00, executed by Coda, payable to NationsBank of Texas, N.A. filed as Exhibit 4.6 above. 10.21 Promissory Note dated February 14, 1996, in the original principal amount of $37,500,000.00, executed by Coda, payable to Bank One, Texas, N.A. filed as Exhibit 4.7 above. 10.22 Promissory Note dated February 14, 1996, in the original principal amount of $75,000,000.00, executed by Coda, payable to Texas Commerce Bank National Association filed as Exhibit 4.8 above. 10.23 Promissory Note dated February 14, 1996, in the original principal amount of $50,000,000.00, executed by Coda, payable to the First National Bank of Boston filed as Exhibit 4.9 above. 10.24 Form of Nonstatutory Stock Option Agreement attached and filed as Exhibit A to Exhibit 99.3 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.25 Form of Limited Recourse Promissory Note attached and filed as Exhibit B to Exhibit 99.3 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.26 Form of Security Agreement attached and filed as Exhibit C to Exhibit 99.3 to Coda's Current Report on Form 8-K dated October 30, 1995, and incorporated by reference herein. 10.27 List of Management Investors who are parties to Nonstatutory Stock Option Agreement (Exhibit 10.24), Limited Recourse Promissory Note (Exhibit 10.25) or Security Agreement (Exhibit 10.26) filed as Exhibit 10.27 to the 1996 Form S-4 and incorporated by reference herein. 10.28 Non-competition Agreement between Coda and Tommie E. Lohman dated April 29, 1994, filed as Exhibit 10.28 to the 1996 Form S-4 and incorporated by reference herein. 29 10.29 First Amendment to Credit Agreement, dated August 1, 1996, among the Company, NationsBank and additional lenders named therein filed as Exhibit 4.13 above. 10.30* Limited Recourse Promissory Note dated July 31, 1996, in the original principal amount of $1,187,500.00 executed by Douglas H. Miller, payable to the Company. 10.31* Amendment to Nonstatutory Stock Option Agreement dated July 31, 1996 between the Company and Douglas H. Miller amending the Nonstatutory Stock Option Agreement filed as Exhibit 10.24 above. 27* Financial Data Schedule. - ------------- * Filed herewith (B) Reports on Form 8-K Current Report on Form 8-K dated January 10, 1996. Item 5. Other Events -Conditions to the effectiveness of the Merger Agreement have been satisfied. -Board of Directors Approves Second Amendment to this Merger Agreement. -Special Meeting of Stockholders to be held February 16, 1996. Item 7. Financial statement and Exhibits. Exhibit 2.1 Second Amendment to Agreement and Plan of Merger dated as of January 10, 1996. Exhibit 99.1 Coda Energy, Inc. Press Release dated January 11, 1996. Exhibit 99.2 Amendment No. 1 to Subscription Agreement dated as of January 10, 1996. Exhibit 99.3 Amendment No. 1 to Stockholders Agreement dated as of January 10, 1996. Exhibit 99.4 Agreement of Coda to provide schedules and exhibits to Second Amendment to Agreement and Plan of Merger (Exhibit 2.1) and to provide schedules to Amendment No. 1 to Subscription Agreement (Exhibit 99.2) and Amendment No. 1 to Stockholders Agreement (Exhibit 99.3). 30 - -------------------------------------------------------------------------------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CODA ENERGY, INC. (Registrant) By: \s\ Grant W. Henderson --------------------------------------- Grant W. Henderson President and Chief Financial Officer Date: November 8, 1996 31 EXHIBIT INDEX Sequential Exhibit No. Description of Exhibit Page No. - ----------- ---------------------- -------- 4.13* First Amendment to Credit Agreement, dated August 1, 1996, among the Company, NationsBank and additional lenders named therein, amending the Credit Agreement filed as Exhibit 4.5 above. 10.30* Limited Recourse Promissory Note dated July 31, 1996, in the original principal amount of $1,187,500.00 executed by Douglas H. Miller, payable to the Company. 10.31* Amendment to Nonstatutory Stock Option Agreement dated July 31, 1996 between the Company and Douglas H. Miller amending the Nonstatutory Stock Option Agreement filed as Exhibit 10.24 above. 27.* Financial Data Schedule. - ------------- * Filed herewith EX-4.13 2 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.13 First Amendment to Credit Agreement, dated August 1, 1996, among the Company, NationsBank and additional lenders named therein, amending the Credit Agreement filed as Exhibit 4.5 above. FIRST AMENDMENT TO CREDIT AGREEMENT ----------------------------------- This First Amendment to Credit Agreement (this "First Amendment") is entered --------------- into as of the 1st day of August, 1996, among Coda Energy, Inc., a Delaware corporation ("Borrower"), NationsBank of Texas, N.A., as Agent ("Agent"), -------- ----- NationsBank of Texas, N.A., Bank One, Texas, N.A., Texas Commerce Bank National Association and The First National Bank of Boston, as Banks ("Banks"). ----- W I T N E S S E T H WHEREAS, Borrower, Agent and Banks entered into that certain Credit Agreement dated as of February 14, 1996 (as amended, the "Credit Agreement"), pursuant to ---------------- which Banks have provided a revolving credit loan to Borrower (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrower has requested that certain provisions of the Credit Agreement be amended in certain respects; and WHEREAS, subject to the terms and conditions set forth herein, Agent and Banks have agreed to Borrower's request. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Borrower, Agent and each Bank hereby agree as follows: SECTION 1. In reliance on the representations, warranties, covenants and - --------- agreements contained in this First Amendment, the Credit Agreement shall be amended effective August 1, 1996 (the "Effective Date") in the manner provided -------------- in this SECTION 1: 1.1. AMENDMENT TO DEFINITIONS. The definitions of Agreement, Applicable ------------------------ Commitment Fee Percentage, Applicable Margin and Loan Papers contained in SECTION 1.5 of the Credit Agreement shall be amended to read in full as follows: AGREEMENT means this Credit Agreement, including the Schedules and Exhibits hereto, as amended by the First Amendment, as the same may be further amended or supplemented from time to time. APPLICABLE COMMITMENT FEE PERCENTAGE means (a) on any date on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is less than fifty percent (50%) of the Borrowing Base, .300%, (b) on any date on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than fifty percent (50%) but less than seventy percent (70%) of the Borrowing Base, .350%, (c) on any date on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than seventy percent (70%) but less than ninety percent (90%) of the Borrowing Base, .375%, and (d) on any date on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than ninety percent (90%) of the Borrowing Base, .425%. APPLICABLE MARGIN means (a) on any day on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is less than fifty percent (50%) of the Borrowing Base, the amount set forth below (based on the type of Tranche): (i) Base Rate 0% (ii) Eurodollar 1.00% (iii) CD Rate 1.00% (b) on any day on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than fifty percent (50%) but less than seventy percent (70%) of the Borrowing Base, the amount set forth below (based on the type of Tranche): (i) Base Rate 0% (ii) Eurodollar 1.125% (iii) CD Rate 1.125% (c) on any day on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than seventy percent (70%) but less than ninety percent (90%) of the Borrowing Base, the amount set forth below (based on the type of Tranche): (i) Base Rate 0% (ii) Eurodollar 1.250% (iii) CD Rate 1.250% (d) on any day on which the sum of (i) the Principal Debt, and (ii) the Letter of Credit Exposure is equal to or greater than ninety percent (90%) of the Borrowing Base, the amount set forth below (based on the type of Tranche): (i) Base Rate 0% (ii) Eurodollar 1.500% (iii) CD Rate 1.500% LOAN PAPERS means (a) this Agreement, (b) the First Amendment, (c) any and all notes, mortgages, deeds of trust, security agreements, guarantees, assignments, and other agreements, documents and instruments ever delivered pursuant to this Agreement, as any of the same may hereafter be amended, supplemented or restated, and (d) any and all future renewals and extensions or restatements of, or amendments or supplements to, all or any part of the foregoing. 1.2 ADDITIONAL DEFINITION. SECTION 1.5 of the Credit Agreement shall be --------------------- amended to add the following definition to such Section: FIRST AMENDMENT means that certain First Amendment to Credit Agreement dated as of August 1, 1996, by and among Agent, Borrower and Banks. SECTION 2. REPRESENTATIONS AND WARRANTIES OF BORROWER. To induce Banks and - ----------------------------------------------------- Agent to enter into this First Amendment, Borrower hereby represents and warrants to Agent as follows: 2.1. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation ----------------------------------------------- and warranty of Borrower contained in (a) the Credit Agreement, and (b) each of the other Loan Papers is true and correct on the date hereof and will be true and correct after giving effect to the amendments set forth in SECTION 1 hereof. 2.2. CORPORATE AUTHORITY; NO CONFLICTS. The execution, delivery and --------------------------------- performance by Borrower of this First Amendment are within the Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any Tribunal and do not violate or constitute a default under any provision of applicable Law or any Material Agreement binding upon any Company or result in the creation or imposition of any Lien upon any of the assets of any Company except Permitted Liens. 2.3. ENFORCEABILITY. This First Amendment constitutes the valid and binding -------------- obligation of Borrower enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application. 2.4. NO DEFENSES. Borrower has no defenses to payment, counterclaims or ----------- rights of set off with respect to the Obligations. SECTION 3. MISCELLANEOUS. - ------------------------ 3.1 REAFFIRMATION OF LOAN PAPERS; EXTENSION OF LIENS. Any and all of the ------------------------------------------------ terms and provisions of the Credit Agreement and the Loan Papers shall, except as amended and modified hereby, remain in full force and effect. 3.2 PARTIES IN INTEREST. All of the terms and provisions of this First ------------------- Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 3.3 LEGAL EXPENSES. Borrower hereby agrees to pay on demand all reasonable -------------- fees and expenses of counsel to Agent incurred by Agent, in connection with the preparation, negotiation and execution of this First Amendment and all related documents. 3.4 COUNTERPARTS. This First Amendment may be executed in counterparts, and ------------ all parties need not execute the same counterpart; however, no party shall be bound by this First Amendment until all parties have executed a counterpart. 3.5 COMPLETE AGREEMENT. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE ------------------ OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 3.6 HEADINGS. The headings, captions and arrangements used in this First -------- Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this First Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed by their respective authorized officers on the date and year first above written. BORROWER: -------- CODA ENERGY, INC., a Delaware corporation By: \s\ Grant W. Henderson -------------------------------------------- Grant W. Henderson, President AGENT: ----- NATIONSBANK OF TEXAS, N.A. By: \s\ J. Scott Fowler -------------------------------------------- J. Scott Fowler, Vice President BANKS: ----- NATIONSBANK OF TEXAS, N.A. By: \s\ J. Scott Fowler ------------------------------------- J. Scott Fowler, Vice President BANK ONE, TEXAS, N.A. By: \s\ Reed V. Thompson ------------------------------------- Its: Vice President ------------------------------------- THE FIRST NATIONAL BANK OF BOSTON By: \s\ Carol E. Holley ------------------------------------- Its: Vice President ------------------------------------- TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: \s\ Dale S. Hurd ------------------------------------- Its: Senior Vice President ------------------------------------- To induce Agent and each Bank to enter into this First Amendment, the undersigned, each a Designated Subsidiary of Borrower, jointly and severally (a) consent and agree to the execution, delivery and effectiveness of this First Amendment, (b) ratify and confirm that all guaranties and assurances granted, conveyed or otherwise provided to Agent or any Bank under the Loan Papers -- as they may have been renewed, increased, extended, restated or replaced -- are not released, diminished, impaired, reduced, or otherwise adversely affected by this First Amendment and continue to guarantee and assure the full payment and performance of all present and future Obligations as renewed, increased, extended, restated or replaced pursuant to this First Amendment or as the same may hereafter be renewed, increased, extended, restated or replaced, (c) agree to perform such acts and duly authorize, execute, acknowledge and deliver such additional guarantees, assurances and other documents, instruments and agreements as Agent may reasonably deem necessary or appropriate in order to create, perfect, preserve and protect those guaranties and assurances, and (d) waives notice of acceptance of this consent and agreement, which consent and agreement binds the undersigned and their successors and assigns and inures to Agent, the Banks, and their respective successors and assigns. Electra Resources, Inc. By: \s\ Grant W. Henderson ---------------------------------------- Its: President ---------------------------------------- Diamond Energy Operating Company By: \s\ Grant W. Henderson ---------------------------------------- Its: Vice President ---------------------------------------- Taurus Energy Corp. By: \s\ Grant W. Henderson ---------------------------------------- Its: Vice President ---------------------------------------- EX-10.30 3 LIMITED RECOURSE PROMISSORY NOTE EXHIBIT 10.30 Limited Recourse Promissory Note dated July 31, 1996, in the original principal amount of $1,187,500.00 executed by Douglas H. Miller, payable to the Company. LIMITED RECOURSE PROMISSORY NOTE $1,187,500.00 July 31, 1996 For value received, the undersigned, Douglas H. Miller ("Maker"), promises and agrees to pay, in the manner hereinafter provided, to the order of Coda Energy, 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 ONE MILLION ONE HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($1,187,500), together with interest on the unpaid principal balance from time to time outstanding hereunder from the date hereof to maturity at a rate of 6.74% 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 February 16, 2001 (the "Maturity Date"). This Promissory Note may be prepaid at any time, in whole or in part, without penalty or premium. Maker may acquire certain common stock, par value $.01 per share, of Payee 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, Coda Acquisition, Inc., 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 address or telecopy number as provided on Schedule 1 hereto (or such other address 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. 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 any 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 any such 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. 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. \s\ Douglas H. Miller ----------------------------------------- Douglas H. Miller Schedule 1 Name, Address, Telephone and Fax No. of Maker - --------------------------------------------- Douglas H. Miller 7611 Glenshannon Circle Dallas, Texas 75225 214-692-1800 (Office) 214-265-4777 (FAX) EX-10.31 4 AMENDMENT TO NONSTATUTORY STOCK OPTION AGREEMENT EXHIBIT 10.31 Amendment to Nonstatutory Stock Option Agreement dated July 31, 1996 between the Company and Douglas H. Miller amending the Nonstatutory Stock Option Agreement filed as Exhibit 10.24 above. AMENDMENT TO NONSTATUTORY STOCK OPTION AGREEMENT THIS AMENDMENT TO NONSTATUTORY STOCK OPTION AGREEMENT is made as of the 31st day of July, 1996, between Coda Energy, Inc., a Delaware corporation (the "Company") and Douglas H. Miller ("Employee"). WHEREAS, the Company, Employee and Coda Acquisition, Inc. have entered into that certain Nonstatutory Stock Option Agreement dated February 16, 1996 (the "Option Agreement") covering the right and option to purchase shares of common stock of the Company, par value $.01 per share (the "Stock"); WHEREAS, the Company is the successor by merger to Coda Acquisition, Inc.; and, WHEREAS, the Company and Employee desire to amend the Option Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed that Section 3 of the Option Agreement is hereby amended by adding the following additional paragraph thereto: "Notwithstanding anything to the contrary contained herein: (i) this Option shall not be exercisable as to any shares of Stock unless and until all principal and accrued interest (whether or not then due and payable), together with any other sums due and payable, under that certain Limited Recourse Promissory Note dated July 31, 1996, drawn in the amount of $1,187,500 and payable by Employee to Company, as modified, extended or renewed, (the "Note") are paid in full; and, (ii) in the event of a default under the Note, the Company shall have the unilateral right to cancel this Option, but only as to that number of shares of Stock, rounded to the nearest whole share, having an aggregate fair market value (determined by the Company in accordance with Section 4.4(c)(ii) of the Stockholders Agreement (as defined herein)) equal to the unpaid principal balance plus accrued interest under the Note, and the Company shall furnish prompt written notice of such cancellation to Employee." IN WITNESS WHEREOF, the Company and Employee have executed this instrument as of the day and year first above written. CODA ENERGY, INC. By: /s/ Grant Henderson -------------------- Grant W. Henderson President and CFO \s\ Douglas H. Miller ----------------------- Douglas H. Miller EX-27 5 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM FINANCIAL STATEMENTS OF CODA ENERGY, INC. FOR THE 227 DAYS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 OTHER DEC-31-1996 FEB-17-1996 SEP-30-1996 9,134 0 13,557 0 0 24,327 290,631 16,750 302,777 18,898 178,496 0 20,000 9 42,626 302,777 73,926 75,312 42,017 42,017 0 0 10,595 (79,357) (28,369) (50,988) 0 0 0 (50,988) 0 0
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