Exhibit 10.11(c)
Xxxxxxx X. Xxxxxxx
0000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
September 29, 1999
Xxxxxxx "Skeeter" Lasuzzo
0000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Dear Skeeter:
Reference is made to the Consulting Agreement, dated April 1, 1999, between
you and Indian Oil Company (the "Company"). Please consider this letter as
written confirmation of my agreement to grant you the option to purchase,
subject to the terms and conditions described below, shares of my Company stock
immediately prior to the Reorganization or liquidation of the Company or the
occurrence of certain other transactions described below (all capitalized terms
used in this letter and not otherwise defined shall have the same meaning as set
forth in the Consulting Agreement and the attachment hereto).
If the Consulting Agreement is terminated under Section 7.6 (which would be
a termination upon the occurrence of the Reorganization), Section 7.1(b) (which
would be a termination upon consummation of liquidation of the Company), or
Section 7.7 (which would be a termination upon the occurrence of a transaction
[an "Other Transaction"] of the type described in Section 7.7 of the Consulting
Agreement), then you will have the option to purchase from me that number of
shares of Company stock owned by me determined as follows:
1. If the Debt equals the Company's Value or the Debt exceeds the
Company's Value by less than $1,000,000 (calculated as of the Reorganization,
liquidation or closing of the Other Transaction), then you will have the option
to purchase that number of shares of Company stock owned by me that has a value,
determined upon consummation of the Reorganization, liquidation, or the Other
Transaction, equal to $75,000.
September __, 1999
Page 2
2. If the Debt exceeds the Company's Value by $1,000,000 or more
(calculated as of the consummation of the Reorganization, liquidation, or
closing of the Other Transaction), then your options will terminate and you will
not have the option to purchase any shares of Company stock (or any other stock)
owned by me.
3. If the Company's Value exceeds the Debt by less than $3,000,000
(calculated as of the consummation of the Reorganization, liquidation, or
closing of the Other Transaction), then you will have the option to purchase
that number of shares of Company stock owned by me that has a value, determined
upon consummation of the Reorganization, liquidation, or closing of the Other
Transaction, equal to the sum of (i) $75,000 plus (ii) 2.5% times the amount
that the Company's Value exceeds the Debt.
4. If the Company's Value exceeds the Debt by $3,000,000 or more
(calculated as of the consummation of the Reorganization, liquidation, or
closing of the Other Transaction), then you will have the option to purchase
that number of shares of Company stock owned by me that has a value, determined
upon consummation of the Reorganization, liquidation, or closing of the Other
Transaction, equal to $150,000.
Consider these examples:
1. If the Company's Value is $29,500,000 and the Debt is $30,000,000
(i.e., the Debt exceeds the Company's Value by $500,000, which is less than
$1,000,000) (calculated as of the consummation of the Reorganization,
liquidation, or closing of the Other Transaction), then you will have the option
to purchase that number of shares of Company stock owned by me valued at
$75,000.
2. If the Debt is $31,500,000 (or greater) and the Company's Value is
$30,500,000 (i.e., the Debt exceeds the Company's Value by $1,000,000 or more)
(calculated as of the consummation of the Reorganization, liquidation, or
closing of the Other Transaction), then your options will terminate and you will
have no options to purchase any shares of Company stock owned by me.
3. If the Company's Value is $33,000,000 and the Debt is $30,500,000
(i.e., the Company's Value exceeds the Debt by $2,500,000, which is less than
$3,000,000) (calculated as of the consummation of the Reorganization,
liquidation, or closing of the Other Transaction), then you will have the option
to purchase that number of shares of Company stock owned by me valued at the sum
of (i) $75,000 plus (ii) 2.5% times $2,500,000. In other words, you
September __, 1999
Page 3
would have the option to purchase that number of shares of Company stock owned
by me valued at $137,500.
4. If the Company's Value is $33,500,000 (or greater) and the Debt is
$30,500,000 (i.e., the Company's Value exceeds the Debt by $3,000,000 or more)
(calculated as of the consummation of the Reorganization, liquidation, or
closing of the Other Transaction), then you would have the option to purchase
that number of shares of Company stock owned by me valued at $150,000.
Your option to purchase shares of Company stock owned by me may only be
exercised in whole, and not in part, and must be exercised at least three (3)
days prior to commencement of the liquidation of the Company or closing of the
Reorganization or Other Transaction. I agree to give you notice at least ten
(10) days prior to closing of the Reorganization or Other Transaction or
consummation of the liquidation of the Company.
Your notice to me to exercise your option must be accompanied by a written
statement that the shares are being purchased for investment and not with a view
to distribution. Upon the exercise of such options, we agree to consummate the
purchase and sale of the applicable shares pursuant to terms and conditions
mutually agreeable to us at a closing. The closing shall occur as soon as
possible after the delivery of the notice to me. At the closing, I will deliver
to you a duly endorsed certificate or certificates representing the number of
shares of Company stock being purchased, and you agree to pay the purchase price
to me in cash or its equivalent. However, and notwithstanding anything to the
contrary herein, upon your exercise of the options granted hereunder, I may, in
my sole discretion, deliver to you the required amount in cash or certified
funds (i.e., $75,000 in the case of the first example above) in lieu of
delivering to you any shares of my Company stock. The delivery to you of the
required amount in cash or certified funds in lieu of Company stock will
completely extinguish any obligation to deliver any Company stock to you upon
your exercise of the option.
The price per share at which the shares of Company stock subject to this
option may be purchased shall be $1.00. The option price shall be paid in cash
or its equivalent. If I choose to deliver the required amount in cash or
certified funds in lieu of delivering Company stock to you, you will be refunded
any option price paid by you.
If you exercise your options to purchase Company stock prior to the closing
of the Reorganization, then you understand that you
September __, 1999
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will be required to enter into various agreements in connection with the
Reorganization, such as a stock purchase agreement and a lock-up agreement. You
agree to promptly enter into such agreements.
Notwithstanding anything to the contrary herein, the options that I have
granted you under this letter shall terminate and lapse automatically on March
2, 2001.
Please sign below to confirm that this letter accurately reflects our
agreement.
Sincerely,
Xxxxxxx X. Xxxxxxx
Agreed to and accepted by:
______________________________
Xxxxxxx "Skeeter" Lasuzzo
APPENDIX
"Company's Value" - the aggregate value of the Reserve Report as determined
---------------
by independent third party engineers and as required under the Merger Agreement.
"Debt" - (i) the amount required at the commencement of the liquidation or
----
closing of the Reorganization or Other Transaction to repay in full the
Company's debt to Bank One, Oklahoma, N.A.; plus (ii) the amount required at the
commencement of the liquidation or closing of the Reorganization or Other
Transaction to repay in full the Company's debt to MidFirst Bank; plus (iii)
$6,000,000, less the amount of Contingent Production Payments, as defined in the
Merger Agreement, paid by the Company to the Coral Group, as defined in the
Merger Agreement; plus (iv) $3,000,000; less (v) the amount at the commencement
of the liquidation or closing of the Reorganization or Other Transaction of the
Company's Net Working Capital, as defined in the Merger Agreement, and the
amount required to make the gas balancing computations in the manner and as
required by the Merger Agreement.
"Merger Agreement" - that certain Agreement and Plan of Merger among the
----------------
Company, Coral Reserves, Inc., Coral Reserves Energy Corp., and Coral Group,
Ltd., dated February 15, 1999.
"Reserve Report" - the engineering reports required by the Merger Agreement
--------------
and prepared by independent third parties engineers setting forth:
(i) The proven oil and gas reserves attributable to the oil and gas
properties of the Company;
(ii) the aggregate present value, determined on the basis of stated
pricing assumptions, of the future net income with respect to such oil and
gas properties, discounted as a stated per annum discount rate of proven
reserves; and
(iii) projections of the annual rate of production, gross income and
net income with respect to such proven reserves.
For purposes of calculating the number of shares to be delivered to you, we
agree to use, to the extent practicable and to extent consistent with the
calculations required under the Merger Agreement, the above definitions to
determine the value of the Company stock. For instance, assume that the
Company's Value is $33,500,000 and the Debt is $30,000,000, and thus you are
entitled to $150,000 of Company stock (also assume that I do not elect to pay
you cash in lieu of such Company stock). Assume that there are 65,643 shares of
Company stock outstanding. Because each share of Company stock would be worth
$53.32 ($3,500,000 divided by 65,643),
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you would have the option to purchase from me 2,813 shares ($150,000 divided by
$53.32) of Company stock.
