<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
SHERIDAN ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock,par value $.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
823764105
-----------------------------------
(CUSIP Number)
Julia Heintz Murray, General Counsel-Finance
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
(713) 853-4794
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 31, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 11
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SCHEDULE 13D
CUSIP NO.: 823764105 Page 2 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Enron Capital & Trade Resources Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
Delaware
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 1,600,000 shares
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
1,600,000 shares
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,600,000 shares
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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SCHEDULE 13D
CUSIP NO.: 823764105 Page 3 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Enron Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 2,600,000 shares
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,600,000 shares
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,600,000 shares
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
43.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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SCHEDULE 13D
CUSIP NO. 823764105 PAGE 4 OF 11 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
JEDI Hydrocarbon Investments I Limited Partnership
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 450,000 shares
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
450,000 shares
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
450,000 shares
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
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SCHEDULE 13D
CUSIP NO. 823764105 PAGE 5 OF 11 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Joint Energy Development Investments Limited Partnership
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 1,000,000 shares
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
1,000,000 shares
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000 shares
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
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<PAGE> 6
THIS AMENDMENT NO. 1 RELATES TO THE SCHEDULE 13d ORIGINALLY FILED ON BEHALF OF
THE REPORTING PERSONS WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER
24, 1997, WHICH IS HEREBY AMENDED AS FOLLOWS:
Item 1. Security and Issuer:
This statement relates to the Common Stock, par value $.01 per share
(the "Common Stock"), of Sheridan Energy, Inc., a Delaware corporation (the
"Issuer"). The address of the principal executive office of the Issuer is 1000
Louisiana, Suite 800, Houston, Texas 77002.
Item 2. Identity and Background:
This statement is being filed by (i) Enron Capital & Trade Resources
Corp., a Delaware corporation ("ECT"), whose principal business is the purchase
of natural gas, gas liquids and power through a variety of contractual
arrangements, marketing these energy products to local distribution companies,
electric utilities, cogenerators and both commercial and industrial end users,
and provision of risk management services, (ii) Enron Corp., an Oregon
corporation ("Enron"), which is an integrated natural gas and electricity
company that engages, primarily through subsidiaries, in the transportation and
wholesale marketing of natural gas, the exploration for and production of
natural gas and crude oil, the production, purchase, transportation and
worldwide marketing and trading of natural gas liquids, crude oil and refined
petroleum products, and the purchasing and marketing of electricity and other
energy-related commitments, (iii) Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI"), which is engaged
primarily in the business of investing in and managing certain energy related
assets, and (iv) JEDI Hydrocarbon Investments I Limited Partnership, a Delaware
limited partnership ("JEDI I"), which is engaged primarily in the business of
investing in and managing certain energy related assets. ECT, Enron, JEDI and
JEDI I are referred to herein as the "Reporting Entities." ECT is a
wholly-owned subsidiary of Enron. Additional entities that may be deemed to be
control persons of JEDI are (a) Enron Capital Management Limited Partnership, a
Delaware limited partnership and the general partner of JEDI ("ECMLP"), whose
principal business is to manage oil and gas related investments, (b) Enron
Capital Corp., a Delaware corporation and the general partner of ECMLP ("ECC"),
whose principal business is to manage oil and gas related investments, and (c)
ECT. ECC is a wholly-owned subsidiary of ECT and an indirect, wholly-owned
subsidiary of Enron. Additional entities that may be deemed to be control
persons of JEDI I are (a) JEDI Capital L.L.C., a Delaware limited liability
company and the general partner of JEDI I ("JEDI Capital"), whose principal
business is to manage oil and gas related investments, and (b) JEDI. JEDI
Capital is a majority-owned subsidiary of JEDI.
The address of the principal business office of ECT, Enron, JEDI, JEDI I,
ECMLP, ECC and JEDI Capital is 1400 Smith Street, Houston, Texas 77002.
Schedule I attached hereto sets forth certain additional information with
respect to each director or manager and each executive officer of ECT, Enron,
ECC and JEDI Capital. The filing of this statement on Schedule 13D shall not
be construed as an admission that any person listed on Schedule I hereto is,
for the purposes of Section 13(d) or 13(g) of the Securities Exchange Act of
1934, the beneficial owner of any securities covered by this statement.
None of the Reporting Entities, nor to their knowledge, ECMLP, ECC or
JEDI Capital or any person listed on Schedule I hereto, has been, during the
last five years (a) convicted of any criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, U.S. federal or state securities laws or finding any violations with
respect to such laws.
Page 6 of 11
<PAGE> 7
Item 3. Source and Amount of Funds or Other Consideration:
On December 15, 1997, ECT purchased 1,600,000 shares of Issuer's
Common Stock par value $.01 per share (the "Common Stock"), for cash
consideration in the amount of $10,000,000. The source of the $10,000,000
consideration paid to the Issuer for the Common Stock was working capital of
ECT and Enron.
On December 31, 1997, Grand Gulf Production L.L.C. ("GGP", which is
not affiliated with the Reporting Entities or the Issuer) sold substantially
all of its assets (the "Grand Gulf Assets") to the Issuer in exchange for
467,500 shares of the Issuer's Common Stock and common stock purchase
warrants (the "GGP Warrants") to purchase 82,500 shares of the Issuer's
Common Stock. The Purchase Agreement by and between GGP and the Issuer dated
as of December 31, 1997 (the "GGP Purchase Agreement"), the Warrant Agreement
by and between GGP and the Issuer dated as of December 31, 1997 (the "GGP
Warrant Agreement"), and the Assignment and Bill of Sale between GGP and the
Issuer effective as of September 1, 1997 are incorporated herein by reference
to Exhibits 5, 6 and 7, respectively.
Pursuant to the Warrant Assignment between GGP and JEDI dated December
31, 1997 (the "Warrant Assignment") and the Stock Transfer and Termination
Agreement between JEDI and GGP entered into as of December 31, 1997 (the
"Stock Transfer and Termination Agreement"), which are incorporated herein by
reference to Exhibits 8 and 9, respectively, GGP transferred to JEDI 467,500
shares of the Issuer's Common Stock and the GGP Warrants in satisfaction of
loans previously made by JEDI to GGP.
In addition, on December 31, 1997, JEDI I sold its interest in certain
oil and gas properties that were jointly owned by JEDI I and GGP to the
Issuer in exchange for 382,500 shares of the Issuer's Common Stock and common
stock purchase warrants (the "JEDI I Warrants") to purchase 67,500 shares of
the Issuer's Common Stock. The Purchase Agreement by and between the Issuer
and JEDI I dated as of December 31, 1997 (the "JEDI I Purchase Agreement"),
the Warrant Agreement by and between the Issuer and JEDI I dated as of
December 31, 1997 (the "JEDI I Warrant Agreement"), and the Assignment and
Bill of Sale between JEDI I and the Issuer effective as of September 1, 1997,
are incorporated herein by reference to Exhibits 10, 11 and 12, respectively.
Item 4. Purpose of Transaction:
The transactions described in Item 3 were the result of negotiated
transactions among the Issuer, ECT, JEDI, JEDI I and GGP. The securities
acquired by ECT, JEDI and JEDI I were acquired for investment purposes. ECT,
JEDI and JEDI I intend to review their investment in the Issuer on a continuing
basis and, depending upon the price of, and other market conditions relating
to, the Common Stock, subsequent developments affecting the Issuer, the
Issuer's business and prospects, other investment and business opportunities
available to ECT, JEDI and JEDI I, general stock market and economic
conditions, tax considerations and other factors deemed relevant and subject to
the Standstill Agreement referenced below, may decide to increase or decrease
the size of their investment in the Issuer.
The following transactions could result in the acquisition by ECT or
its affiliates of additional shares of Common Stock of the Issuer:
Acquisition of Preferred Stock of the Issuer. Contemporaneously with
the acquisition by ECT of the Issuer's Common Stock as described herein,
ECT also acquired 1,000,000 shares of the Issuer's Series A Preferred
Stock (the "Preferred Stock") for a purchase price of $10,000,000. The
terms of the Preferred Stock, set forth in the Certificate of
Designation that is incorporated herein by reference to Exhibit 4 of the
Schedule 13D filed on December 24, 1997, include certain obligations
Page 7 of 11
<PAGE> 8
to pay dividends in respect of the Preferred Stock and redeem the
Preferred Stock in certain circumstances.
The consent of the holders of 66 2/3% of the shares of Preferred Stock is
required to, among other things, (i) increase or decrease the aggregate
number of authorized shares of the Preferred Stock, (ii) exchange,
reclassify, or cancel all or part of the Preferred Stock, (iii) change
the designations, powers, preferences, relative and other special rights,
or the qualifications, limitations or restrictions of the Preferred
Stock, (iv) issue additional securities convertible into or exchangeable
for, or reclassify any other securities into, shares of the Preferred
Stock, (v) create any security ranking senior to or on a parity with
(with respect to voting or dividends or upon liquidation, dissolution or
winding up) the Preferred Stock, (vi) approve any material change in the
principal business of the Issuer or (vii) pay a dividend or distribution
of cash or property in respect of, or redeem, repurchase or otherwise
acquire, any "Junior Security" (as defined in the Certificate of
Designation, but including the Issuer's Common Stock).
In the event of a default by the Issuer of its dividend or redemption
obligations under the terms of the Preferred Stock, the holders of the
Preferred Stock have the option to elect that number of directors
constituting a majority of the Issuer's Board of Directors, and may
require the Issuer to redeem the Preferred Stock held by such holder at
the "Mandatory Redemption Price" (as defined in the Certificate of
Designation). In the event of a "Change of Control" of the Issuer (as
defined in the Certificate of Designation), the holders of the Preferred
Stock may require the Issuer to redeem the Preferred Stock held by such
holder at the Mandatory Redemption Price (as defined in the Certificate
of Designation).
Agreement with respect to Election of Board of Directors of Issuer. As
described in more detail in Item 6 below, pursuant to the Stock Purchase
Agreement incorporated herein by reference to Exhibit 1 of the Schedule
13D filed on December 24, 1997, ECT acquired the right to appoint up to
two members of the Issuer's Board of Directors, which is currently
comprised of five members and could be expanded to seven members to
accommodate ECT's designees. In connection therewith, pursuant to a
Shareholders' Agreement between ECT and Jeffrey E. Susskind (Chairman of
the Board of the Issuer and holder of 1,000,037 shares of the Issuer's
Common Stock) and his spouse incorporated herein by reference to Exhibit
3 of the Schedule 13D filed on December 24, 1997, ECT and its affiliates
agreed to vote shares of the Issuer's Common Stock held by them in favor
of the current members of the Board of Directors, and the Susskinds and
certain related parties agreed to vote shares of the Issuer's Common
Stock held by them in favor of ECT's nominees to the Board of Directors.
Pursuant to the Stock Purchase Agreement, the Issuer agreed to not
increase the size of the Board of Directors beyond seven members
(including ECT's designees) unless necessary to ensure that such
designees attained their positions on the Board of Directors.
"Standstill" Agreement. As described in more detail in Item 6 below,
ECT agreed that none of ECT, JEDI, JEDI I nor their respective
subsidiaries would (i) purchase additional shares of the Issuer's Common
Stock, except pursuant to certain permitted transactions, or (ii) make
or participate in a solicitation of proxies to vote shares of the
Issuer's Common Stock.
Other than the transactions described herein, none of the Reporting
Entities, nor to their knowledge, ECMLP, ECC, JEDI Capital, or any person
listed on Schedule I hereto, has any plan or proposal that would result in any
of the consequences listed in paragraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer:
As of the date of this statement, ECT beneficially owns and has the
sole power to vote and dispose of 1,600,000 shares of the Common Stock, which
represents approximately 27.2% of the Issuer's
Page 8 of 11
<PAGE> 9
Common Stock outstanding as of December 31, 1997. Because ECT is a direct,
wholly-owned subsidiary of Enron, Enron may also be deemed to beneficially own
such shares. Enron disclaims beneficial ownership of all such shares.
As of the date of this statement, JEDI beneficially owns and has the
sole power to vote and dispose of 550,000 shares of Common Stock, which
represents approximately 9.2% of the Common Stock outstanding as of December
31, 1997. Because ECC is an indirect, wholly-owned subsidiary of Enron, Enron
may also be deemed to beneficially own such shares. Enron disclaims beneficial
ownership of all such shares.
As of the date of this statement, JEDI I beneficially owns and has the
sole power to vote and dispose of 450,000 shares of Common Stock, which
represents 7.6% of the Common Stock outstanding as of December 31, 1997.
Because JEDI Capital is a majority-owned subsidiary of JEDI, and ECC is an
indirect, wholly-owned subsidiary of Enron, JEDI and Enron may also be deemed
to beneficially own such shares. Each of JEDI and Enron disclaim beneficial
ownership of all such shares.
Other than the transactions described herein, none of the Reporting
Entities, nor to their knowledge, ECMLP, ECC, JEDI Capital, or any person
listed on Schedule I hereto, effected any transactions in shares of Common
Stock of the Issuer during the preceding sixty days.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer:
Agreement with respect to Election of Board of Directors of Issuer.
The Issuer's Board of Directors is currently comprised of five members.
Pursuant to the Stock Purchase Agreement, ECT has the right to appoint (i) two
designees to the Issuer's Board of Directors if ECT and its affiliates hold in
excess of 14% of the Issuer's Common Stock and (ii) one designee if ECT and its
affiliates hold in the range of 7% through 14% of the Issuer's Common Stock.
Pursuant to a Shareholders' Agreement between ECT and Jeffrey E. Susskind
(Chairman of the Board of the Issuer and holder of 1,000,037 shares of the
Issuer's Common Stock) and his spouse, ECT and its affiliates agreed to vote
Common Stock held by them in favor of the current members of the Board of
Directors, and the Susskinds and certain related parties agreed to vote Common
Stock held by them in favor of ECT's designees to the Board of Directors. The
Shareholders' Agreement terminates at the earlier of (i) the date that ECT no
longer holds 7% of the Issuer's Common Stock and (ii) December 15, 1999. ECT
has the right to appoint (i) two persons as observers to the Issuer's Board of
Directors if ECT and its affiliates hold in excess of 14% of the Issuer's
Common Stock and (ii) one person as an observer if ECT and its affiliates hold
in the range of 7% through 14% of the Issuer's Common Stock.
"Standstill" Agreement. Pursuant to the Stock Purchase Agreement,
ECT, JEDI and JEDI I and their respective subsidiaries and affiliates agreed,
for a period of two years, (i) to not acquire additional shares of the Issuer's
Common Stock (other than in transactions approved by the Issuer's Board of
Directors and certain inadvertent purchases), and (ii) to not make or
participate in a solicitation of proxies to vote or form a "group" for such
purpose. This provision of the Stock Purchase Agreement terminates in the
event ECT's designees are not elected to the Issuer's Board of Directors as
required by the Stock Purchase Agreement.
Registration Rights Agreement. Certain demand and piggyback
registration rights granted to ECT and certain of its assignees by the Issuer
and set forth in the Stock Purchase Agreement have been superseded by the
Registration Rights Agreement effective as of December 31, 1997 by and among
the Issuer, ECT, GGP and JEDI I (the "Registration Rights Agreement"), which is
incorporated herein by reference to Exhibit 13. The Registration Rights
Agreement sets forth the rights of ECT, GGP and JEDI I for the registration of
their shares of Common Stock. GGP assigned its rights under the Registration
Page 9 of 11
<PAGE> 10
Rights Agreement to JEDI pursuant to the Assignment and Assumption Agreement
entered into on December 31, 1997 by and among GGP, the Issuer and JEDI (the
"Assignment and Assumption Agreement").
Warrants. Pursuant to the JEDI I Purchase Agreement and the JEDI I
Warrant Agreement, JEDI I purchased the JEDI I Warrants to purchase 67,500
shares of Common Stock, subject to adjustment as described in the JEDI I
Warrant Agreement. The JEDI I Warrants have an exercise price of $5.50 per
share and terminate on December 31, 2002. Pursuant to the GGP Purchase
Agreement and the GGP Warrant Agreement, GGP purchased the GGP Warrants to
purchase 82,500 shares of Common Stock, subject to adjustment as described in
the GGP Warrant Agreement. The GGP Warrants have an exercise price of $5.50
per share and terminate on December 31, 2002. The GGP Warrants were
transferred from GGP to JEDI pursuant to the Warrant Assignment and the
Assignment and Assumption Agreement.
Item 7. Material to be Filed as Exhibits:
<TABLE>
<S> <C>
* Exhibit 1: Stock Purchase Agreement dated as of November 28, 1997 between the Issuer and ECT.
* Exhibit 2: First Amendment to Stock Purchase Agreement dated as of December 15, 1997 between Issuer and
ECT.
* Exhibit 3: Shareholders' Agreement dated as of December 15, 1997 among the Issuer, Jeffrey E. Susskind and
Janis Susskind and ECT.
* Exhibit 4: Certificate of Designation, Preferences and Rights of Series A Preferred Stock.
Exhibit 5: Purchase Agreement by and between the Issuer and GGP dated as of December 31, 1997.
Exhibit 6: Warrant Agreement by and between the Issuer and GGP dated as of December 31, 1997.
Exhibit 7: Assignment and Bill of Sale between GGP and the Issuer effective as of September 1, 1997.
Exhibit 8: Warrant Assignment between GGP and JEDI dated December 31, 1997.
Exhibit 9: Stock Transfer and Termination Agreement between JEDI and GGP entered into as of December 31,
1997.
Exhibit 10: Purchase Agreement by and between the Issuer and JEDI I dated as of December 31, 1997.
Exhibit 11: Warrant Agreement by and between the Issuer and JEDI I dated as of December 31, 1997.
Exhibit 12: Assignment and Bill of Sale between JEDI I and the Issuer effective as of September 1, 1997.
Exhibit 13: Registration Rights Agreement by and among the Issuer, ECT, GGP and JEDI I effective as of
December 31, 1997.
Exhibit 14: Assignment and Assumption Agreement by and among GGP, the Issuer and JEDI entered into on
December 31, 1997.
</TABLE>
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* Previously filed.
Page 10 of 11
<PAGE> 11
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Date: January 13, 1998 ENRON CAPITAL & TRADE RESOURCES CORP.
---
By: PEGGY S. MENCHACA
-----------------------------
Name: Peggy S. Menchaca
Title: Vice President and Secretary
Date: January 13, 1998 ENRON CORP.
---
By: PEGGY S. MENCHACA
-----------------------------
Name: Peggy S. Menchaca
Title: Vice President and Secretary
Date: January 13, 1998 JOINT ENERGY DEVELOPMENT INVESTMENTS
--- LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By: PEGGY S. MENCHACA
-----------------------------
Name: Peggy S. Menchaca
Title: Vice President and Secretary
Date: January 13, 1998 JEDI HYDROCARBON INVESTMENTS I
--- LIMITED PARTNERSHIP
By: JEDI Capital L.L.C.,
its general partner
By: PEGGY S. MENCHACA
-----------------------------
Name: Peggy S. Menchaca
Title: Vice President and Secretary
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
Page 11 of 11
<PAGE> 12
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL & TRADE RESOURCES CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Mark A. Frevert U.S.A. Director; President - ECT Europe and Managing
Director
Mark E. Haedicke U.S.A. Director; Managing Director - Legal
Kevin P. Hannon U.S.A. Director; President and Chief Operating
Officer
Kenneth D. Rice U.S.A. Director; Chairman of the Board, Chief
Executive Officer and Managing Director;
Chairman and Chief Executive Officer - ECT
North America
Gene E. Humphrey U.S.A. Vice Chairman
Amanda K. Martin U.S.A. President - Energy and Finance Services
William O. Butler U.S.A. Managing Director
John B. Echols, Jr. U.S.A. Managing Director and Chief Accounting
Officer
Stephen A. Smaby U.S.A. Managing Director
Donald C. Bentley II U.S.A. Senior Vice President
Marty Sunde U.S.A. Senior Vice President
Brian J. Barrington U.S.A. Vice President
Kevin W. Beasley U.S.A. Vice President
Philippe A. Bibi U.S.A. Vice President
Donald W. Black U.S.A. Vice President
Raymond M. Bowen U.S.A. Vice President
Harold G. Buchanan U.S.A. Vice President
Thomas M. Buiocchi U.S.A. Vice President
</TABLE>
I-1
<PAGE> 13
<TABLE>
<S> <C> <C>
David K. Carboneau U.S.A. Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control Officer
W. Craig Childers U.S.A. Vice President
David Cox U.S.A. Vice President
Wanda C. Curry U.S.A. Vice President
Michel Decnop U.S.A. Vice President
David W. Delainey Canada Vice President
Timothy J. Detmering U.S.A. Vice President
Janet R. Dietrich U.S.A. Vice President
Richard G. DiMichele U.S.A. Vice President
Raymond W. Doshier U.S.A. Vice President
James I. Ducote U.S.A. Vice President
William D. Duran U.S.A. Vice President
Jay L. Fitzgerald U.S.A. Vice President
Craig A. Fox U.S.A. Vice President
Dana R. Gibbs U.S.A. Vice President
P. Stinson Gibner U.S.A. Vice President
Thomas S. Glanville U.S.A. Vice President
Monte L. Gleason U.S.A. Vice President
Julie A. Gomez U.S.A. Vice President
Eric Gonzales U.S.A. Vice President
John C. Gorman Canada Vice President
Barbara N. Gray U.S.A. Vice President, General Counsel, Trading,
and Assistant Secretary
Mary L. Hamilton U.S.A. Vice President
Dwayne L. Hart U.S.A. Vice President
</TABLE>
I-2
<PAGE> 14
<TABLE>
<S> <C> <C>
Steven D. Heinz U.S.A. Vice President
John C. Henderson U.S.A. Vice President
Robert J. Hermann U.S.A. Vice President and General Tax Counsel
Clifford P. Hickey U.S.A. Vice President
Patrick H. Hickey U.S.A. Vice President
Leonard L. Hilton U.S.A. Vice President
Stephen R. Horn U.S.A. Vice President
William C. Horwitz U.S.A. Vice President
G. Douglas Hurley U.S.A. Vice President
Richard Ingersoll U.S.A. Vice President
Lee Jestings U.S.A. Vice President
Doy G. "Rocky" Jones U.S.A. Vice President
Vince J. Kaminski U.S.A. Vice President
Darrell W. Kinder U.S.A. Vice President
Kyle Kitagawa Canada Vice President
Sheila A. Knudsen U.S.A. Vice President
Fred D. Lagrasta U.S.A. Vice President
John J. Lavorato Canada Vice President
Mark K. Lay U.S.A. Vice President
Daniel P. Leff U.S.A. Vice President
Randal T. Maffett U.S.A. Vice President
Thomas A. Martin U.S.A. Vice President
Grant S. Masson U.S.A. Vice President
James R. McBride U.S.A. Vice President
Michael R. McCall U.S.A. Vice President
</TABLE>
I-3
<PAGE> 15
<TABLE>
<S> <C> <C>
Danny J. McCarty U.S.A. Vice President
George A. McClellan, III U.S.A. Vice President
Michael S. McConnell U.S.A. Vice President
J. Kevin McConville U.S.A. Vice President
Peggy B. Menchaca U.S.A. Vice President and Secretary
Michael Jaye Miller U.S.A. Vice President
Jordan H. Mintz U.S.A. Vice President, Tax and Tax Counsel
Kristina M. Mordaunt U.S.A. Vice President
Mark S. Muller U.S.A. Vice President
Julia Heintz Murray U.S.A. Vice President, General Counsel, Finance
and Assistant Secretary
Scott M. Neal U.S.A. Vice President
Bradford C. Nebergall U.S.A. Vice President
David Parquet U.S.A. Vice President
Nicholas E. V. Perry U.S.A. Vice President
Bradley C. Petzold U.S.A. Vice President
Gregory F. Piper U.S.A. Vice President
J. Scott Porter U.S.A. Vice President
George W. Posey U.S.A. Vice President
Stephen C. Schneider U.S.A. Vice President
Robert C. Schorr U.S.A. Vice President
Donald P. Schroeder U.S.A. Vice President
Jeffrey A. Shankman U.S.A. Vice President
Richard S. Shapiro U.S.A. Vice President
Gregory L. Sharp U.S.A. Vice President
John R. Sherriff U.S.A. Vice President
</TABLE>
I-4
<PAGE> 16
<TABLE>
<S> <C> <C>
William N. Shoff U.S.A. Vice President
Wynne M. Snoots U.S.A. Vice President
John M. Stokes U.S.A. Vice President
Bruce N. Stram U.S.A. Vice President
Colleen Sullivan-Shaklovitz U.S.A. Vice President
Thomas M. Talley U.S.A. Vice President
Timothy E. Vail U.S.A. Vice President
Lawrence Greg Whalley U.S.A. Vice President
Robert R. White U.S.A. Vice President
Robert C. Williams U.S.A. Vice President and Assistant General Counsel
Peter J. Wilt U.S.A. Vice President
Mario M. Yzaguirre U.S.A. Vice President
Victoria T. Sharp U.S.A. General Counsel
Mary A. Perkins U.S.A. Treasurer
Elaine V. Overturf U.S.A. Deputy Corporate Secretary
Brent C. Bailey U.S.A. Assistant Secretary
Kate B. Cole U.S.A. Assistant Secretary
James E. Keller U.S.A. Assistant Secretary
</TABLE>
I-5
<PAGE> 17
MANAGERS AND EXECUTIVE OFFICERS
JEDI CAPITAL L.L.C.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Jeremy M. Blachman U.S.A. Manager
Richard L. Carson U.S.A. Manager
Shirley A. Hudler U.S.A. Manager
Don R. Rollins U.S.A. Manager
Robert J. Hermann U.S.A. Vice President and General Tax
Counsel
Peggy B. Menchaca U.S.A. Vice President and Secretary
Jordan H. Mintz U.S.A. Vice President, Tax and Tax Counsel
Julia Heintz Murray U.S.A. Vice President and General Counsel,
Finance
Elaine V. Overturf U.S.A. Deputy Corporate Secretary
Kate B. Cole U.S.A. Assistant Secretary
Geneva H. Hiroms U.S.A. Assistant Secretary
</TABLE>
I-6
<PAGE> 18
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
James V. Derrick, Jr. U.S.A. Director
Mark A. Frevert U.S.A. Director and Managing Director
Kenneth D. Rice U.S.A. Director, Chairman, Chief Executive
Officer and Managing Director
Gene E. Humphrey U.S.A. President and Managing Director
Andrew S. Fastow U.S.A. Managing Director
Mark E. Haedicke U.S.A. Managing Director and General Counsel
Jeremy M. Blachman U.S.A. Vice President
Richard B. Buy U.S.A. Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control
Officer
William D. Gathmann U.S.A. Vice President, Finance and Treasurer
Robert J. Hermann U.S.A. Vice President, Tax
Clifford P. Hickey U.S.A. Vice President
Peggy B. Menchaca U.S.A. Vice President and Secretary
Kristina M. Mordaunt U.S.A. Vice President and Assistant General
Counsel
Julia Heintz Murray U.S.A. Vice President, General Counsel,
Finance and Assistant Secretary
Andrea Vail U.S.A. Vice President
</TABLE>
I-7
<PAGE> 19
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
- ------------------------- ----------- -----------------------
<S> <C> <C>
Robert A. Belfer U.S.A. Director
767 Fifth Avenue, 46th Fl. Chairman, President and Chief
New York, NY 10153 Executive Officer,
Belco Oil & Gas Corp.
Norman P. Blake, Jr. U.S.A. Director
USF&G Corporation Chairman, United States Fidelity
6225 Smith Ave. LA0300 and Guaranty Company
Baltimore, MD 21209
Ronnie C. Chan U.S.A. Director
Hang Lung Development Chairman of Hang Lung
Company Limited Development Group
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director
5851 San Felipe, Suite 850 Investments
Houston, TX 77057
Joe H. Foy U.S.A. Director
404 Highridge Dr. Retired Senior Partner,
Kerrville, TX 78028 Bracewell & Patterson, L.L.P.
Wendy L. Gramm U.S.A. Director
P.O. Box 39134 Former Chairman, U.S. Commodity
Washington, D.C. 20016 Futures Trading Commission
Ken L. Harrison U.S.A. Director
121 S.W. Salmon Street Vice Chairman of Enron Corp.
Portland, OR 97204
Robert K. Jaedicke U.S.A. Director,
Graduate School of Business Professor (Emeritus), Graduate
Stanford University School of Business
Stanford, CA 94305 Stanford University
Charles A. Lemaistre U.S.A. Director
13104 Travis View Loop President (Emeritus), University of
Austin, TX 77030 Texas M.D. Anderson Cancer
Center
</TABLE>
I-8
<PAGE> 20
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<S> <C> <C>
Jerome J. Meyer U.S.A. Director
26600 S.W. Parkway Chairman and Chief Executive Officer,
Building 63;P.O. Box 1000 Tektronix, Inc.
Wilsonville, OR 97070-1000
John A. Urquhart U.S.A. Director and Vice Chairman of
John A. Urquhart Assoc. Enron Corp.
111 Beach Road President, John A. Urquhart
Fairfield, CT 06430 Associates
John Wakeham U.K. Director
Pinglestone House Former U.K. Secretary of State for
Old Alresford Energy and Leader of the
Hampshire S024 9TB Houses of Commons and Lords
United Kingdom
Charls E. Walker U.S.A. Director
Walker & Walker, LLC. Chairman, Walker & Walker, LLC
10220 River Road, Ste. 105
Potomac, Maryland 20854
Bruce G. Willison U.S.A. Director
4900 Riverdale Road President and Chief Operating
Irwindale, CA 91706 Officer, Homes Savings of America
Herbert S. Winokur, Jr. U.S.A. Director
Winokur & Associates, Inc. President, Winokur & Associates,
30 East Elm Ct. Inc.
Greenwich, CT 06830
1400 Smith Street
Houston, TX 77002
Kenneth L. Lay U.S.A. Director, Chairman and Chief
Executive Officer
Jeffrey K. Skilling U.S.A. Director, President and Chief
Operating Officer
J. Clifford Baxter U.S.A. Senior Vice President, Corporate
Development
</TABLE>
I-9
<PAGE> 21
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<S> <C> <C>
Richard A. Causey U.S.A. Senior Vice President and Chief
Accounting and Information Officer
Edmund P. Segner, III U.S.A. Executive Vice President and Chief of
Staff
James V. Derrick, Jr. U.S.A. Senior Vice President and General
Counsel
Andrew S. Fastow U.S.A. Senior Vice President, Finance
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer,
Enron Gas Pipeline Group
Rebecca P. Mark U.S.A. Chairman and Chief Executive Officer,
Enron International, Inc.
Thomas E. White U.S.A. Chairman and Chief Executive Officer,
Enron Ventures Corp.
Rodney L. Gray U.S.A. Executive Vice President,
Financial Management, of
Enron International, Inc.
</TABLE>
I-10
<PAGE> 1
EXHIBIT 5
================================================================================
PURCHASE AGREEMENT
BY AND BETWEEN
SHERIDAN ENERGY, INC.
AND
GRAND GULF PRODUCTION, L. L. C.
DATED AS OF
DECEMBER 31, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
Definitions
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I.
Sale and Purchase; Closing
1.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.3 Ownership, Revenues and Expenses of GGP Properties. . . . . . . . . . . . . . . . . . . . . 12
1.4 Certain Reassignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II.
Representations and Warranties of Sheridan
2.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6 SEC Documents and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 Liabilities; Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9 Title to Properties and Assets; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.10 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.12 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.13 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.14 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.16 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.17 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.19 Intellectual Property and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . 21
2.20 No Public Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.22 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.23 Plugging and Abandonment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.24 No Material Misstatements or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III.
Representations and Warranties of GGP
3.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.5 Consents and Preferential Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.7 Title to Properties and Assets; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.8 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.10 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.11 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV.
Covenants
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 Operation of Business by Sheridan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 Operation of GGP Properties by GGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V.
Closing Conditions
5.1 Conditions to Obligation of GGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2 Conditions to Obligation of Sheridan . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI.
Other Provisions
6.1 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Business Opportunity Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
6.6 Survival of Terms; Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Disclaimers of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 37
6.8 Transfer Taxes and Recording Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII.
Miscellaneous
7.1 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.8 Further Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.11 Exhibits; Schedules; Amendment of Disclosure Letter . . . . . . . . . . . . . . . . . . . . 39
7.12 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
Exhibit A - Form of Warrant Agreement
Exhibit B - Form of Assignment and Bill of Sale
Exhibit C - Form of Registration Rights Agreement
-iv-
<PAGE> 6
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is dated as of December 31,
1997, by and between Sheridan Energy, Inc., a Delaware corporation
("Sheridan"), and Grand Gulf Production, L.L.C., a Texas limited liability
company ("GGP").
RECITALS
Sheridan desires to issue and sell to GGP, subject to the terms and
conditions set forth herein, (i) 467,500 shares of Common Stock (the "Shares"),
and (ii) Warrants to purchase up to 82,500 shares of Common Stock in exchange
for substantially all of GGP's oil and gas properties, together with all of
GGP's interest in and to personal property, equipment, fixtures and data
relating thereto , including the office equipment and 3-D seismic data
described in Schedule III attached hereto, LESS AND EXCEPT and GGP hereby
excludes from the foregoing all 2-D seismic information, licenses and data
relating to the GGP Leases, to the extent that the same is not transferable
without consent, payment or penalty (collectively, the "GGP Properties").
Simultaneously herewith, (i) Sheridan is entering into an agreement
with JEDI Hydrocarbon Investments I Limited Partnership, a Delaware limited
partnership ("JEDI I Partnership") (the "JEDI I Partnership/Sheridan Purchase
Agreement") pursuant to which Sheridan will acquire all of JEDI I Partnership's
right, title and interest in and to certain oil and gas properties, together
with all personal property, equipment, fixtures and data relating thereto,
including the 3-D seismic data described in Schedule III attached hereto, LESS
AND EXCEPT all 2-D seismic information, licenses and data relating to the JEDI
I Leases, to the extent that the same is not transferable without consent,
payment or penalty, in exchange for 382,500 shares of Common Stock and warrants
to purchase up to 67,500 shares of Common Stock, (ii) GGP is entering into a
termination and release agreement with JEDI I Partnership (the "GGP/JEDI I
Partnership Termination Agreement") pursuant to which GGP and JEDI I
Partnership will terminate the Farmout Agreement and the Participation
Agreement, (iii) GGP is entering into an agreement (the "GGP/JEDI Termination
Agreement") with Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI"), pursuant to which JEDI will terminate
all of the outstanding debt obligations of GGP to JEDI under the JEDI Loan
Agreement in exchange for the transfer by GGP to JEDI of 467,500 shares of
Common Stock and warrants to purchase up to 82,500 shares of Common Stock, (iv)
JEDI will release and terminate the Lehto Guaranty Agreement pursuant to the
GGP/JEDI Termination Agreement, (v) BBU Mezzanine Fund II, a California limited
partnership ("BBU II") is entering into a sharing agreement with JEDI (the
"Sharing Agreement") pursuant to which BBU II and JEDI will agree to the
sharing of proceeds from the sale of certain shares of Common Stock and
warrants of Sheridan transferred to JEDI by GGP, (vi) BBU II and GGP are
entering into an agreement (the "BBU II/GGP Termination Agreement") pursuant to
which BBU II will terminate the BBU II/GGP Loan Agreement (vii) BBU Mezzanine
Fund, a California limited partnership ("BBU"), BBU II, AmPac Oil & Gas, Inc.,
a Texas corporation ("AmPac") and GGP are entering into an agreement (the
<PAGE> 7
"BBU/AmPac Termination Agreement") pursuant to which the BBU/AmPac Letter
Agreement will be terminated and (viii) BBU II and AmPac are entering into an
agreement (the "BBU II/AmPac Termination Agreement") pursuant to which the BBU
II/AmPac Loan Agreement will be terminated.
It is the desire of Sheridan and GGP that the transactions
contemplated by this Purchase Agreement, the JEDI I Partnership/Sheridan
Purchase Agreement, the GGP/JEDI I Partnership Termination Agreement, the
GGP/JEDI Termination Agreement, the Sharing Agreement, the BBU/AmPac
Termination Agreement and the BBUII/GGP Termination Agreement shall close
simultaneously in accordance with the terms and conditions set forth herein and
therein.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the capitalized
terms defined elsewhere in this Agreement, the following capitalized terms
shall have the following respective meanings when used in this Agreement:
"AFFILIATE" as applied to any specified Person means any other
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such specified Person. The
term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly,
of 10% or more of the voting power (or in the case of a Person which
is not a corporation, 10% or more of the ownership interest,
beneficial or otherwise) of such Person or the power otherwise to
direct or cause the direction of the management and policies of that
Person, whether through voting, by contract or otherwise. For
purposes of this paragraph, "voting power" of any Person means the
total number of votes which may be cast by the holders of the total
number of outstanding shares of equity of any class or classes of such
Person in any election of directors (or Persons performing similar
functions) of such Person. For purposes of this Agreement all
executive officers and directors of a Person shall be deemed to be
Affiliates of such Person. For purposes of this Agreement (i) all
executive officers and directors of a Person shall be deemed to be
Affiliates of such Person, (ii) for avoidance of doubt, Enron Corp.
and its Affiliates shall be deemed to be Affiliates of JEDI I
Partnership, (iii) Sheridan and its Subsidiaries shall not be
considered Affiliates of JEDI I Partnership
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or its Affiliates, and (iv) JEDI I Partnership and its Affiliates
shall not be considered Affiliates of Sheridan and its Subsidiaries.
"ASSIGNMENT" means the Assignment and Bill of Sale in the form
of Exhibit B hereto.
"AMPAC" shall have the meaning assigned to such term in the
recitals.
"BBU" shall have the meaning assigned to such term in the
recitals.
"BBU/AMPAC LETTER AGREEMENT" means that certain letter
agreement, dated October 3, 1994, among BBU, BBU II, AmPac and GGP.
"BBU/AMPAC TERMINATION AGREEMENT" shall have the meaning
assigned to such term in the recitals.
"BBU II" shall have the meaning assigned to such term in the
recitals.
"BBU II/GGP TERMINATION AGREEMENT" shall have the meaning
assigned to such term in the recitals.
"BBU II/AMPAC LOAN AGREEMENT" means that certain Term Credit
Agreement, dated as of October 30, 1992, between AmPac and BBU II, as
amended by that certain First Amendment to Term Credit Agreement,
dated effective as of December 1, 1994, between AmPac and BBU II.
"BBU II/GGP LOAN AGREEMENT" means that certain Loan Agreement,
dated October 3, 1994, between BBU II and GGP, as amended by (i) that
certain Amendment to Loan Agreement and Rights Agreement, dated
effective as of February 23, 1995, between BBU II and GGP and (ii)
that certain Second Amendment to Loan Agreement, dated effective May
3, 1995, between BBU II and GGP.
"CAPITALIZED LEASE OBLIGATIONS" means all payment obligations
arising under any lease of property which, in accordance with GAAP,
would be capitalized on Sheridan's or any of its Subsidiary's balance
sheet or for which the amount of the asset and liability thereunder as
if so capitalized should, in accordance with GAAP, be disclosed in a
note to such balance sheet.
"CHARTER" means, for any Person, such Person's certificate of
incorporation, articles of incorporation or other organizational
documents, as the same may be amended.
"CLAIMS" shall have the meaning assigned to such term in
Section 7.5(b).
"CLOSING" shall have the meaning assigned to such term in
Section 2.2.
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<PAGE> 9
"CLOSING DATE" shall have the meaning assigned to such term in
Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and all rules and regulations promulgated
thereunder, and any successor statute.
"COMMISSION" shall have the meaning assigned to such term in
Section 3.6.
"COMMON STOCK" means the common stock, par value $.01 per
share, of Sheridan.
"CONSOLIDATED" refers to the consolidation of financial
statements in accordance with GAAP.
"ECT" means Enron Capital & Trade Resources Corp.
"ECT PURCHASE AGREEMENT" means that Stock Purchase Agreement
dated November 28, 1997 between Sheridan and ECT.
"EFFECTIVE DATE" means September 1, 1997.
"ENVIRONMENTAL LAWS" means any and all laws, statutes,
ordinances, rules, regulations, orders or determinations of any
Governmental Authority pertaining to health or the environment in
effect in any and all jurisdictions in which the Person identified
conducts business or at any time has conducted business, or where any
of its properties or operations are located, including without
limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous and Solid Waste Amendments Act
of 1984, as amended, the Hazardous Materials Transportation Act, as
amended, the Outer Continental Shelf Lands Act, as amended, the
Coastal Zone Management Act, as amended, and other environmental
conservation or protection laws. The terms "hazardous substance" and
"release" (or "threatened release") have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed")
have the meanings specified in RCRA; provided, however, that to the
extent the laws of the state in which any property or operation is
located has established a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
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<PAGE> 10
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) which together with Sheridan or a Subsidiary of Sheridan
would be deemed to be a "single employer" within the meaning of
Section 4001 of ERISA.
"EXCHANGE ACT" shall have the meaning assigned to such term in
Section 3.6.
"EXISTING LAWSUIT" means the pending cause of action described
in Section 4.6 of the GGP Disclosure Letter.
"FARMOUT AGREEMENT" means that certain letter agreement, dated
September 19, 1997, among JEDI, JEDI I Partnership and GGP.
"GAAP" means generally accepted accounting principles
(including principles of consolidation), in effect from time to time,
consistently applied.
"GGP" shall have the meaning assigned to such term in the
recitals.
"GGP DISCLOSURE LETTER" means that certain disclosure letter
of even date herewith delivered to Sheridan by GGP relating to GGP's
disclosure in connection with its representations and warranties
hereunder.
"GGP ENCUMBRANCES" means any of the following matters:
(a) the terms, conditions, restrictions, exceptions,
reservations, limitations and other matters contained in the
agreements, instruments and documents that create or reserve to GGP
its interests in any of the GGP Properties;
(b) any (i) undetermined or inchoate Liens constituting
or securing the payment of expenses that were incurred incidental to
maintenance, development, production or operation of the GGP
Properties or for the purpose of developing, producing or processing
oil, gas or other hydrocarbons therefrom or therein, excluding any
Liens for borrowed money, and (ii) statutory Liens (including
materialman's, mechanics', repairman's, mineral contractor's or
mineral sub-contractor's and similar Liens), to the extent not shown
in the applicable public records, and operators' Liens, in each case
arising in the ordinary course of business (x) that GGP has agreed to
assume or pay pursuant to the terms hereof, (y) for which GGP is
responsible for paying or releasing at Closing, or (z) for which
Sheridan has agreed to assume or pay pursuant to the terms hereof;
(c) any Liens for taxes not yet due and payable or, if
due and payable, to the extent being contested in good faith by
appropriate proceedings;
(d) any Liens created by law or reserved in oil and gas
leases for royalty, bonus or rental, or created to secure compliance
with the terms of the agreements, instruments and documents that
create or reserve to GGP its interests in the GGP Properties;
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<PAGE> 11
(e) any obligations or duties affecting the GGP
Properties to any municipality or public authority with respect to any
franchise, grant, license or permit, and all applicable laws, rules,
regulations and orders of any Governmental Authority;
(f) any (i) easements, rights-of-way, servitudes,
permits, licenses, surface leases and other rights in respect of
surface operations, pipelines, grazing, hunting, lodging, canals,
ditches, reservoirs or the like, and (ii) easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways
and other similar rights-of-way, on, over or in respect of property
owned or leased by GGP or over which GGP owns rights-of-way,
easements, permits or licenses;
(g) all lessors' royalties, overriding royalties, net
profits interests (other than those granted to JEDI, which net profits
interest shall be reconveyed to GGP at or prior to Closing); carried
interests, production payments, reversionary interests and other
burdens on or deductions from the proceeds of production created or in
existence as of the date hereof that do not operate to reduce the Net
Revenue Interests of GGP in the GGP Wells described in Schedule II;
(h) preferential rights to purchase or similar
agreements;
(i) required third party consents to assignments or
similar agreements;
(j) all rights to consent by, required notices to,
filings with, or other actions by any Governmental Authority in
connection with the sale or conveyance of oil and gas leases or
interests therein;
(k) production sales contracts; division orders;
contracts for sale, purchase, exchange, refining or processing of
hydrocarbons; unitization and pooling designations, declarations,
orders and agreements; operating agreements; agreements of
development; area of mutual interest agreements; gas balancing or
deferred production agreements (but only to the extent Sheridan and
GGP have agreed on, and/or balanced up, any imbalances pursuant
thereto); processing agreements; plant agreements; pipeline, gathering
and transportation agreements; injection, repressuring and recycling
agreements; carbon dioxide purchase or sale agreements; salt water or
other disposal agreements; seismic or geophysical permits or
agreements; tax partnership agreements (but only if there is
currently, and at the Closing Date, no capital account deficit which
would be required to be made up, in whole or in part, upon liquidation
or termination); and any and all other agreements that are ordinary
and customary in the oil, gas, sulphur and other mineral exploration,
development or extraction business, or in the business of processing
of gas and gas condensate production for the extraction of products
therefrom; and
(l) all defects and irregularities affecting the GGP
Properties which individually or in the aggregate do not operate to
reduce the Net Revenue Interests of GGP in the GGP Wells described in
Schedule II, increase the proportionate share of costs and expenses of
leasehold operations attributable to or to be borne by the Working
Interests of GGP in the
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<PAGE> 12
GGP Wells described in Schedule II, or otherwise interfere materially
with the operation, value or use of the GGP Properties, taken as a
whole.
"GGP/JEDI I PARTNERSHIP TERMINATION AGREEMENT" shall have the
meaning assigned to such term in the recitals.
"GGP/JEDI TERMINATION AGREEMENT" shall have the meaning
assigned to such term in the recitals.
"GGP LEASES" means the leases described in Schedule 1-A and
Schedule 1-B.
"GGP MATERIAL ADVERSE EFFECT" means any change or event that,
individually or in the aggregate, would or could reasonably be
expected to have a material adverse effect on (a) the GGP Properties,
taken as a whole, (b) the ability of GGP to meet its obligations under
this Agreement or the Operative Documents to which it is a party, or
(c) the consummation of the transactions contemplated hereby;
provided, however, that any change or event resulting from (i) changes
in the prices of oil, gas, natural gas liquids or other hydrocarbon
products, or (ii) changes in general economic conditions, including
general stock market conditions and interest rate changes or (iii) the
adverse determination of any pending litigation disclosed in the GGP
Disclosure Letter shall not constitute a GGP Material Adverse Effect.
"GGP PROPERTIES" shall have the meaning assigned to such term
in the recitals.
"GGP WELLS" means the wells located on the GGP Leases
described in Schedule 2.
"GOOD TITLE" means that, subject to and except for the GGP
Encumbrances:
(a) GGP is (i) entitled to receive not less than the
percentage set forth in Schedule II hereto as the "Net Revenue
Interest" of all hydrocarbons produced, saved and marketed from the
GGP Wells listed in Schedule II to which such interest corresponds,
all without reduction throughout the duration of the life of such
well, except as specifically set forth in Schedule II, and (ii)
obligated to bear the percentage of the costs and expenses relating to
the maintenance, development and operation of such well, not greater
than the "Working Interest" shown in Schedule II with respect to such
well, without increase throughout the duration of the life of such
well, except as specifically set forth in Schedule II; and
(b) the title of GGP is free and clear of all liens,
encumbrances and material defects.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic
federal, state, county, municipal, or other governmental or regulatory
authority, agency, board, body, commission, instrumentality, court, or
any political subdivision thereof.
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<PAGE> 13
"GOVERNMENTAL REQUIREMENT" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other
direction or requirement (including but not limited to any of the
foregoing which relate to Environmental Laws, energy regulations and
occupational, safety and health standards or controls) of any
Governmental Authority.
"INDEBTEDNESS" means, with respect to any Person, the
principal of, premium, if any, and interest on: (a) indebtedness for
money borrowed from others whether or not evidenced by notes, bonds,
debentures or otherwise; (b) indebtedness of another Person
guaranteed, directly or indirectly, in any manner by such Person,
including, without limitation, through an agreement, contingent or
otherwise, (i) to purchase or pay any such indebtedness, (ii) to
advance or supply funds for the purchase or payment of such
indebtedness, (iii) to purchase and pay for property if not delivered
or pay for services if not performed, primarily for the purpose of
enabling such other Person to make payment of such indebtedness or to
assure the owners of the indebtedness against loss, or (iv) to
maintain working capital, equity capital or other financial condition
of such other Person so as to enable it to pay such indebtedness; (c)
all indebtedness secured by any Lien upon property owned by such
Person, even though such Person has not in any manner become liable
for the payment of such indebtedness; (d) all indebtedness of such
Person created or arising under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security
agreement with respect to property acquired by such Person even though
the rights and remedies of Sheridan, lessor or lender under such
agreement or lease in the event of default may be limited to
repossession or sale of such property; (e) all obligations of such
Person issued or assumed for the deferred purchase price of property
or services, including all trade credit, to the extent such
obligations have remained outstanding in excess of sixty days; (f)
Capitalized Lease Obligations and the present value of all future
lease payments under a lease other than Capitalized Lease Obligations;
(g) all unfunded post-retirement and post-employment benefits
including, without limitation, unfunded pension liabilities; (h)
mandatory redemption or mandatory dividend rights on ordinary shares
(or other equity); (i) obligations of discontinued businesses that are
subsumed within the single-sum amount of the net assets of the
discontinued operations being held for sale, and (j) all obligations
of such Person under or with respect to letters of credit.
"INTERIM BALANCE SHEET" shall have the meaning assigned to
such term in Section 3.6(a).
"INTERMEDIARY" shall have the meaning assigned to such term in
Section 7.1.
"JEDI" shall have the meaning assigned to such term in the
recitals.
"JEDI I PARTNERSHIP" shall have the meaning assigned to such
term in the recitals.
"JEDI I PARTNERSHIP/SHERIDAN PURCHASE AGREEMENT" shall have
the meaning assigned to such term in the recitals.
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<PAGE> 14
"JEDI LOAN AGREEMENT" means that certain Loan Agreement, dated
May 3, 1995, between GGP and JEDI, as amended by (i) that certain
First Amendment and Supplement to Loan Agreement, dated effective
January 1, 1996, between GGP and JEDI and (ii) that certain Second
Amendment and Supplement to Loan Agreement, dated January 23, 1997,
between GGP and JEDI.
"KNOWLEDGE" or "KNOWN" means with respect to Sheridan, those
individuals listed in Section 1.1 of the Sheridan Disclosure Letter
and with respect to GGP, those individuals listed in Section 1.1 of
the GGP Disclosure Letter, in each case, individually or collectively,
have conducted such investigations and inquiries as they reasonably
believe to be most likely to confirm the truth and accuracy of the
matter being represented and warranted (or have caused such
investigations and inquiries to be made under their supervision) and,
after evaluating the findings of such investigation and inquiries
either (a) know that the matter being represented and warranted is
true and accurate or (b) have no reason to believe that the matter
being represented and warranted is not true and accurate.
"LEHTO GUARANTY AGREEMENT" means that certain Guaranty
Agreement, dated January 23, 1997, executed by Donald K. Lehto in
favor of JEDI.
"LIEN" means, with respect to any Person, any mortgage, deed
of trust, lien, security interest, pledge, lease, conditional sale
contract, claim, charge, easement, right of way, assessment,
restriction and other encumbrance of every kind.
"OPERATIVE DOCUMENTS" means this Agreement, the Warrant
Agreement, the Warrant Certificate, the Assignment (including the
warrant agreement and warrant certificates referred to therein), and
the Registration Rights Agreement.
"PARTICIPATION AGREEMENT" means that certain Participation
Agreement, dated February 27, 1995, between GGP and JEDI I
Partnership, as amended by that certain First Amendment to
Participation Agreement, dated January 1, 1996, between GGP and JEDI I
Partnership.
"PERMITS" means all licenses, permits, exceptions, franchises,
accreditations, privileges, rights, variances, waivers, approvals and
other authorizations (including, without limitation, those relating to
environmental matters) of, by or from Governmental Authorities
necessary for the conduct of the business of such Person as currently
conducted and as proposed to be conducted after the Closing.
"PERMITTED LIENS" means (a) Liens for taxes not yet due and
payable, (b) statutory Liens (including materialmen's, mechanic's,
repairmen's, landlord's, and other similar Liens) and operators'
Liens, in each case arising in connection with the ordinary course of
business securing payments not yet due and payable, (c) Liens created
pursuant to or under the Sheridan Senior Credit Facility and (d) such
imperfections or irregularities of title, if any, as (i) are not
substantial in character, amount, or extent and do not materially
detract from the value of the property subject thereto, (ii) do not
and will not materially
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<PAGE> 15
interfere with either the present or intended use of such property,
and (iii) do not and will not, individually or in the aggregate,
materially interfere with the conduct of Sheridan's or its
Subsidiaries current or proposed operations.
"PERSON" means an individual or individuals, a partnership, a
corporation, a company, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization, any other form of legal entity, or a Governmental
Authority.
"PLAN" shall have the meaning assigned to such term in Section
3.12(a)(i).
"PROPERTIES EXPENSES" means all costs and expenses (including
royalties, production taxes, capital expenditures, lease operating
expenses and overhead) paid by GGP that are (x) attributable to the
GGP Properties, and (y) attributable to the period of time from and
after the Effective Date including one-third of the ad valorem taxes
for 1997.
"PROPERTIES REVENUES" means the amount of all proceeds
actually received by GGP that are (x) attributable to the GGP
Properties, and (y) attributable to the period of time from and after
the Effective Time.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of Exhibit C hereto.
"SEC DOCUMENTS" shall have the meaning assigned to such term
in Section 3.6.
"SECURITIES ACT" shall have the meaning assigned to such term
in Section 3.6.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock
of Sheridan issued to ECT pursuant to the ECT Purchase Agreement.
"SHARES" shall have the meaning assigned to such term in
Section 2.1.
"SHARING AGREEMENT" shall have the meaning assigned to such
term in the recitals.
"SHERIDAN DISCLOSURE LETTER" means that certain disclosure
letter of even date herewith delivered to GGP by Sheridan relating to
Sheridan's disclosures in connection with its representations and
warranties hereunder.
"SHERIDAN MATERIAL ADVERSE EFFECT" means any change or event
that, individually or in the aggregate, would or could reasonably be
expected to have a material adverse effect on (a) the assets,
liabilities, condition (financial or otherwise), business, results of
operations or prospects of Sheridan and its Subsidiaries on a
Consolidated basis, (b) the ability of Sheridan to meet its
obligations under this Agreement or the Operative Documents to which
Sheridan is a party, or (c) the consummation of the transactions
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<PAGE> 16
contemplated hereby; provided, however, that any change or event
resulting from (i) changes in the prices of oil, gas, natural gas
liquids or other hydrocarbon products, (ii) changes in general
economic conditions, including general stock market conditions and
interest rate changes or (iii) the adverse determination of any
pending litigation disclosed in the Sheridan Disclosure Letter shall
not constitute a Sheridan Material Adverse Effect.
"SHERIDAN SENIOR CREDIT FACILITY" means that certain First
Amended and Restated Credit Agreement dated as of September 30, 1997
by Sheridan, as the borrower and Bank One Texas, N.A., as the lender.
"SUBSIDIARY" means, as to any Person, any corporation,
company, association, partnership, limited liability company or other
business entity of which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a
group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of
such entity, and any partnership, limited liability company or joint
venture if more than a 50% interest in the profits or capital thereof
is owned by such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries.
"WARRANT AGREEMENT" means the Warrant Agreement to be executed
by Sheridan and GGP, in the form of Exhibit A hereto, as the same may
be amended, supplemented, or otherwise modified from time to time.
"WARRANT CERTIFICATE" means the certificate evidencing
Warrants, in the form of Exhibit A to the Warrant Agreement, as the
same may be amended, supplemented, or otherwise modified from time to
time.
"WARRANTS" means the Common Stock purchase warrants described
in the Warrant Agreement.
"WARRANT SHARES" means the shares of Common Stock issued or
issuable upon the exercise of the Warrants.
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<PAGE> 17
ARTICLE I.
SALE AND PURCHASE; CLOSING
1.1 SALE AND PURCHASE. Subject to the satisfaction of the terms
and conditions herein set forth and in reliance upon the respective
representations, warranties, and covenants of the parties set forth herein or
in any document delivered pursuant hereto, at the Closing (i) Sheridan agrees
to deliver to GGP, and GGP agrees to accept, 467,500 shares of Common Stock
(the "Shares") and, pursuant to the terms of the Warrant Agreement, Warrants to
purchase 82,500 shares of Common Stock for $5.50 per share and (ii) GGP agrees
to deliver to Sheridan, and Sheridan agrees to accept, all of GGP's right,
title and interest in and to the GGP Properties.
1.2 CLOSING. The closing of the exchange of the Shares and the
Warrants for the GGP Properties by the parties (the "Closing") will occur on or
before December 31, 1997, or on such other date as may be agreed by the parties
(the "Closing Date"), at the offices of Vinson & Elkins L.L.P. At the Closing,
(i) Sheridan will deliver to GGP (or its designee) the Shares, duly executed
and registered in the name of GGP or its designee (such shares bearing the
appropriate legend agreed to by the parties), and the Warrant Agreement and the
Warrant Certificates, (ii) GGP will deliver to Sheridan the Assignment covering
the GGP Properties and (iii) each of Sheridan, GGP, JEDI I Partnership and ECT
shall execute and deliver the Registration Rights Agreement; and (iv) GGP shall
deliver such letters in lieu or similar documents as Sheridan shall reasonably
request in order to reflect the transfer of the GGP Properties.
1.3 OWNERSHIP, REVENUES AND EXPENSES OF GGP PROPERTIES. (a)
Subject to the other provisions of this Agreement, including without limitation
the indemnification provisions hereof, GGP shall be entitled to all of the
rights of ownership (including, without limitation, the right to all production
including proceeds of production and other proceeds) and shall be responsible
for costs and expenses attributable to the GGP Properties for the period of
time prior to the Effective Date. Subject to the other provisions of this
Agreement, Sheridan shall be entitled to all of the rights of ownership
(including, without limitation, the right to all production including all
proceeds of production and other proceeds), and shall be responsible for costs
and expenses attributable to the GGP Properties for the period of time from and
after the Effective Date.
(b) Notwithstanding anything herein to the contrary, including the
provisions of Section 2.3(a) hereof, (i) GGP shall not be responsible for (and
Sheridan hereby assumes) any plugging and abandonment costs attributable to the
Georgia-Pacific Well #1, (ii) Sheridan shall be responsible for twenty-five
percent (25%) of GGP's general and administrative expenses for the period
commencing on September 1, 1997 and ending on December 31, 1997, (iii) GGP
shall not be responsible for (and Sheridan hereby assumes) costs in excess of
$7,500 relating to repairs of pipeline right-of- way(s) on those GGP Leases
under which either John Barton, Sr., et al. or Ridge Road Land Company Ltd., et
al. is the lessor thereunder and (iv) Sheridan hereby assumes fifty percent
(50%) of the delay rental costs attributable to the Wilcox prospects for the
period commencing on September 1, 1997 and ending on December 31, 1997.
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<PAGE> 18
(c) At Closing, GGP shall prepare, and shall furnish to Sheridan,
an accounting statement setting forth an estimate of the Properties Revenues
and the Properties Expenses. To the extent that the Properties Revenues exceed
the Properties Expenses, GGP shall pay to Sheridan the amount by which the
Properties Revenues exceed the Properties Expenses at the Closing. To the
extent that the Properties Expenses exceed the Properties Revenues, Sheridan
shall pay to GGP the amount by which the Properties Expenses exceed the
Properties Revenues at the Closing.
(d) Promptly after the Closing Date (but not later than 120 days
thereafter), Sheridan shall prepare, and shall furnish to GGP, a final
accounting statement setting forth the actual amounts provided in Section
2.3(a). As soon as reasonably practicable thereafter (but not later than 30
days thereafter), GGP shall deliver to Sheridan a written report containing any
changes that GGP proposes be made to such statement. The parties shall
undertake to agree on the final adjustment amount, and such final adjustment
amount shall be paid by GGP or Sheridan, as appropriate, not later than 180
days after the Closing Date. During said 180 day period, either party may at
its own expense audit the other party's books, accounts and records relating to
production proceeds, operating expenses and taxes paid that may have been
adjusted on account of this transaction. Such audit shall be conducted so as
to cause a minimum of inconvenience to the audited party.
1.4 CERTAIN REASSIGNMENTS. If the consent described in
Section 4.5 of the GGP Disclosure Letter with respect to that certain Oil, Gas
and Mineral Lease dated February 1, 1990 between Joseph T. Howell et al, as
Lessor, and Grand Gulf Production, L.L.C., as Lessee, and recorded under Entry
121809, Book H-8 covering the J. Howell Estate 62 #1 and J. Howell Estate 62 #3
has not been received by August 1, 1998, Sheridan may require, upon written
notice to GGP, a reassignment by GGP of 46,750 Shares and 8,250 Warrants. Upon
receipt of such notice, GGP shall assign to Sheridan 46,750 Shares endorsed in
blank or accompanied by duly executed assignment documents and 8,250 Warrants
accompanied by duly executed assignment documents and Sheridan shall reassign
to GGP the GGP Leases affected by such consents. Such assignments must be made
not later than November 1, 1998. In the event that the stock certificates
representing the Shares contain a restrictive legend referring to this Section
2.4, then upon the request of GGP or its assignee after the receipt of the
consent referenced in this Section 2.4 or the execution and delivery of
assignments referred to herein (whichever is earlier), Sheridan agrees to cause
new stock certificate(s) evidencing the Shares (less any Shares reassigned to
Sheridan pursuant to this Section 2.4) to be issued to GGP or its assignee
without such restrictive legend.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SHERIDAN
Sheridan represents and warrants to GGP as follows:
2.1 CORPORATE EXISTENCE. Sheridan is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sheridan has full corporate power and authority to conduct its business as it
is now being conducted and to own, operate and lease the properties and assets
it currently owns, operates and holds under lease. Sheridan is duly
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<PAGE> 19
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business activities or its ownership or leasing of property
makes such qualification necessary, except where the failure to be so qualified
would not have a Sheridan Material Adverse Effect. On or before the date
hereof Sheridan has delivered to GGP's counsel true and complete copies of
Sheridan's Certificate of Incorporation and bylaws, together with all
amendments thereto. No other amendments to Sheridan's Certificate of
Incorporation have been approved by the Board of Directors or stockholders of
the Corporation or filed with the Delaware Secretary of State.
2.2 CORPORATE POWER AND AUTHORIZATION. Sheridan is duly
authorized and empowered to issue the Shares, the Warrants and the Warrant
Shares, and to execute, deliver, and perform this Agreement and to consummate
the transactions contemplated hereby and thereby. All action on Sheridan's
part requisite for the due issuance of the Shares and the Warrants and for the
due execution, delivery, and performance of this Agreement and the other
Operative Documents to which Sheridan is a party has been duly and effectively
taken. The execution and delivery of this Agreement and the other Operative
Documents to which Sheridan is a party and the consummation of the transactions
to be performed by Sheridan hereby and thereby have been duly and validly
authorized by all necessary action on the part of the Board of Directors of
Sheridan, and no other corporate proceedings are necessary to authorize the
execution and delivery of this Agreement or the other Operative Documents to
which Sheridan is a party by Sheridan or to consummate the transactions to be
performed by Sheridan hereby and thereby.
2.3 BINDING OBLIGATIONS. This Agreement and the other Operative
Documents to which Sheridan is a party, when executed and delivered, shall each
constitute a legal, valid and binding obligation of Sheridan enforceable in
accordance with its respective terms, except insofar as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity. When issued to GGP at the
Closing upon Sheridan's receipt of the Assignment, (i) the Shares will be
validly issued, fully paid and nonassessable and free and clear of any Liens,
and (ii) the Warrants will be validly issued and free and clear of any Liens.
When issued and paid for in accordance with the terms of the Warrant Agreement,
the Warrant Shares will be validly issued, fully paid and nonassessable and
free and clear of any Liens.
2.4 NO VIOLATION. The execution and delivery of this Agreement or
any of the other Operative Documents to which Sheridan is a party, the
consummation of the transactions provided for herein and therein and
contemplated hereby and thereby, and the fulfillment by Sheridan of the terms
hereof and thereof, will not (a) conflict with or result in a breach of any
provision of the Charter or bylaws or other organizational document of Sheridan
or any of its Subsidiaries, (b) except for consents described in Section 3.5 of
the Sheridan Disclosure Letter, result in any default or in any material
modification of the terms of any material contract, agreement, obligation,
commitment applicable to Sheridan or its Subsidiaries, or the creation of any
Lien upon any of the properties or assets owned by Sheridan or any of its
Subsidiaries, (c) except for consents described in Section 3.5 of the Sheridan
Disclosure Letter, require any consent or approval (which has not been obtained
or waived) under any Permit or any note, bond, mortgage, indenture, loan,
distribution agreement, license, agreement, lease or material instrument or
material obligation to which Sheridan or any of its Subsidiaries is a party or
by which Sheridan
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or any of its Subsidiaries may be bound, or (d) violate any Governmental
Requirement or Permit applicable to Sheridan or any of its Subsidiaries, except
in the case of subparagraphs (b), (c) and (d) above where any such default,
modification, consent, approval or violation that would not have a Sheridan
Material Adverse Effect.
2.5 CONSENTS. Except as set forth in Section 3.5 of the Sheridan
Disclosure Letter, all consents, approvals, qualifications, orders or
authorizations of, or filings with, any Governmental Authority, and all
consents under any contracts, agreements, or instruments by which Sheridan or
any of its Subsidiaries is bound or to which it or any of its Subsidiaries is
subject, and required in connection with Sheridan's valid execution, delivery,
or performance of this Agreement and the other Operative Documents to which
Sheridan is a party, and the consummation of the transactions contemplated
hereby and thereby has been obtained or made, except where the failure to have
obtained or made such consents, approvals, qualifications, orders,
authorizations or filings would not have a Sheridan Material Adverse Effect.
2.6 SEC DOCUMENTS AND FINANCIAL STATEMENTS. (a) Sheridan and its
predecessor, TGX Corporation ("TGX"), have filed with the Securities and
Exchange Commission (the "Commission") all forms, reports, schedules,
statements and other documents required to be filed by them since January 1,
1994 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or the Securities Act of 1933, as amended (the "Securities Act") (such
documents, as supplemented and amended since the time of filing, collectively,
the "SEC Documents"). The SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The financial
statements of Sheridan and TGX included in the SEC Documents at the time filed
(and, in the case of registration statements and proxy statements, on the dates
of effectiveness and the dates of mailing, respectively) complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the Commission), and
fairly present (subject in the case of unaudited statements to normal,
recurring audit adjustments) the Consolidated financial position of Sheridan or
TGX, as the case may be, as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. The
Consolidated balance sheet for Sheridan included in its quarterly report on
Form 10-Q dated September 30, 1997 is referred to herein as the "Interim
Balance Sheet".
(b) Since September 30, 1997, there has been no Sheridan Material
Adverse Effect with respect to Sheridan.
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2.7 LIABILITIES; INDEBTEDNESS. Except for liabilities incurred in
the ordinary course of business and that would not, individually or in the
aggregate, have a Sheridan Material Adverse Effect, Sheridan and its
Subsidiaries do not have liabilities, direct or contingent (including but not
limited to liability with respect to any Plan or, to Sheridan's knowledge, any
Environmental Law) other than those provided for in the Interim Balance Sheet
or disclosed in Section 3.7 of the Sheridan Disclosure Letter or the borrowings
under the Sheridan Senior Credit Facility or in connection with the Series A
Preferred Stock. Except as would not have a Sheridan Material Adverse Effect,
Sheridan and its Subsidiaries have no Indebtedness other than (a) the Series A
Preferred Stock, (b) the Indebtedness disclosed in Section 3.7 of the Sheridan
Disclosure Letter and (c) the borrowings under the Sheridan Senior Credit
Facility.
2.8 LITIGATION. Except as disclosed in Section 3.8 of the Sheridan
Disclosure Letter, there is no action, suit or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the knowledge of
Sheridan, threatened against Sheridan or any of its Subsidiaries or any
material property of Sheridan or any Subsidiary thereof before any Governmental
Authority (i) which challenges the validity of this Agreement or any of the
Operative Documents to which Sheridan is a party, or (ii) which, if adversely
determined, would have a Sheridan Material Adverse Effect.
2.9 TITLE TO PROPERTIES AND ASSETS; LEASES. (a) Except as set
forth in Section 3.9 of the Sheridan Disclosure Letter or as would not have a
Sheridan Material Adverse Effect, Sheridan or its Subsidiaries has defensible
title to (i) all of its properties and assets (real and personal, tangible and
intangible) reflected on the Interim Balance Sheet, and (ii) as of the Closing
Date, all properties acquired by Sheridan or its Subsidiaries after December 1,
1997, in each case free and clear of all liens except the Permitted Liens. All
equipment owned by Sheridan or its Subsidiaries which is necessary to the
business of Sheridan or its Subsidiaries is in good condition and repair
(ordinary wear and tear excepted), except where the failure to be in good
condition and repair would not have a Sheridan Material Adverse Effect.
(b) Except as set forth in Section 3.9 of the Sheridan Disclosure
Letter, the oil and gas leases in which Sheridan or its Subsidiaries own an
interest (i) have been maintained according to their terms and in compliance
with all material agreements to which such oil and gas leases are subject,
except where the failure to be so maintained or any noncompliance therewith
would not have a Sheridan Material Adverse Effect, and (ii) are in full force
and effect, except where the failure to be in full force and effect would not
have a Sheridan Material Adverse Effect.
(c) All royalties, overriding royalties, compensatory royalties
and other payments due with respect to the oil and gas properties of Sheridan
and its Subsidiaries have been properly and correctly paid, except where the
failure to make such payment would not have a Sheridan Material Adverse Effect.
2.10 COMPLIANCE WITH THE LAW. Except with respect to environmental
matters (which are exclusively covered by Section 3.18), neither Sheridan nor
any of its Subsidiaries (i) is in violation of any Governmental Requirement or
(ii) has failed to obtain any Permit, necessary to
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the ownership of any of their respective properties or the conduct of their
respective business, except where a violation or failure would not have a
Sheridan Material Adverse Effect.
2.11 TAXES. Sheridan and its Subsidiaries (i) have filed all tax
returns and reports ("Tax Returns") required to be filed by or with respect to
Sheridan or any of its Subsidiaries, (ii) have included all items of income,
gain, loss, deduction and credit or other items required to be included in each
such Tax Return, and (iii) have paid all taxes, assessments, fees, imposts,
duties or other charges, including any interest and penalties, (all
collectively referred to herein as "Taxes") due with respect to such Tax
Returns. There is no claim against Sheridan or any of its Subsidiaries for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to Sheridan or any
of its Subsidiaries which would have a Sheridan Material Adverse Effect.
2.12 EMPLOYEE BENEFIT MATTERS. (a) Definitions. Where the
following words and phrases appear in this Agreement, they shall have the
respective meanings set forth below, unless the context clearly indicates to
the contrary:
(i) Plan: Each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, but not limited to, any
employee benefit plan that may be exempt from some or all of the
provisions of ERISA, which is sponsored, maintained, or contributed to
by Sheridan or any of its Subsidiaries for the benefit of the
employees, former employees, independent contractors, or agents of
Sheridan or any of its Subsidiaries, or has been so sponsored,
maintained or contributed to since 1974.
(ii) Benefit Program or Agreement: Each personnel policy,
stock option plan, collective bargaining agreement, workers'
compensation agreement or arrangement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy, severance pay
plan, policy or agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental income
arrangement, consulting agreement, employment agreement, and each
other employee benefit plan, agreement, arrangement, program, practice
or understanding, which is not described in Section 3.12(a)(i) and
which is sponsored, maintained, or contributed to by Sheridan or any
of its Subsidiaries for the benefit of the employees, former
employees, independent contractors, or agents of Sheridan or any of
its Subsidiaries, or has been so sponsored, maintained, or contributed
to since 1974.
(iii) Benefit Plans: Collectively, the Plans and Benefit
Programs or Agreements.
(b) Employee Benefit Plan Compliance.
(i) Neither Sheridan nor any corporation, trade,
business, or entity under common control with Sheridan, within the
meaning of Section 414(b), (c), (m), or (o) of the Code or Section
4001 of ERISA, ("Commonly Controlled Entity") contributes to or has an
obligation to contribute to, nor has Sheridan or any Commonly
Controlled Entity at any time within six years prior to the Closing
Date contributed to or had an obligation to
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contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA or any plan subject to Title IV of ERISA; and
(ii) All obligations, whether arising by operation of law
or by contract, required to be performed in connection with the
Benefit Plans have been performed, and there have been no defaults,
omissions, or violations by any party with respect to any Benefit Plan
or law applicable thereto.
(iii) Each Plan that is intended to be qualified under
Section 401(a) of the Code (A) satisfies the requirements of such
Section, (b) has received a favorable determination letter from the
Internal Revenue Service ("IRS") regarding such qualified status and
covering amendments required under the Tax Reform Act of 1986 ("TRA
'86"), the Unemployment Compensation Amendments of 1992, the Omnibus
Reconciliation Act of 1993, the final nondiscrimination regulations
under Section 401(a)(4) of the Code, and all other amendments required
to be filed within the TRA '86 remedial amendment period described in
Internal Revenue Procedure 95-12 (the "TRA '86 Amendments") (or the
TRA '86 Amendments to such Plans have been timely made and filed with
the IRS for such a determination letter), and (C) has not, since
receipt of the most recent favorable determination letter, been
amended or operated in a way that would adversely affect such
qualified status.
(c) NO ADDITIONAL RIGHTS OR OBLIGATIONS. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not (A) require Sheridan or any of its Subsidiaries to
make a larger contribution to, or pay greater benefits under, any Benefit Plan
than it otherwise would or (B) create or give rise to any additional vested
rights or service credits under any Benefit Plan.
(d) NO ADDITIONAL SEVERANCE. Except as set forth in Section
3.12(d) of the Sheridan Disclosure Letter, neither Sheridan nor any of its
Subsidiaries is a party to any agreement, nor has Sheridan or any of its
Subsidiaries established any policy or practice requiring it to make a payment
or provide any other form of compensation or benefit to any person performing
services for Sheridan upon termination of such services that would not be
payable or provided in the absence of the consummation of the transactions
contemplated by this Agreement.
(e) NO EXCESS PARACHUTE PAYMENTS. In connection with the
consummation of the transaction contemplated by this Agreement, no payments
have or will be made under the Benefit Plans which, in the aggregate, would
result in imposition of the sanctions imposed under Section 280G or Section
4999 of the Code.
2.13 INVESTMENT COMPANY ACT. Neither Sheridan nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
2.14 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Sheridan nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of
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<PAGE> 24
a "holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
2.15 NO RESTRICTIONS ON AFFILIATES. Neither Sheridan nor any of its
Subsidiaries is a party to any agreement that would purport to impose
restrictions or limitations on GGP or any of its Affiliates.
2.16 CAPITALIZATION. The authorized capital stock of Sheridan
consists of (i) 20,000,000 shares of Common Stock, of which 5,881,471 shares
are issued and outstanding and an additional 450,000 shares are reserved for
issuance under the Sheridan 1997 Flexible Incentive Plan and (ii) 5,000,000
shares of preferred stock, par value $0.01 per share, of which 1,000,000 shares
of Series A Preferred Stock are issued and outstanding and an additional
900,000 shares of Series A Preferred Stock are reserved for issuance as
dividends to holders of Series A Preferred Stock of Sheridan. Section 3.16 of
the Sheridan Disclosure Letter sets forth the name and address of each person
known to Sheridan to be the beneficial owner of 5% or more of the outstanding
shares of Common Stock. Except as set forth in Section 3.16 of the Sheridan
Disclosure Letter and except for up to 450,000 shares of Common Stock reserved
for issuance upon purchases of shares of Common Stock under the Sheridan 1997
Flexible Incentive Plan, there are no outstanding subscriptions, warrants,
options, calls, commitments or other rights to purchase or acquire, or
securities convertible into or exchangeable for, any capital stock of Sheridan
or its Subsidiaries. All of the outstanding shares of Common Stock are validly
issued, fully paid, and nonassessable.
2.17 SUBSIDIARIES. (a) Section 3.17 of the Sheridan Disclosure
Letter contains (except as noted therein) a complete and correct list of
Sheridan's Subsidiaries and joint ventures, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by Sheridan and each other Subsidiary. Except for the
Subsidiaries, Sheridan does not own, directly or indirectly, any interest or
investment in any corporation, association, joint venture, partnership, limited
liability company or other business organization, firm or enterprise of any
character, other than interests under any joint operating agreement of oil and
gas property that expressly provides the relationship of the parties created by
such agreement is not intended to render the parties thereto liable as
partners. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has full corporate power and authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. Each Subsidiary is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its business or the nature of its properties makes such
qualification necessary.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Section 3.17 of the Sheridan
Disclosure Letter as being owned by Sheridan and its Subsidiaries have been
validly issued, are fully paid and nonassessable, and are owned by Sheridan or
such other Subsidiaries free and clear of any Liens (except as otherwise
disclosed in Section 3.17 of the Sheridan Disclosure Letter).
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<PAGE> 25
(c) No Subsidiary of Sheridan is a party to, or otherwise subject
to any legal restriction or any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to Sheridan or any of its Subsidiaries that
owns outstanding shares of capital stock or similar equity interests of such
Subsidiary.
2.18 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.18 of
the Sheridan Disclosure Letter:
(a) to the knowledge of Sheridan and its Subsidiaries, the
properties and operations of Sheridan and its Subsidiaries are not in violation
of any Environmental Laws or any order or requirement of any court or
Governmental Authority to the extent pertaining to health or the environment,
except where a violation would not have a Sheridan Material Adverse Effect, nor
are there any conditions existing on such property or resulting from operations
thereon that may give rise to any on-site or off-site remedial obligations
under any Environmental Law, except for any condition that would not have a
Sheridan Material Adverse Effect;
(b) without limitation of Section 3.18(a) above, Sheridan and its
Subsidiaries are not subject to any pending or, to the knowledge of Sheridan,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority under any Environmental Law;
(c) except as would not have a Sheridan Material Adverse Effect,
to the knowledge of Sheridan all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by Sheridan and its
Subsidiaries under any Environmental Law, including without limitation those
relating to the treatment, storage, disposal or release of a hazardous
substance or solid waste into the environment, have been duly obtained or
filed, and Sheridan and its Subsidiaries are in compliance with the terms and
conditions of all such notices, permits, licenses and similar authorizations;
(d) except as would not have a Sheridan Material Adverse Effect,
all hazardous substances or solid wastes generated by or as a result of
operations on properties owned by Sheridan and its Subsidiaries and requiring
disposal have been transported only by carriers maintaining valid
authorizations under applicable Environmental Laws and treated and disposed of
only at treatment, storage and disposal facilities maintaining valid
authorizations under applicable Environmental Laws, and, to the knowledge of
Sheridan, such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any pending or
threatened action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(e) except as would not have a Sheridan Material Adverse Effect,
to the knowledge of Sheridan there are no asbestos-containing materials on or
in any property owned or used by Sheridan and its Subsidiaries, and there are
no storage tanks or similar containers exceeding 55 gallons in size on or under
any such properties from which hazardous substances, petroleum products or
other contaminants may be released into the surrounding environment;
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(f) without limiting the foregoing, to the knowledge of Sheridan
there is no material liability (accrued or contingent) to any non-governmental
third party in tort or under common law in connection with any release or
threatened release of any hazardous substances, solid wastes, petroleum,
petroleum products, and oil and gas exploration and production wastes into the
environment as a result of operations conducted on its properties; and
(g) Section 3.18 of the Sheridan Disclosure Letter also separately
lists for Sheridan and each Subsidiary any and all Claims against or affecting
it and relating to the release, discharge or emission or any hazardous
substance, or to the generation, treatment, storage or disposal of any wastes,
or otherwise relating to the protection of the environment or to the
noncompliance with any notices, permits, licenses, consent decrees or other
authorization and the disposition of each such Claim. With respect to each
such pending or prior matter, Section 3.18 of the Sheridan Disclosure Letter
hereto lists the date of the Claim, the claimant or investigating agency, the
nature and a brief description of the matter, the damages claimed or relief
sought, and the status or outcome of the matter. Except as set forth on
Section 3.18 of the Sheridan Disclosure Letter, neither Sheridan nor any
Subsidiary has received any written notice that it is a potentially responsible
party under any Environmental Laws.
2.19 INTELLECTUAL PROPERTY AND OTHER INTANGIBLE ASSETS. Sheridan and
its Subsidiaries (i) own or have the right to use, free and clear of all Liens,
all patents, trademarks, service marks, trade names, and copyrights, and all
applications, licenses, and rights with respect to the foregoing, and all trade
secrets, including know-how, inventions, designs, processes, works of
authorship, computer programs, and technical data and information
(collectively, "Intellectual Property") used and sufficient for use in the
conduct of its business, without infringing upon or violating any right, Lien,
or claim of others, and (ii) except as described in Section 3.19 of the
Sheridan Disclosure Letter, is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees, or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service mark, trade
name, copyright, or other intangible asset, with respect to the use thereof or
in connection with the conduct of its business or otherwise.
2.20 NO PUBLIC OFFER. Neither Sheridan nor anyone acting on its
behalf has offered to any Person securities of Sheridan, nor any part thereof,
nor any instruments convertible, exercisable, or exchangeable into such
securities, or has solicited from any Person any offer to acquire the same, in
a manner so as to make the transactions contemplated by this Agreement not
exempt from the registration requirements of Section 5 of the Securities Act.
2.21 INSURANCE. Sheridan has previously provided to GGP true and
complete copies of all of Sheridan's and its Subsidiaries' insurance policies.
Sheridan has given in a timely manner to its insurers all notices required to
be given under such insurance policies with respect to all claims and actions
covered by insurance, and no insurer has denied coverage of any such claims or
actions or reserved its rights in respect of or rejected any of such claims.
Sheridan has not received any notice or other communication from any such
insurer canceling or materially amending any of such insurance policies, and no
such cancellation is pending or threatened.
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<PAGE> 27
2.22 CERTAIN TRANSACTIONS. Except for the Series A Preferred Stock
and except as set forth on Section 3.22 of the Sheridan Disclosure Letter, (a)
neither Sheridan nor any of its Subsidiaries is indebted directly or indirectly
to any of its officers, directors or stockholders or to their respective
spouses or children in any amount whatsoever, (b) none of such officers,
directors or stockholders, or any members of their immediate families, are
indebted to Sheridan or any of its Subsidiaries, and (c) no officer, director
or stockholder, or any member of his immediate family, has a direct or indirect
financial interest in any material contract with Sheridan or any of its
Subsidiaries.
2.23 PLUGGING AND ABANDONMENT OBLIGATIONS. Except as set forth in
Section 3.23 of the Sheridan Disclosure Letter or as would not have a Sheridan
Material Adverse Effect, there is no well located upon any property owned by
Sheridan or its Subsidiaries that Sheridan or its Subsidiaries is currently
obligated by law or contract to plug and abandon.
2.24 NO MATERIAL MISSTATEMENTS OR OMISSIONS. Neither this Agreement
nor any certificates or documents made or delivered in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading, in view
of the circumstances in which they were made.
2.25 MATERIAL CONTRACTS AND COMMITMENTS. (a) Except as set forth
in Section 3.25 of the Sheridan Disclosure Letter, Sheridan and its
Subsidiaries have no (i) employment or consulting contracts involving annual
payments by Sheridan or its Subsidiaries in excess of $100,000 and not
cancelable without liability on sixty days' notice or less; (ii) capital
redemption or purchase agreements other than in connection with the Series A
Preferred Stock; (iii) agreements providing for the indemnification of other
parties for such parties' negligence or other fault (except for such
obligations incurred in the ordinary course of business as an operator of oil
and gas properties, including obligations under master service agreements,
drilling contracts and similar agreements) or the sharing of the tax liability
of other parties; (iv) collective bargaining agreements; (v) gas sales or
purchase contracts, gas marketing agreements or transportation agreements under
which Sheridan or its Subsidiaries is the seller, any of which contracts or
agreements is for a term of greater than one year and provides for a fixed
price; (vi) agreements for capital expenditures, the acquisition or
commodities, equipment or material or the construction of fixed assets which
requires aggregate future payments by Sheridan or its Subsidiaries in excess of
$250,000; (vii) agreements for, or that contemplate, the sale of any interest
in oil or gas leases which involves payment (including property received in
exchange or other non-cash consideration) to Sheridan or its Subsidiaries in
excess of $500,000; (viii) agreements which require future payments by Sheridan
or its Subsidiaries in excess of $500,000 which is not otherwise specifically
disclosed herein; (ix) agreements containing covenants limiting or restricting
the freedom of Sheridan or its Subsidiaries to compete in any line of business
or territory or with any person or entity; (x) area of mutual interest
agreements binding Sheridan or its Subsidiaries, (xi) futures, hedge, swaps,
collars, puts, calls, floors, caps, options or other contracts that are
intended to benefit from or reduce or eliminate the risk of fluctuations in the
price of commodities, including hydrocarbons or (xii) indentures, mortgages,
promissory notes, loan agreements, guaranties or other agreements or
commitments for the borrowing of money or any related security agreements
(other than relating to the Sheridan Senior Credit
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<PAGE> 28
Facility or the Indebtedness described in Section 3.7 of the Sheridan
Disclosure Letter) (collectively, "Sheridan Material Contracts"). None of the
Sheridan Material Contracts have been amended or modified except as set forth
in Section 3.25 of the Sheridan Disclosure Letter or as would not have a
Sheridan Material Adverse Effect;
(b) All of the Sheridan Material Contracts are in full force and
effect and constitute legal, valid and binding obligations of Sheridan or its
Subsidiaries, as applicable, and, to the knowledge of Sheridan, the other
parties thereto, enforceable in accordance with their respective terms, except
insofar as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
and except where the failure to be in full force and effect would not have a
Sheridan Material Adverse Effect. Neither Sheridan (or Sheridan's
Subsidiaries, if applicable) nor, to the knowledge of Sheridan, any other party
to any Sheridan Material Contract, is in default in complying with any
provisions thereof, and no condition or event or fact exists which, with
notice, lapse of time or both would constitute a default thereunder on the part
of Sheridan (or Sheridan's Subsidiaries, if applicable) or, to the knowledge of
Sheridan, any other party thereto, except for any such default, condition,
event, or fact that, individually or in the aggregate, would not have a
Sheridan Material Adverse Effect.
Sheridan have provided counsel to GGP with a true and complete copy of
each contract, agreement and instrument listed in Section 3.25 of the Sheridan
Disclosure Letter or has otherwise made such documents available for GGP to
review.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF GGP
GGP represents and warrants to Sheridan as follows:
3.1 EXISTENCE. GGP is a limited liability company duly formed and
validly existing under the laws of the State of Texas. GGP has full power and
authority to conduct its business as it is now being conducted and to own,
operate and lease the GGP Properties. GGP is duly qualified to do business and
is in good standing in each jurisdiction in which the GGP Properties are
located, except where the failure to be so qualified would not have a GGP
Material Adverse Effect.
3.2 POWER AND AUTHORIZATION. GGP is duly authorized to execute,
deliver and perform this Agreement and the Operative Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. All
action on GGP's part requisite for the due execution, delivery, and performance
of this Agreement and the other Operative Documents to which it is a party has
been duly and effectively taken.
3.3 BINDING OBLIGATIONS. This Agreement and the other Operative
Documents to which it is a party, when executed and delivered, shall each
constitute a legal, valid and binding obligation of GGP enforceable in
accordance with its respective terms, except insofar as the
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enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
3.4 NO VIOLATION. The execution and delivery of this Agreement or
any of the other Operative Documents to which it is a party, the consummation
of the transactions provided for herein and therein and contemplated hereby and
thereby, and the fulfillment by GGP of the terms hereof and thereof, will not
(a) conflict with or result in a breach of any provision of the organizational
document of GGP, (b) except for the consents described in Section 4.5 of the
GGP Disclosure Letter, result in any default or in any material modification of
the terms of any material contract, agreement, obligation, commitment
applicable to GGP, (c) except as set forth in Section 4.5 of the GGP Disclosure
Letter, require any consent or approval (which has not been obtained or waived)
under any Permit or any note, bond, mortgage, indenture, loan, distribution
agreement, license, agreement, lease or material instrument or material
obligation to which GGP is a party or by which GGP may be bound with respect to
the GGP Properties, or (d) violate any Governmental Requirement applicable to
GGP with respect to the GGP Properties, except in the case of subparagraphs
(b), (c) and (d) above, where any such default, modification consent, approval
or violation would not have a GGP Material Adverse Effect.
3.5 CONSENTS AND PREFERENTIAL PURCHASE RIGHTS. Except as set forth
in Section 4.5 of the GGP Disclosure Letter, all consents, approvals,
qualifications, orders or authorizations of, or filings with, any Governmental
Authority, and all consents or waivers of preferential purchase rights under
any contracts, agreements, or instruments by which GGP is bound with respect to
the GGP Properties, and required in connection with GGP's valid execution,
delivery, or performance of this Agreement and the other Operative Documents to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby has been obtained or made, except where the failure to have
so obtained or made such consents, approvals, qualifications, orders,
authorizations, filings or waivers, would not have a GGP Material Adverse
Effect.
3.6 LITIGATION. Except as disclosed in Section 4.6 of the GGP
Disclosure Letter, there is no action, suit or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the knowledge of
GGP, threatened against GGP or any of the GGP Properties before any
Governmental Authority (i) which challenges the validity of this Agreement or
any of the Operative Documents to which it is a party, or (ii) which, if
adversely determined, would have a GGP Material Adverse Effect.
3.7 TITLE TO PROPERTIES AND ASSETS; LEASES. (a) Except (i) as set
forth in Section 4.7 of the GGP Disclosure Letter, (ii) for the Participation
Agreement and Farmout Agreement to be terminated pursuant to the GGP/JEDI I
Partnership Termination Agreement, (iii) releases of non-productive acreage in
accordance with terms of the applicable GGP Leases, (iv) liens and security
interests in favor of JEDI, BBU and BBU II that will be released or (v) as
would not have a GGP Material Adverse Effect, GGP has Good Title to all of the
GGP Leases. Schedule III sets forth a true, correct and complete list of all
office equipment owned by GGP and being transferred to Sheridan hereunder and
all proprietary 3-D seismic data owned by GGP. All equipment owned by GGP and
included in the GGP Properties which is necessary to the ownership and
operation
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of the GGP Properties is in satisfactory condition and repair (ordinary wear
and tear excepted), except where the failure to be in satisfactory condition
and repair would not have a GGP Material Adverse Effect.
(b) Except as set forth in Section 4.7 of the GGP Disclosure
Letter, the producing oil and gas leases included in the GGP Properties in
which GGP owns an interest (i) have been maintained by the operator thereof
according to their terms and in compliance with all material agreements to
which such oil and gas leases are subject, except where the failure to be so
maintained or any noncompliance therewith would not have a GGP Material Adverse
Effect, and (ii) are in full force and effect, except where the failure to be
in full force and effect would not have a GGP Material Adverse Effect.
(c) All royalties, overriding royalties, compensatory royalties
and other payments due with respect to the GGP Leases has been properly and
correctly paid by the operator of the GGP Leases, except where the failure to
make such payment would not have a GGP Material Adverse Effect.
3.8 COMPLIANCE WITH THE LAW. Except with respect to environmental
matters (which are exclusively covered in Section 4.9), GGP (i) is not in
violation of any Governmental Requirement with respect to the GGP Properties
and (ii) has not failed to obtain any Permit necessary to the ownership of the
GGP Properties, except where a violation or failure would not have a GGP
Material Adverse Effect.
3.9 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.9 of
the GGP Disclosure Letter:
(a) to the knowledge of GGP, the GGP Properties and the operations
of GGP thereon are not in violation of any Environmental Laws or any order or
requirement of any court or Governmental Authority to the extent pertaining to
health or the environment, except where a violation would not have a GGP
Material Adverse Effect, nor are there any conditions existing on such
properties or resulting from its operations thereon that may give rise to any
on-site or off-site remedial obligations under any Environmental Law, except
for any condition that would not have a GGP Material Adverse Effect;
(b) without limitation of Section 4.9(a) above, GGP is not subject
to any pending or, to the knowledge of GGP, threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority under any Environmental Law;
(c) except as would not have a GGP Material Adverse Effect, to the
knowledge of GGP all notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by GGP under any Environmental Law with
respect to GGP, including without limitation those relating to the treatment,
storage, disposal or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed, and GGP is in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
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(d) except as would not have a GGP Material Adverse Effect, all
hazardous substances or solid wastes generated by or as a result of its
operations on the GGP Properties and requiring disposal have been transported
only by carriers maintaining valid authorizations under applicable
Environmental Laws and treated and disposed of only at treatment, storage and
disposal facilities maintaining valid authorizations under applicable
Environmental Laws, and, to the knowledge of GGP, such carriers and facilities
have been and are operating in compliance with such authorizations and are not
the subject of any pending or threatened action, investigation or inquiry by
any Governmental Authority in connection with any Environmental Laws;
(e) except as would not have a GGP Material Adverse Effect, to the
knowledge of GGP there are no asbestos- containing materials on or in any GGP
Property, and there are no storage tanks or similar containers exceeding 55
gallons in size on or under any such properties from which hazardous
substances, petroleum products or other contaminants may be released into the
surrounding environment;
(f) without limiting the foregoing, to the knowledge of GGP there
is (there will be) no material liability (accrued or contingent) to any
non-governmental third party in tort or under common law in connection with any
release or threatened release of any hazardous substances, solid wastes,
petroleum, petroleum products, and oil and gas exploration and production
wastes into the environment as a result of operations conducted on the GGP
Properties; and
(g) Section 4.9 of the GGP Disclosure Letter also separately lists
for GGP any and all Claims against or affecting it and relating to the release,
discharge or emission of any hazardous substance, or to the generation,
treatment, storage or disposal of any wastes, or otherwise relating to the
protection of the environment or to the noncompliance with any notices,
permits, licenses, consent decrees or other authorization and the disposition
of each such Claim. With respect to each such pending or prior matter, Section
4.9 of the GGP Disclosure Letter hereto lists the date of the Claim, the
claimant or investigating agency, the nature and a brief description of the
matter, the damages claimed or relief sought, and the status or outcome of the
matter. Except as set forth on Section 4.9 of the GGP Disclosure Letter, GGP
has not received any written notice that it is a potentially responsible party
under any Environmental Laws.
3.10 PURCHASE FOR INVESTMENT. GGP is acquiring the Shares and the
Warrants for its own accounts and not with a view to the public resale of all
or any part thereof in any transaction which would constitute a "distribution"
within the meaning of the Securities Act. GGP acknowledges that the Shares and
Warrants have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available.
3.11 FEES AND COMMISSIONS. Other than Weisser, Johnson & Co.
Capital Corporation ("Weisser Johnson"), GGP has not retained any Intermediary
in connection with the transactions contemplated by this Agreement and the
Operative Documents.
3.12 MATERIAL CONTRACTS AND COMMITMENTS. (a) Except as set forth in
Section 4.12 of the GGP Disclosure Letter, GGP has no (i) agreements included
in or encumbering the GGP
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Properties providing for the indemnification of other parties for such parties'
negligence or other fault (except for such obligations incurred in the ordinary
course of business as an owner or operator of oil and gas properties, including
obligations under master service agreements, drilling contracts and similar
agreements) or the sharing of the tax liability of other parties; (ii) gas
sales or purchase contracts, gas marketing agreements or transportation
agreements included in or encumbering the GGP Properties, any of which
contracts or agreements is for a term of greater than one year and provides for
a fixed price; (iii) agreements for capital expenditures, the acquisition of
commodities, equipment or material or the construction of fixed assets with
respect to the GGP Properties which requires aggregate future payments by GGP
in excess of $50,000; (iv) agreements included in or encumbering the GGP
Properties or that contemplate, the sale of any interest in oil or gas leases
included in the GGP Properties which involves payment (including property
received in exchange or other non-cash consideration) to GGP in excess of
$50,000; (v) agreements included in or encumbering the GGP Properties which
require future payments by GGP in excess of $50,000 which is not otherwise
specifically disclosed herein; (iv) area of mutual interest agreements binding
the GGP Properties; and (vii) futures, hedge, swaps, collars, puts, calls,
floors, caps, options or other contracts included in or encumbering the GGP
Properties that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including hydrocarbons, that are not
terminated at Closing (collectively, "GGP Material Contracts"). None of the
GGP Material Contracts have been amended or modified except as set forth in
Section 4.12 of the GGP Disclosure Letter or as would not have a GGP Material
Adverse Effect.
(b) All of the GGP Material Contracts are in full force and effect
and constitute legal, valid and binding obligations of GGP, as applicable, and,
to the knowledge of GGP, the other parties thereto, enforceable in accordance
with their respective terms, except insofar as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity and except where the failure to be in full
force and effect would not have a GGP Material Adverse Effect. Neither GGP
nor, to the knowledge of GGP or any other party to any GGP Material Contract is
in default in complying with any provisions thereof, and no condition or event
or fact exists which, with notice, lapse of time or both would constitute a
default thereunder on the part of GGP or, to the knowledge of GGP, any other
party thereto, except for any such default, condition, event or fact that,
individually or in the aggregate, would not have a GGP Material Adverse Effect.
GGP has provided counsel to Sheridan with a true and complete copy of
each contract, agreement and instrument listed in Section 4.12 of the GGP
Disclosure Letter or has otherwise made such documents available for Sheridan
to review.
3.13 PLUGGING AND ABANDONMENT OBLIGATIONS. Except as set forth in
Section 4.13 of the GGP Disclosure Letter or as would not have a GGP Material
Adverse Effect, there is no well located upon any GGP Lease that GGP is
currently obligated by law or contract to plug and abandon.
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ARTICLE IV.
COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
4.1 GENERAL. Each of the parties will use all reasonable efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and to make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Article VI).
4.2 NOTICES AND CONSENTS. Each of Sheridan and GGP will give any
notices to third parties, and will use all reasonable efforts to obtain all
third party consents and waivers of preferential rights, that are required for
the consummation of the transactions contemplated hereby by such a party
(except for governmental consents customarily obtained after closing).
4.3 OPERATION OF BUSINESS BY SHERIDAN. Sheridan covenants and
agrees that, unless otherwise expressly contemplated by this Agreement or
consented to in writing by GGP, (x) Sheridan will:
(a) operate its business only in the usual and ordinary
course consistent with past practices;
(b) preserve its business and properties, including its
present operations, leases, working conditions and relationships with
lessors, licensors, suppliers, customers and employees;
(c) maintain and keep its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted;
and
(d) keep in full force and effect insurance comparable in
amount and scope of coverage to that currently maintained;
and (y) Sheridan will not:
(a) make any declaration for setting aside or payment of
dividends or distributions in respect of shares of Common Stock or any
redemption, purchase or other acquisition of any of its securities;
(b) make any capital expenditures, or commit to make any
capital expenditures, other than in the ordinary course of business;
(c) except for borrowings under the Sheridan Senior
Credit Facility or the incurrence of other obligations in the ordinary
course of business (other than debt for borrowed money), incur any
Indebtedness; and
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(d) amend or modify its Charter or, without the written
consent of GGP, the JEDI I Partnership/Sheridan Purchase Agreement.
4.4 OPERATION OF GGP PROPERTIES BY GGP. GGP covenants and agrees
that, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Sheridan, GGP will use its reasonable efforts to cause the
operator of the GGP Properties to:
(a) operate the GGP Properties only in the usual and
ordinary course consistent with past practices;
(b) preserve the GGP Properties, including its present
operations, leases, working conditions and relationships with lessors,
licensors, suppliers, customers and employees with respect to such
properties;
(c) maintain and keep the GGP Properties in as good
repair and condition as at present, ordinary wear and tear excepted;
(d) keep in full force and effect insurance comparable in
amount and scope of coverage to that currently maintained;
(e) submit to Sheridan for prior written approval, all
requests for operating or capital expenditures to be incurred after
the date hereof and all proposed contracts and agreements to be
entered into by GGP after the date hereof, in each case relating to
the GGP and that involve individual commitments of more than $5,000
and $10,000 in the aggregate; and
(f) obtain Sheridan's written approval prior to voting
under any operating, joint venture, partnership or similar agreement.
Sheridan acknowledges that GGP owns an undivided interest in the GGP
Properties, and Sheridan agrees that the acts or omissions of the other working
interests owners shall not constitute a violation of the provisions of this
Section 5.4, nor shall any action required by a vote of working interest owners
constitute such a violation so long as GGP has voted its interest in a manner
that complies with the provisions of this Section 5.4. To the extent that GGP
is not the operator of any of the GGP Leases, the obligations of GGP in this
Section 5.4 shall be construed to require that GGP use reasonable efforts
(without being obligated to incur any expense or institute any cause of action)
to cause the operator of such leases to take such actions or render such
performance within the constraints of the applicable operating agreements and
other applicable agreements.
4.5 FULL ACCESS. (a) Sheridan will permit representatives of GGP
to have full access at reasonable times during normal business hours, in a
manner that will not interfere with the normal business operations of Sheridan,
to all premises, properties, personnel, books, records (including tax records),
contracts and documents of or pertaining to Sheridan. GGP HEREBY AGREES TO
DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS SHERIDAN AND ITS
OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS AND ADVISORS FROM AND
AGAINST
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ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THE ACCESS TO THE PROPERTY OF
SHERIDAN PURSUANT TO THIS SECTION 5.5(a) AND ANY OTHER DUE DILIGENCE ACTIVITY
CONDUCTED BY GGP OR ANY OF ITS OFFICERS, EMPLOYEES, AGENTS OR ADVISORS,
INCLUDING WITHOUT LIMITATION ANY CLAIMS RESULTING, IN WHOLE OR IN PART, FROM
THE CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY OF SHERIDAN OR ITS
OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS OR ADVISORS. THE PARTIES
AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
(b) GGP will permit representatives of Sheridan to have full
access at reasonable times during normal business hours, in a manner that will
not interfere with the normal business operations of GGP, to all personnel,
books, records (including tax records), contracts and documents of or
pertaining to GGP Properties in GGP's possession. SHERIDAN HEREBY AGREES TO
DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS GGP AND ITS
OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS AND ADVISORS FROM AND
AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THE ACCESS TO THE
PROPERTY OF GGP PURSUANT TO THIS SECTION 5.5(b) AND ANY OTHER DUE DILIGENCE
ACTIVITY CONDUCTED BY SHERIDAN OR ANY OF ITS OFFICERS, EMPLOYEES, AGENTS OR
ADVISORS, INCLUDING WITHOUT LIMITATION ANY CLAIMS RESULTING, IN WHOLE OR IN
PART, FROM THE CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY OF GGP OR ITS
OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS OR ADVISORS. THE PARTIES
AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
(c) Except as required by law and except for information that is
public, all information relating to the GGP Properties obtained by or on behalf
of Sheridan in connection with its evaluation of the GGP Properties under
Section 5.5(b) shall be kept confidential and shall not be disclosed by
Sheridan or any of Sheridan's employees, agents, representatives or advisors
(collectively, "Sheridan Representatives") in any manner whatsoever, in whole
or in part, unless and until the Closing occurs. Sheridan shall indemnify,
defend and hold harmless GGP, its officers, partners, Affiliates, employees,
agents and advisors from any Claims incurred as the result of the use of such
information by Sheridan or the Sheridan Representatives in contravention of the
terms of this Agreement or the breach by Sheridan or the Sheridan
Representatives of the covenant contained in the preceding sentence.
(d) Except as required by law and except for information that is
public, all information relating to the Sheridan properties obtained by or on
behalf of GGP in connection with this Agreement shall be kept confidential and
shall not be disclosed by GGP or any of GGP's employees, agents,
representatives or advisors (collectively, "GGP Representatives") in any manner
whatsoever, in whole or in part, unless and until the Closing occurs. GGP
shall indemnify, defend and hold harmless Sheridan, its officers, partners,
Affiliates, employees, agents and advisors from any Claims incurred as the
result of the use of such information by GGP or the GGP Representatives in
contravention of the terms of this Agreement or the breach by GGP or the GGP
Representatives of the covenant contained in the preceding sentence.
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4.6 NOTICE OF DEVELOPMENTS. Each party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its representations and warranties under this Agreement.
ARTICLE V.
CLOSING CONDITIONS
5.1 CONDITIONS TO OBLIGATION OF GGP. The obligation of GGP to
consummate the transactions contemplated hereby is subject to satisfaction of
the following conditions:
(a) the representations and warranties contained in
Article III, to the extent qualified as to materiality shall be
accurate in all respects, and, to the extent not so qualified, shall
be accurate in all material respects, as of the Closing Date as though
such representations and warranties had been made at and as of that
time;
(b) Sheridan shall have performed and complied with all of
the covenants and agreements hereunder in all material respects
through the Closing;
(c) no action suit, or proceeding shall be pending before
any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would prevent consummation
of any of the transactions contemplated by this Agreement; and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect;
(d) Sheridan shall have delivered to GGP a certificate
from an officer of Sheridan to the effect that each of the conditions
specified above in Section 6.1(a)-(c) is satisfied in all respects;
(e) the conditions to the closing of the transactions
contemplated by the JEDI I Partnership/Sheridan Purchase Agreement
shall have been satisfied and such transaction shall have been
consummated;
(f) the transaction contemplated by the GGP/JEDI I
Termination Agreement shall have been consummated;
(g) the transaction contemplated by the Sharing Agreement
shall have been consummated;
(h) JEDI shall have executed mortgage and deed of trust
lien releases and UCC-3 termination statements releasing mortgage and
deed of trust liens and security interests securing payment of debt
owing under the JEDI Loan Agreement;
(i) BBU II shall have executed mortgage and deed of trust
lien releases and UCC-3 termination statements releasing mortgage and
deed of trust liens and security
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interests securing payment of debt owing under the BBU II/GGP Loan
Agreement and under the BBU II/AmPac Loan Agreement;
(j) the transaction contemplated by the GGP JEDI I
Partnership Termination Agreement shall have been consummated;
(k) the Lehto Guaranty Agreement shall have been
terminated and released pursuant to the GGP/JEDI Termination
Agreement.
(l) The transaction anticipated by the BBU II/GGP
Termination Agreement shall have been consummated;
(m) the transaction contemplated by the BBU/AmPac
Termination Agreement shall have been consummated;
(n) JEDI I Partnership shall have executed and delivered
to Sheridan the Registration Rights Agreement in connection with the
consummation of the transactions under the JEDI I Partnership/Sheridan
Purchase Agreement; and
(o) GGP shall have received an opinion of Winstead
Sechrest & Minick P.C., dated as of the Closing Date, that addresses
the matters set forth in Sections 3.1, 3.2, 3.3, 3.13, 3.14, the first
sentence in 3.16 and 3.20 hereof, including such exceptions and
assumptions as are customary in such opinions, in form and substance
reasonably acceptable to GGP.
5.2 CONDITIONS TO OBLIGATION OF SHERIDAN. The obligation of
Sheridan to consummate the transactions contemplated hereby is subject to
satisfaction of the following conditions:
(a) the representations and warranties contained in
Article IV, to the extent qualified as to materiality shall be
accurate in all respects, and, to the extent not so qualified, shall
be accurate in all material respects, as of the Closing Date as though
such representations and warranties had been made at and as of that
time;
(b) GGP shall have performed and complied with all of the
covenants and agreements hereunder in all material respects through
the Closing;
(c) no action, suit, or proceeding shall be pending
before any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would prevent consummation
of any of the transactions contemplated by this Agreement, and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect;
(d) GGP shall have delivered to Sheridan a certificate to
the effect that each of the conditions specified above in Section
6.2(a)-(c) is satisfied in all respects;
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(e) the conditions to the closing of the transactions
contemplated by the JEDI I Partnership/Sheridan Purchase Agreement
shall have been satisfied and such transaction shall have been
consummated; and
(f) Sheridan shall have received an opinion of (i)
Hutcheson & Grundy, L.L.P., addressing the matters set forth in
Section 4.1, 4.2, and 4.3, in each case, dated as of the Closing Date
and including such exceptions and assumptions as are customary in such
opinions, in form and substance reasonably acceptable to Sheridan.
ARTICLE VI.
OTHER PROVISIONS
6.1 FEES AND COMMISSIONS. Sheridan agrees to pay, and to indemnify
and hold harmless GGP from and against liability for, any compensation to any
finder, broker, agent, financial advisor (other than Weisser, Johnson), or
other intermediary (collectively, an "Intermediary") that it has retained in
connection with the transactions contemplated by this Agreement , and the fees
and expenses of defending against such liability or alleged liability. Each
party shall be responsible for all expenses, including due diligence expenses,
incurred by it in connection with the consummation of the transactions
contemplated by this Agreement.
6.2 NO RESTRICTIONS ON AFFILIATES. As long as GGP or any of its
Affiliates hold any shares of Common Stock, neither Sheridan nor any of its
Subsidiaries will enter into any agreement that would purport to impose
restrictions or limitations on the business, operations or assets of GGP or its
Affiliates.
6.3 CERTAIN PUBLIC UTILITY MATTERS. Except as contemplated herein,
Sheridan will not take any action that would be inconsistent with the
representations contained in Sections 3.14 and 3.15 hereof so long as the GGP
or its Affiliates holds any shares of Common Stock. For purposes of this
Section 7.3, the term "Affiliate" when used to refer to Affiliates of GGP,
shall exclude Sheridan and its Subsidiaries.
6.4 BUSINESS OPPORTUNITY MATTERS. (a) Sheridan and GGP
acknowledge and agree that neither GGP nor any of its Affiliates shall be
expressly or implicitly restricted or proscribed pursuant to this Agreement,
the relationship that exists between GGP and Sheridan or otherwise, from
engaging in any type of business activity or owning an interest in any type of
business entity, regardless of whether such business activity is (or such
business entity engages in businesses that are) in direct or indirect
competition with the businesses or activities of Sheridan or any of its
Affiliates. Without limiting the foregoing, GGP and Sheridan acknowledge and
agree that (i) neither Sheridan nor its Affiliates nor any other Person shall
have any rights, by virtue of this Agreement, the relationship that exists
between GGP and Sheridan or otherwise, in any business venture or business
opportunity of GGP or any of its Affiliates, and neither GGP nor its Affiliates
shall have any obligation to offer any interest in any such business venture or
business opportunity to Sheridan, any Affiliate of Sheridan or any other
Person, or otherwise account to any of such Persons in respect of any such
business ventures, (ii) the activities of GGP or any of its Affiliates
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that are in direct or indirect competition with the activities of Sheridan or
any of its Affiliates are hereby approved by Sheridan, and (iii) it shall be
deemed not to be a breach of any fiduciary or other duties, if any and whether
express or implied, that may be owed by GGP or its Affiliates to Sheridan or
its Affiliates for GGP to permit itself or one of its Affiliates to engage in a
business opportunity in preference or to the exclusion of Sheridan, its
Affiliates or any other Person.
(b) Neither Sheridan or its Affiliates shall enter into any "area
of mutual interest" agreement of similar agreement that could or would have the
effect of binding GGP or any of its Affiliates or their respective properties.
(c) Except for duties and obligations owed by Sheridan to GGP or
any of its Affiliates pursuant to this Agreement, any of the Operative
Documents to which GGP or any of its Affiliates is a party, or any other
existing or prospective contract or agreement between Sheridan and GGP or any
of its Affiliates, nothing in the relationship between Sheridan and GGP and its
Affiliates created by this Agreement shall be deemed to create any duty or
obligation of Sheridan to offer any interest in any business venture or
business opportunity to GGP or its Affiliates.
6.5 INDEMNIFICATION. Subject to Sheridan's rights hereunder with
respect to a Claim under the indemnity of GGP set forth in Section 7.5(c)
hereof, as of the Closing, Sheridan hereby assumes (i) all obligations to
properly plug and abandon all wells and remove all related equipment now
located on the GGP Properties or hereafter placed on the GGP Properties by
Sheridan, its successors and assigns, and cleanup and restore the lands related
to such GGP Properties, and (ii) all other liabilities (other than the Existing
Lawsuit) attributable to the GGP Properties, including liabilities arising
from, attributable to, or alleged to be arising from or attributable to,
personal injury or property damage and any violation of, or the failure to
perform any obligation imposed by, any Environmental Laws (in each case the
assumption by Sheridan is made regardless of whether any such obligation or
liability is attributable to events or periods of time prior to or after the
Effective Date) (such assumed obligations and liabilities being hereinafter
collectively referred to as the "Assumed Obligations").
(b) Sheridan agrees to indemnify, release, defend, and hold
harmless GGP, its partners, and Affiliates, and their respective officers,
directors, employees and agents from, against, and in respect of any and all
claims, demands, losses, reasonable costs and expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties and reasonable attorneys' fees (collectively, "Claims"), that GGP
shall incur or suffer, which arise, result from, or relate to (i) any breach
of, or failure by Sheridan or any of its Subsidiaries to perform, any of its
representations, warranties, covenants, or agreements in this Agreement or in
any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by Sheridan or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement, or (ii) the Assumed Obligations.
(c) GGP agrees to indemnify, release, defend, and hold harmless
Sheridan and its Subsidiaries and their respective officers, directors,
employees and agents from, against, and in respect of any and all Claims, that
Sheridan shall incur or suffer, which arise, result from, or relate to (i)
other than with respect to its covenant under Section 7.5(c)(iii) hereof, any
breach of,
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or failure by GGP to perform, any of its representations, warranties,
covenants, or agreements in this Agreement or in any schedule, certificate,
exhibit, or other instrument furnished or to be furnished by GGP in connection
with the transactions contemplated by this Agreement, (ii) the Existing
Lawsuit, (iii) the operation or ownership of the GGP Properties prior to the
Effective Date or (iv) the continued sponsorship by GGP of any group health
plan maintained by GGP and its affiliates with respect to its former or
existing employees subject to the Consolidated Omnibus Budget Reconciliation
Act of 1984 ("COBRA") and any and all COBRA Claims with respect to any
"qualifying event" (as defined therein) that occurs before or on the Closing
Date.
(d) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION
AND EXCULPATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN INDEMNIFIED OR
RELEASED PARTY SHALL BE ENTITLED TO INDEMNIFICATION OR EXCULPATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW
OF OR BY SUCH INDEMNIFIED OR RELEASED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
(e) With respect to the representations, warranties, covenants and
agreements that survive the Closing pursuant to Section 7.6, in no event shall
any amounts be recovered from the indemnifying party under this Section 7.5 or
otherwise for any matter for which a written notice of claim specifying in
reasonable detail the specific nature of the claim ("Claim Notice") is not
delivered to the indemnifying party prior to the time provided in Section 7.6;
provided, however, that such indemnities shall survive with respect only to the
specific matter that is the subject of any Claim Notice delivered in good faith
in compliance with the requirements of this Section 7.5(e) until the earlier to
occur of (A) the date on which a final nonappealable resolution of the matter
described in such Claim Notice has been reached or (B) the date on which the
matter described in such Claim Notice has otherwise reached final resolution.
The indemnifications provided by Sections 7.5(b) and 7.5(c) of this Agreement
are expressly subject to the following: in case any legal proceeding or claim,
including any investigatory proceeding, is brought or made against a party (the
"Indemnified Party") in a matter for which indemnification may be provided
under Sections 7.5(b) and 7.5(c), the Indemnified Party shall within 20
business days notify the other party (the "Indemnifying Party") with the
delivery of the Claim Notice. The Indemnifying Party shall have the right to
control and assume the defense of any such legal proceeding or claim, including
the employment of counsel satisfactory to the Indemnifying Party. If the
Indemnifying Party controls and assumes the defense of any proceeding or claim,
the Indemnified Party shall have the right to employ separate counsel, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Party unless the representation of both parties by the same counsel would be
inappropriate due to any actual or potential conflicts of interest as
determined by counsel to the Indemnifying Party. The Indemnifying Party shall
not be liable for the fees and expenses of more than one separate firm of
attorneys at any one time for the Indemnified Party in connection with any one
legal proceeding or claim or substantially similar related proceedings and
claims. The indemnification obligations of this Section 7.5 shall not apply to
any settlements effected without the consent of the Indemnifying Party. The
indemnification obligations of this
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<PAGE> 41
Section 7.5 shall not be deemed to create any rights of subrogation or other
rights in any insurer or third party.
(f) Except for the parties' rights pursuant to the Registration
Rights Agreement, the Warrant Agreement and the Assignment, each of the parties
hereto acknowledges and agrees that its sole and exclusive remedy with respect
to any and all Claims relating to this Agreement or the transactions
contemplated hereby shall be limited to the indemnification provisions set
forth in this Agreement, and, in furtherance of the forgoing, each party hereby
waives, to the fullest extent permitted under any applicable law, any and all
other rights, claims and causes of action it may have against the other party
with respect to this Agreement or the transactions contemplated hereby.
(g) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN CONNECTION
WITH ANY CLAIM MADE BY A PARTY AGAINST ANOTHER PARTY HEREUNDER, THE CLAIMING
PARTY SHALL NOT BE ENTITLED TO RECOVER ANY PUNITIVE, CONSEQUENTIAL, SPECIAL,
INCIDENTAL OR INDIRECT DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY EXEMPLARY
DAMAGES, TREBLE DAMAGES, PENALTIES, OR LOSS OF PROFITS OR INCOME), WHETHER
BASED ON STATUTE, IN TORT, CONTRACT OR OTHERWISE, REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER APPLICABLE LAW OR OTHERWISE, AND WHETHER OR NOT
ARISING FROM A PARTY'S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT, THE PARTIES HERETO HEREBY WAIVING THEIR RIGHT, IF ANY, TO
RECOVER SUCH DAMAGES IN CONNECTION WITH ANY CLAIMS HEREUNDER.
(h) Notwithstanding anything herein to the contrary and, except
for the matters set forth in Section 7.5(c)(ii) and (c)(iv), (i) neither
Sheridan nor GGP shall be required to indemnify the other party hereto (or such
party's related indemnified parties) unless the total amount of all payments
required to be made by such party pursuant to the indemnification provisions
hereof exceeds, in the aggregate, $100,000, in which event the party required
to indemnify the other party shall be liable under such indemnification
provisions for the entire amount and not merely the excess over $100,000, and
(ii) neither Sheridan nor GGP shall be required to indemnify the other party
hereto (or such party's related indemnified parties) under this Agreement in
any amount exceeding in the aggregate $2,750,000.
(i) Notwithstanding anything herein to the contrary, GGP shall not
be obligated to indemnify Sheridan (or such party's related indemnified
parties) pursuant to the provisions of Section 7.5(c)(iii) unless (i) the Claim
by Sheridan for indemnification under Section 7.5(c)(iii) is made as a result
of a Claim brought against Sheridan by a Person that is not an Affiliate of
Sheridan or (ii) the Claim by Sheridan for indemnification under Section
7.5(c)(iii) is made on account of the GGP Properties being in violation of a
Governmental Requirement.
6.6 SURVIVAL OF TERMS; FAILURE TO CLOSE. All representations,
warranties, indemnities, and covenants contained herein or made in writing by
any party in connection herewith will survive the execution and delivery of
this Agreement and any investigation made at any time by or on behalf of
Sheridan and GGP; provided, however, that any Claim with respect to the breach
thereof may be made only if the party claiming such breach shall have delivered
a Claim Notice
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<PAGE> 42
to the responsible party hereunder (a) in the case of the representations,
warranties and covenants of Sheridan contained in Sections 2.3 and 2.4 and
Articles 3 and 5 and of GGP contained in Sections 2.3 and 2.4 and Articles 4
and 5, on or before first anniversary of the Closing Date, (b) in the case of
the covenant of GGP contained in Section 7.5(c)(iii), on or before the third
anniversary of the Closing Date and (c) at any time, in the case of all other
provisions. Notwithstanding anything herein to the contrary, in the event the
Closing has not occurred on or before January 15, 1998, because one or more
conditions set forth in Section 6.1 has not been satisfied Sheridan or GGP may
terminate its obligations under this Agreement by written notice to Sheridan;
provided, however, that the provisions of Sections 7.1 and 7.6 shall survive
any such termination.
6.7 DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES. The express
representations and warranties of the parties contained in this Agreement are
exclusive and are in lieu of all other representations and warranties, express,
implied or statutory. SHERIDAN ACKNOWLEDGES THAT GGP HAS NOT MADE, AND GGP
HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND SHERIDAN HEREBY EXPRESSLY WAIVES,
ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (A) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE
RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE
RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE GGP PROPERTIES, AND (B)
THE ACCURACY, COMPLETENESS OR MATERIALITY OR ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO SHERIDAN
BY OR ON BEHALF OF GGP. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, GGP EXPRESSLY DISCLAIMS AND NEGATES, AND SHERIDAN HEREBY WAIVES, AS
TO PERSONAL PROPERTY, EQUIPMENT AND FIXTURES CONSTITUTING A PART OF THE GGP
PROPERTIES (I) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (II) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (III) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(IV) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION, (V) ANY CLAIMS BY SHERIDAN FOR DAMAGES BECAUSE OF REDHIBITORY
VICES OR DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN AS OF THE
EFFECTIVE DATE OR THE CLOSING DATE, AND (VI) ANY AND ALL IMPLIED WARRANTIES
EXISTING UNDER APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH SHERIDAN
AND GGP THAT THE PERSONAL PROPERTY, EQUIPMENT AND FIXTURES INCLUDED WITHIN THE
GGP PROPERTIES ARE HEREBY CONVEYED TO SHERIDAN IN THEIR PRESENT CONDITION AND
STATE OF REPAIR, "AS IS" AND "WHERE IS" WITH ALL FAULTS, AND THAT SHERIDAN HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS SHERIDAN DEEMS APPROPRIATE. GGP
AND SHERIDAN AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE
"CONSPICUOUS" DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR
ORDER.
6.8 TRANSFER TAXES AND RECORDING FEES. All sales, use or other
taxes (other than taxes on gross income, net income or gross receipts) and
duties, levies or other governmental charges incurred by or imposed with
respect to the property transfers undertaken pursuant to this
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Agreement and all costs of recording the Assignment shall be the responsibility
of, and shall be paid by Sheridan.
6.9 ACTIONS BY SHERIDAN. Notwithstanding anything herein to the
contrary, GGP shall not be liable for, or in breach of its representations or
covenants hereunder on account of, any actions taken by Sheridan on or with
respect to the GGP Properties prior to the Closing Date.
ARTICLE VII.
MISCELLANEOUS
7.1 AMENDMENTS; WAIVERS. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by Sheridan or GGP therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance or for the specific purpose for which given.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors of the parties hereto, whether so expressed or not and
the permitted assigns of the parties hereto including, without limitation and
without need of any express assignment. This Agreement and the rights and
obligations of Sheridan shall not be assigned without the prior written consent
of GGP. GGP may not assign or transfer any or all of its rights and
obligations under this Agreement without the consent of Sheridan except
following the Closing, to an Affiliate or to JEDI.
7.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement unless the consummation of the transaction
contemplated hereby is materially and adversely affected thereby.
7.4 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute
a part of and shall not be utilized in interpreting this Agreement.
7.5 GOVERNING LAW. Each of the parties hereto hereby consents and
agrees that this Agreement shall be deemed a contract and instrument made under
the laws of the State of Texas and shall be construed and enforced in
accordance with and governed by the laws of the State of Texas, without regard
to principles of conflicts of law.
7.6 ENTIRE AGREEMENT. This Agreement, the Operative Documents and
the disclosure letters delivered by the parties hereto constitutes the entire
agreement between Sheridan and GGP concerning the matters referred to herein
and therein, and, supersede all prior agreements and
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understandings among Sheridan and GGP relating to the subject matter hereof and
thereof. There are no unwritten oral agreements between the parties.
7.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
7.8 FURTHER COOPERATION. At any time and from time to time, and at
its own expense, each party shall promptly execute and deliver all such
documents and instruments, and do all such acts and things, as the other party
may reasonably request in order to further effect the purposes of this
Agreement.
7.9 NOTICES. All notices, requests, and other communications to
any party hereunder shall be in writing (including telecopy) and shall be given
to such party at its address or telecopy number set forth on the signature
pages hereof or such other address or telecopy number as such party may
hereafter specify by notice to the other parties.
7.10 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in exercising any right or remedy under this
Agreement and no course of dealing among the parties hereto shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right or remedy under this Agreement. No notice to or
demand on any party hereto not otherwise required by this Agreement shall
entitle such party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of such party to any other
or further action in any circumstances without notice or demand.
7.11 EXHIBITS; SCHEDULES; AMENDMENT OF DISCLOSURE LETTER. (a) The
exhibits attached to this Agreement and the Sheridan Disclosure Letter and the
GGP Disclosure Letter are incorporated herein and shall be considered to be a
part of this Agreement for the purposes stated herein, except that in the event
of any conflict between any of the provisions of such exhibits or schedules and
the provisions of this Agreement, the provisions of this Agreement shall
prevail.
(b) Each of Sheridan and GGP may, from time to time, prior to the
Closing, by written notice to the other party, supplement or amend such party's
disclosure letter to correct any matter that would constitute a breach of any
representation or warranty of such party herein contained; provided, however,
except as provided in the following sentence, no such supplement or amendment
will affect the rights or obligations of the parties to this Agreement
(including without limitation hereof) until after the Closing Date.
Notwithstanding any other provision hereof, if the Closing occurs, any such
supplement or amendment of such disclosure letter will be effective to cure and
correct for indemnification purposes (but only for such purposes) any breach of
any representation, warranty or covenant that would have existed by reason of
not having made such supplement or amendment.
7.12 DISPUTE RESOLUTION. (a) Any controversy, dispute or claim
arising out of or relating to this Agreement or the transactions contemplated
hereby (a "Dispute") shall be submitted
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to non-binding mediation upon the request of Sheridan or GGP on the following
terms. Upon the request of either party, a neutral mediator acceptable to both
parties (the "Mediator") shall be appointed within fifteen (15) days. The
Mediator shall attempt, through negotiations in any manner deemed reasonably
appropriate by the Mediator, in which the parties shall participate, to resolve
the Dispute. The Mediator shall be compensated at a rate agreeable to
Sheridan, GGP and the Mediator, and each of Sheridan and GGP shall pay one-half
of such compensation and other expenses of the mediation.
(b) In the event that the Dispute has not been resolved within 30
days after the appointment of the Mediator, the Dispute shall be resolved by
arbitration administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Section 8.12, the Commercial Arbitration
Rules of the AAA, and, to the maximum extent applicable, the United States
Arbitration Act. Judgment on any matter rendered by arbitrators may be entered
in any court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable in the
subject matter of the Dispute. Each party shall select one arbitrator and the
two arbitrators so selected shall select the third arbitrator. If, within 10
days after notice, a party fails to select an arbitrator, that party's
arbitrator shall be selected by the AAA pursuant to Rule 14 of the Commercial
Arbitration Rules. If the third arbitrator is not selected within thirty (30)
days after the request for an arbitration, then any party may request the AAA
to select the third arbitrator. The arbitrators may engage engineers,
accountants or other consultants they deem necessary to render a conclusion in
the arbitration proceeding. To the maximum extent practicable, an arbitration
proceeding hereunder shall be concluded within 180 days of the filing of the
Dispute with the AAA. Arbitration proceedings shall be conducted in Houston,
Texas. Arbitrators shall be empowered to impose sanctions and to take such
other actions as the arbitrators deem necessary to the same extent a judge
could impose sanctions or take such other actions pursuant to the Federal Rules
of Civil Procedure and applicable law. At the conclusion of any arbitration
proceeding, the arbitrators shall make specific written findings of fact and
conclusions of law. The arbitrators shall have the power to award recovery of
all costs and fees to the prevailing party. All fees of the arbitrators and
any engineer, accountant or other consultant engaged by the arbitrators, shall
be shared equally unless otherwise awarded by the arbitrators.
(c) Nothing in this Section 8.12 shall limit or delay the right of
GGP to exercise the remedies available to it under the Warrant Agreement or the
Registration Rights Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SHERIDAN ENERGY, INC.
By: /s/ B. A. BERILGEN
-----------------------------------
B. A. Berilgen, President
Address for Notice:
1000 Louisiana, Suite 800
Houston, Texas 77002
Attention: B.A. Berilgen
Telecopy:
-----------------------------
GRAND GULF PRODUCTION, L.L.C.
a Texas limited liability company
By: /s/ DONALD K. LEHTO
-----------------------------------
Name: Donald L. Lehto
---------------------------------
Title: C.E.O.
--------------------------------
Address for Notice:
Grand Gulf Production, L.L.C.
Attn: Donald K. Lehto
1111 Fannin, Suite 1465
Houston, Texas 77002
Phone: 713/651-0141
Fax: 713/652-5131
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<PAGE> 47
EXHIBIT A
FORM OF WARRANT
EXHIBIT A
Page 1
<PAGE> 48
EXHIBIT B
FORM OF ASSIGNMENT AND BILL OF SALE
EXHIBIT B
Page 1
<PAGE> 1
EXHIBIT 6
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of December 31, 1997, is made by and
between SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan") and GRAND GULF PRODUCTION, L. L. C., a Texas limited liability
company ("GGP"). GGP, together with any transferee of Warrants or Warrant
Shares, are referred to herein as the "Warrant Holder."
WHEREAS, Sheridan and GGP have entered into that certain Purchase
Agreement (the "Purchase Agreement") dated December 31, 1997; and
WHEREAS, Sheridan proposes to issue to GGP as partial consideration for
GGP entering into the Purchase Agreement, 82,500 common stock purchase warrants
(the "Warrants") to purchase shares (the "Warrant Shares") of Sheridan's common
stock, par value $0.01 per share (the "Common Stock"), each Warrant entitling
the holder thereof to purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Purchase Agreement set forth and for other good
and valuable consideration, the parties hereto agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. Sheridan will issue and
deliver the Warrants to GGP, on the date of Closing referred to in the Purchase
Agreement. The aggregate number of Warrants to be issued and delivered shall
be 82,500. The Warrants shall be exercisable on or after the date of Closing
referred to in the Purchase Agreement. The text of the Warrant, the purchase
form and assignment form to be printed on the reverse thereof shall be
substantially as set forth in the Warrant Certificate attached as Exhibit A
hereto. The Warrants shall be executed on behalf of Sheridan by the manual or
facsimile signature of the President or a Vice President of Sheridan, attested
by the manual or facsimile signature of the Secretary or an Assistant Secretary
of Sheridan. A Warrant bearing the manual or facsimile signature of
individuals who were at any time the proper officers of Sheridan shall bind
Sheridan notwithstanding that such individuals or any of them shall have ceased
to hold such offices prior to the delivery of such Warrant or did not hold such
offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by Sheridan
either upon initial issuance or upon division, exchange, substitution or
transfer.
2. REPRESENTATIONS AND WARRANTIES OF SHERIDAN. Sheridan hereby
represents and warrants as follows:
(a) Power and Authority. Sheridan has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this
<PAGE> 2
Warrant Agreement, to grant, issue and deliver the Warrants and to
authorize and reserve for issuance and, upon payment from time to time
of the Exercise Price, to issue and deliver the shares of Common Stock
or other securities issuable upon exercise of the Warrants. This
Warrant Agreement has been duly executed and delivered by Sheridan.
(b) RESERVATION, ISSUANCE AND DELIVERY OF COMMON
STOCK. There have been reserved for issuance, and Sheridan shall at all
times keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the exercise
of the rights of purchase represented by the Warrants, and such shares,
when issued upon receipt of payment therefor or upon a net exercise in
accordance with the terms of the Warrants and of this Warrant
Agreement, will be legally and validly issued, fully paid and
nonassessable and will be free of any preemptive rights of stockholders
or any restrictions.
3. CONDITIONS TO PURCHASE. GGP's obligations hereunder shall
be subject to satisfaction of the following conditions upon the Closing, in
addition to such other conditions as are set forth in the Purchase Agreement:
(a) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Warrant
Agreement and the Warrants and all other legal matters relating to this
Warrant Agreement, the Warrants and the transactions contemplated
hereby shall be satisfactory in all respects to GGP.
(b) There shall have been duly tendered to GGP or upon the
order of GGP a certificate or certificates representing the Warrants.
4. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of Sheridan (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as GGP has specified to Sheridan.
5. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction upon
transfer set forth in this Warrant Agreement, each Warrant certificate may be
exchanged at the option of the Warrant Holder thereof for another certificate
or certificates of different denominations entitling the Warrant Holder thereof
to purchase upon surrender to Sheridan or its duly authorized agent a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitle such Warrant Holder to purchase. Any Warrant Holder
desiring to exchange a Warrant certificate or certificates shall make such
request in writing delivered to Sheridan, and shall surrender, properly
endorsed, the certificate or certificates to be so exchanged. Thereupon,
Sheridan shall execute and deliver to the person entitled thereto a new Warrant
certificate or certificates, as the case may be, as so requested. Any Warrant
issued upon exchange, transfer or partial exercise of the Warrants shall be the
valid obligation of Sheridan, evidencing the same generic rights and entitled
to the same generic benefits under this Warrant Agreement as the Warrants
surrendered for such exchange, transfer or exercise.
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<PAGE> 3
6. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to Sheridan of the Warrant certificate or certificates duly endorsed
by the Warrant Holder or by his duly authorized attorney-in-fact or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney-in-fact, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with Sheridan. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with Sheridan in its discretion. Upon any registration of transfer,
Sheridan shall deliver a new Warrant or Warrants to the person entitled
thereto.
7. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to purchase one
share of Common Stock during the time period and subject to the conditions set
forth in the Warrant Certificate at an exercise price of $5.50 per share,
subject to adjustment in accordance with Section 12 hereof (the "Exercise
Price"). Each Warrant terminates at 5:00 p.m. Houston time on the fifth
anniversary of the Closing Date as defined in the Purchase Agreement (the
"Expiration Date").
(b) The Exercise Price and the number of shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 12 of this Warrant Agreement.
Subject to the provisions of this Warrant Agreement, each Warrant Holder shall
have the right, which may be exercised as expressed in such Warrants, to
purchase from Sheridan (and Sheridan shall issue and sell to such Warrant
Holder) the number of fully paid and nonassessable shares of Common Stock
specified in such Warrants, upon surrender to Sheridan, or its duly authorized
agent, of such Warrants, and upon payment to Sheridan of the Exercise Price, as
adjusted in accordance with the provisions of Section 12 of this Warrant
Agreement or upon a net exercise pursuant to this subsection of this Warrant
Agreement, for the number of shares in respect of which such Warrants are then
exercised. The Warrant Holder may (i) pay the Exercise Price in cash, by
certified or official bank check payable to the order of Sheridan, or by the
surrender to Sheridan of securities of Sheridan having a Market Price equal to
the Exercise Price or (ii) make an exercise of Warrants for "Net Warrant
Shares." The number of Net Warrant Shares will be determined as described by
the following formula: Net Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the
number of Warrant Shares issuable upon exercise of the Warrants or portion of
Warrants in question. "MP" is the Market Price of the Common Stock on the last
trading day preceding the date of the request to exercise the Warrants.
"Market Price" shall mean the then current market price per share of Common
Stock, as determined in paragraph 12.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise Price,
with cash or securities, or upon a net exercise as aforesaid, Sheridan at its
expense shall issue and cause to be delivered with all reasonable dispatch to
or upon the written order of the Warrant Holder and in
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<PAGE> 4
such name or names as the Warrant Holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon
the exercise of such Warrants, together with cash, as provided in Section 12 of
this Warrant Agreement, in respect of any fraction of a share of such stock
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued, and any person so designated to be named therein
shall be deemed to have become a holder of record of such shares, as of the
date of the surrender of such Warrants and payment of the Exercise Price or
receipt of shares by net exercise as aforesaid. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the
Warrant Holders thereof, either in full or from time to time in part and, in
the event that any Warrant is exercised in respect of less than all of the
shares purchasable on such exercise at any time prior to the Expiration Date, a
new certificate evidencing the remaining Warrant or Warrants will be issued.
8. COMPLIANCE WITH GOVERNMENT REGULATIONS. Sheridan covenants that if
any share of Common Stock required to be reserved for purposes of exercise or
conversion of Warrants require, under any U.S. federal or state or other law or
applicable governing rule or regulation of any securities exchange,
registration with or approval of any governmental authority, or listing on any
such securities exchange, before such shares may be issued upon exercise,
Sheridan will use its best efforts to cause such shares to be duly registered,
approved or listed on the relevant national securities exchange, as the case
may be.
9. PAYMENT OF TAXES. Sheridan will pay all documentary stamp taxes, if
any, attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants and any securities issued pursuant to Section 12 hereof; provided,
however, that Sheridan shall not be required to pay any tax or taxes which may
be payable in respect of any transfer involved in the issue or delivery of any
Warrants or certificates for Warrant Shares and any securities issued pursuant
to Section 12 hereof in a name other than that of the Warrant Holder of such
Warrants.
10. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, Sheridan shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant of like tenor and representing an equivalent right or interest.
11. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. Sheridan shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the Common Stock ("Transfer Agent") and every subsequent
transfer agent for any shares of Sheridan's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. Sheridan will keep a copy of this Warrant Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of
Sheridan's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. Sheridan will supply the Transfer Agent and any
such subsequent transfer agent with duly executed stock
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<PAGE> 5
certificates for such purpose and will itself provide or otherwise make
available any cash which may be issuable as provided by Section 13 of this
Warrant Agreement. Sheridan will furnish to the Transfer Agent and any such
subsequent transfer agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Warrant Holder pursuant to
Section 12.3 hereof. All Warrants surrendered in the exercise of the rights
thereby evidenced shall be canceled, and such canceled Warrants shall
constitute sufficient evidence of the number of shares of stock which have been
issued upon the exercise of such Warrants (subject to adjustment as herein
provided). No shares of stock shall be subject to reservation in respect of
the Warrants subsequent to the Expiration Date except to the extent necessary
to comply with the terms of this Warrant Agreement.
12. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as hereafter defined.
12.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case Sheridan shall (i) pay a dividend to holders of
Common Stock in shares of Common Stock or make a distribution to
holders of Common Stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a larger number of shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of
Sheridan (including any such reclassification in connection with a
consolidation or merger in which Sheridan is the surviving
corporation), the number of Warrant Shares purchasable upon exercise of
each Warrant immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of Sheridan which he would have
owned or have been entitled to receive after the happening of any of
the events described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect
thereto regardless of whether the Warrants are exercisable at the time
of the happening of such event or at the time of any record date
with respect thereto. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) In case Sheridan shall issue rights, options or
warrants to holders of its outstanding Common Stock, without any charge
to such holders, entitling them to subscribe for or purchase shares of
Common Stock at a price per share which is lower at the record date
mentioned below than the greater of (a) the Exercise Price or (b) the
then current market price per share of Common Stock (as determined in
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<PAGE> 6
accordance with paragraph (e) below) (the "Greater Price"), then in
each such case the number of Warrant Shares thereafter purchasable upon
the exercise of each Warrant shall be determined by multiplying the
number of Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the
number of shares which the aggregate offering price of the total number
of shares of common stock so offered would purchase at the Greater
Price. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such rights, options or warrants.
(c) In case Sheridan shall distribute to holders of its
shares of Common Stock evidences of its indebtedness or assets
(including cash dividends or other cash distributions) or rights,
options or warrants, or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in paragraph (b) above), then in
each case the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon the exercise of each
Warrant by a fraction, of which the numerator shall be the then current
market price per share of Common Stock (as determined in accordance
with paragraph (e) below) on the date of such distribution, and of
which the denominator shall be the then current market price per share
of Common Stock, less the then fair value (as determined in good faith
by the Board of Directors of Sheridan) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made, and shall become
effective on the date of distribution retroactive to the record date
for the determination of stockholders entitled to receive such
distribution.
In the event of distribution by Sheridan to holders of its
shares of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an
adjustment in the number of Warrant Shares purchasable upon the
exercise of each Warrant, the Warrant Holder, upon the exercise thereof
at any time after such distribution, shall be entitled to receive from
Sheridan, such subsidiary or both, as Sheridan shall determine, the
stock or other securities to which such Warrant Holder would have been
entitled if such Warrant Holder had exercised such Warrant immediately
prior thereto regardless of whether the Warrants are exercisable at
such time, all subject to further adjustment as provided
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<PAGE> 7
in this subsection 12.1; provided, however, that no adjustment in
respect of dividends or interest on such stock or other securities
shall be made during the term of a Warrant or upon the exercise of a
Warrant.
(d) [intentionally left blank]
(e) For the purpose of any computation under paragraphs
(b) or (c) of this Section, the current market price per share of
Common Stock at any date shall be the average of the daily closing
prices of Sheridan's Common Stock, for 10 consecutive trading days
commencing 30 trading days before the date of such computation. The
closing price for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on such day,
the average of the closing bid and asked prices regular way for such
day, in each case on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or,
if not listed or admitted to trading, the average of the closing bid
and asked prices of the Common Stock in the over-the-counter market as
reported by NASDAQ or any comparable system. In the absence of one or
more such quotations, the Board of Directors of Sheridan shall
determine the current market price, in good faith, on the basis of such
quotations as it considers appropriate.
(f) In any case in which this Section 12.1 shall require
that any adjustment in the number of Warrant Shares be made effective
as of or immediately after a record date for a specified event,
Sheridan may elect to defer until the occurrence of the event the
issuing to the holder of any Warrant exercised after that record date
the shares of Common Stock and other securities of Sheridan, if any,
issuable upon the exercise of any Warrant over and above the shares of
Common Stock and other securities of Sheridan, if any, issuable upon
the exercise of any Warrant prior to such adjustment; provided,
however, that Sheridan shall deliver to such Warrant Holder a due bill
or other appropriate instrument evidencing the holder's right to receive
such additional shares or securities upon the occurrence of the event
requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this
paragraph (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth of a share.
(h) Whenever the number of Warrant Shares purchasable
upon the exercise of each Warrant is adjusted, as herein provided, the
Warrant Price payable
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<PAGE> 8
upon the exercise of each Warrant shall be adjusted by multiplying such
Warrant Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares purchasable
upon the exercise of such Warrant immediately prior to such adjustment,
and of which the denominator shall be the number of Warrant Shares
purchasable immediately after such adjustment.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made under
paragraphs (b) and (c) if Sheridan issues or distributes to each
Warrant Holder the rights, options, warrants, or convertible or
exchangeable securities, or evidences of indebtedness or assets
referred to in those paragraphs which each Warrant Holder would have
been entitled to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect thereto
regardless of whether the Warrants are exercisable at the time of the
happening of such event or at the time of any record date with respect
thereto.
(j) For the purpose of this Section 12.1, the terms
"shares of Common Stock" shall mean (i) the class of stock designated
as the Common Stock of Sheridan at the date of this Agreement, or (ii)
any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment
made pursuant to paragraph (a) above, the Warrant Holders shall become
entitled to purchase any securities of Sheridan other than shares of
Common Stock, thereafter the number of such other securities so
purchasable upon exercise of each Warrant and the Exercise Price of
such securities shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in paragraphs
(a) through (i), inclusive, above, and the provisions of Section 7 and
Section 12.2 through 12.5, inclusive, with respect to the Warrant
Shares, shall apply on like terms to any such other securities.
(k) Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, if any thereof shall not have
been exercised, the Warrant Price and the number of shares of Common
Stock purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment
not been required, as the case may be) as if (A) the only shares of
Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options,
warrants or conversion or exchange rights and (B) such shares of Common
Stock, if any, were issued or sold for the consideration actually
received by Sheridan upon such exercise plus the aggregate
consideration, if any, actually received by Sheridan for the issuance,
sale
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<PAGE> 9
or grant of all such rights, options, warrants or conversion or
exchange rights whether or not exercised; provided, however, that no
such readjustment shall have the effect of increasing the Warrant Price
or decreasing the number of Warrant Shares by an amount in excess of
the amount of the adjustment initially made with respect to the
issuance, sale or grant of such rights, options, warrants or conversion
or exchange rights.
12.2. VOLUNTARY ADJUSTMENT BY SHERIDAN. Sheridan may, at its option,
at any time during the term of the Warrants, reduce the then current Exercise
Price to any amount determined appropriate by the Board of Directors of
Sheridan.
12.3. NOTICE OF ADJUSTMENT. When the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of such
Warrant Shares is adjusted, as herein provided, Sheridan shall promptly mail by
first class, postage prepaid, to each Warrant Holder notice of such adjustment
or adjustments and a certificate of a firm of independent public accountants
selected by the Board of Directors of Sheridan (who may be the regular
accountants employed by Sheridan) setting forth the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Exercise Price of such
Warrant Shares after such adjustment and setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made. Such certificate, absent manifest error, shall be
conclusive evidence of the correctness of such adjustment.
12.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
In case of any consolidation of Sheridan with or merger of Sheridan into
another person or in case of any sale, transfer or lease to another person of
all of or substantially all the assets of Sheridan, Sheridan or such successor
or purchaser, as the case may be, shall execute with each Warrant Holder an
agreement that each Warrant Holder shall have the right thereafter upon payment
of the Exercise Price in effect immediately prior to such action to purchase
upon exercise of each Warrant the kind and amount of shares and other
securities and property which the Warrant Holder would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale,
transfer or lease had such Warrant been exercised immediately prior to such
action regardless of whether the Warrants are exercisable at the time of such
action. Such agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 12. The provisions of this Section 12.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
12.5. STATEMENT ON WARRANTS. Even though Warrants heretofore or
hereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Warrant Agreement; the parties understand and agree that such Warrants will
represent rights consistent with any
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<PAGE> 10
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.
13. FRACTIONAL INTERESTS. Sheridan shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares which shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
13, be issuable on the exercise of any Warrant (or specified portion, thereof),
Sheridan shall pay an amount in cash equal to the closing price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
14. REGISTRATION UNDER THE SECURITIES ACT OF 1933. GGP represents and
warrants to Sheridan that it will not dispose of the Warrant or Warrant Shares
except pursuant to (i) an effective registration statement, or (ii) an
applicable exemption from registration under the Securities Act of 1933, as
amended (the "Act"). In connection with any sale by GGP pursuant to clause
(ii) of the preceding sentence (other than a sale to JEDI Hydrocarbon
Investments I Limited Partnership), GGP shall furnish to Sheridan an opinion of
counsel reasonably satisfactory to Sheridan to the effect that such exemption
from registration is available in connection with such sale.
15. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the certificate or certificates therefor shall bear the
following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH
SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following legend
by which the Warrant Holder thereof shall be bound:
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<PAGE> 11
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL TO THE
EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN
CONNECTION WITH SUCH SALE."
16. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be construed
as conferring upon the Warrant Holders or their transferees the right to vote or
to receive dividends or to consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of Sheridan
or any other matter, or any rights whatsoever as stockholders of Sheridan. If,
however, at any time prior to the expiration of the Warrants and prior to their
exercise, any of the following events shall occur:
(a) Sheridan shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock, or
(b) Sheridan shall offer to the holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right
to subscribe to or purchase any thereof, or
(c) a dissolution, liquidation or winding up of Sheridan
(other than in connection with a consolidation, merger, sale, transfer
or lease or all or substantially all of its property, assets, and
business as an entirety) shall be proposed,
then in any one or more of said events Sheridan shall give notice in writing of
such event to the Warrant Holders as provided in Section 17 hereof, with such
notice to be completed at least 15 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
provide or receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
dividend, distribution or subscription rights, or such proposed dissolution,
liquidation or winding up.
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<PAGE> 12
17. NOTICES. Any notice pursuant to this Warrant Agreement to be given
or made by the holder of any Warrant or Warrant Shares to or on Sheridan shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
Attention: President
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by registered mail, return receipt requested, postage prepaid, addressed to
such Warrant Holder at the address of such Warrant Holder as shown on the
Warrant Register or the Stock Register, as the case may be.
18. GOVERNING LAW; DISPUTES. This Warrant Agreement, the Warrants and
all related documents shall be deemed to be contracts made under and shall be
construed in accordance with and governed by the laws of the State of Texas
without giving effect to principles of conflicts of law; provided, however, that
any matter involving the internal corporate affairs of Sheridan shall be
governed by the provisions of Delaware law.
19. SUPPLEMENTS AND AMENDMENTS. Sheridan and the Warrant Holders may
from time to time supplement or amend this Warrant Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which
Sheridan and the Warrant Holder may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interests of the Warrant Holders. Any amendment to this
Warrant Agreement may be effected with the consent of Warrant Holders of at
least a majority of the total then outstanding Warrants (for this purpose
Warrant Shares shall be deemed to be Warrants in the proportion that Warrant
Shares are then issuable upon the exercise of Warrants); provided that, any
amendment which shall have the effect of materially adversely affecting the
interests of any Warrant Holder shall not be effective with respect to such
Warrant Holder if such Warrant Holder shall not have consented thereto.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sheridan and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration Date
of all Warrants.
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<PAGE> 13
21. SUCCESSORS. All representations and warranties of Sheridan and all
covenants and agreements of this Warrant Agreement by or for the benefit of
Sheridan or the Warrant Holders shall bind and inure to the benefit of their
respective successors and assigns hereunder.
22. MERGER OR CONSOLIDATION OF SHERIDAN. So long as this Warrant
Agreement remains in effect, Sheridan will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not Sheridan), shall expressly assume, by supplemental agreement
executed and delivered to the Warrant Holders, the due and punctual performance
and observance of each and every covenant and condition of this Warrant
Agreement to be performed and observed by Sheridan.
23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
Sheridan and the Warrant Holders, any legal or equitable right, remedy or claim
under this Warrant Agreement, but this Warrant Agreement shall be for the sole
and exclusive benefit of Sheridan and the holders of the Warrants and Warrant
Shares.
24. CAPTIONS. The captions of the sections and subsections of this
Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
25. COUNTERPARTS. This Warrant Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same instrument.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
SHERIDAN ENERGY, INC.
By: /s/ B.A. BERILGEN
---------------------------------
B.A. Berilgen, President
GRAND GULF PRODUCTION, L.L.C.
By: /s/ DONALD K. LEHTO
----------------------------------
Name: Donald K. Lehto
--------------------------------
Title: C.E.O.
-------------------------------
Address for Notice:
1111 Fannin, Suite 1465
Houston, Texas 77002
Attention: Donald K. Lehto
Telecopy:
[Warrant Agreement -- Signature Page 1]
<PAGE> 15
EXHIBIT A
to
Warrant Agreement
(FORM OF WARRANT CERTIFICATE)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE Common Stock OR OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY
SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS AND THE COMMON STOCK UNDERLYING SUCH
WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
Warrant No. 2 82,500 Warrants
VOID AFTER 5:00 P.M. HOUSTON TIME
ON _____________, 2002
SHERIDAN ENERGY, INC.
WARRANT CERTIFICATE
THIS CERTIFIES THAT for value received GRAND GULF PRODUCTION, L.L.C.
("GGP"), the registered holders hereof or registered assigns (the "Warrant
Holders") are the owners of the number of Warrants set forth above, each of
which entitles the owners thereof to purchase at any time from 9:00 A.M.,
Houston time, on December 31, 1997, until 5:00 P.M., Houston time on
_________________, 2002, one fully paid and nonassessable share of common stock
(subject to adjustment), par value $0.01 per share (the "Common Stock"), of
SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan"), at the exercise price of $5.50 per share, subject to adjustment as
described in the Warrant Agreement referred to below (the "Exercise Price").
The Warrant Holders may pay the Exercise Price in cash, or by certified or
official bank check or make a net exercise for Net Warrant Shares as described
in the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of an agreement dated December 31,
1997 (the "Warrant Agreement"), by and among Sheridan and GGP, which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Warrant Agreement reference is hereby made for
A-1
<PAGE> 16
a full description of the rights, limitations of rights, obligations, duties
and immunities hereunder of Sheridan and the Warrant Holders of the Warrant
Certificates. Copies of the Warrant Agreement are on file at the principal
office of Sheridan.
The Warrant Holders hereof may be treated by Sheridan and all other
persons dealing with this Warrant Certificate as the absolute owners hereof for
any purpose and as the persons entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of Sheridan, any notice to the
contrary notwithstanding, and until such transfer on such books, Sheridan may
treat the Warrant Holders hereof as the owners for all purposes.
The Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of Sheridan, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Warrant Holders to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled the Warrant Holders to purchase. If
this Warrant Certificate shall be exercised in part, the Warrant Holders shall
be entitled to receive upon surrender hereof, another Warrant Certificate or
Warrant Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
Neither the Warrants nor the Warrant Certificate entitles any Warrant
Holders hereof to any of the rights of a shareholder of Sheridan.
THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER,
THAT ANY MATTER INVOLVING THE INTERNAL CORPORATE AFFAIRS OF SHERIDAN SHALL BE
GOVERNED BY THE PROVISIONS OF DELAWARE LAW.
A-2
<PAGE> 17
IN WITNESS WHEREOF, SHERIDAN ENERGY, INC. has caused the signature of
its President and Secretary to be printed hereon.
SHERIDAN ENERGY, INC.
By:
--------------------------------
B.A. Berilgen, President
Attest:
- --------------------------------
Name:
Secretary/Assistant Secretary
A-3
<PAGE> 1
EXHIBIT 7
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (this "Assignment") is from GRAND
GULF PRODUCTION, L.L.C., a Texas limited liability company, whose address is
1111 Fannin, Suite 1465, Houston, Texas 77002, as "Assignor" to SHERIDAN
ENERGY, INC., a Delaware corporation, whose address is 1000 Louisiana, Suite
800, Houston, Texas 77002, Attn: Bill Berilgen, as "Assignee."
ARTICLE I.
For and in consideration of $1,000, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor has granted, bargained, sold, conveyed, assigned, transferred, set
over and delivered and hereby grants, bargains, sells, conveys, assigns,
transfers, sets over and delivers unto Assignee all of Assignor's right, title
and interest in and to the following properties (such interest is collectively
referred to herein as the "Properties"):
(a) the oil and gas leases and leasehold interests,
working interests, net revenue interests, operating rights, overriding
royalty interest, net profits interests or similar interests in the
properties, described on Exhibits A-1 and A-2, and any other rights
that may arise from operation of the properties and lands pooled,
unitized, communitized or consolidated with such properties (the "Oil
and Gas Properties"); and
(b) the oil, condensate or natural gas wells, water
source wells, salt water disposal wells and other types of injection
wells either located on the Oil and Gas Properties or held for use in
connection with the Oil and Gas Properties, and whether producing,
operating, shut-in, temporarily abandoned, abandoned, standing or
otherwise; and
(c) the severed crude oil, natural gas, casinghead gas,
drip gasoline, natural gasoline, petroleum, petroleum gas liquids,
condensate, products, liquids and other hydrocarbons and other
minerals or material of every kind and description produced from the
Oil and Gas Properties; and
(d) the physical facilities, equipment, personal
property, rights-of-way and easements or interest therein that are
used or held for use in connection with the ownership or operation of
the properties described in subparagraphs (a) through (c), inclusive,
whether located on or off such properties including, without
limitation, the rights-of-way and easements described on Exhibit B;
and
(e) all contracts and agreements that in any way relate
to the properties described in subparagraphs (a) through (d),
inclusive, including operating agreements, agreements relating to the
production, storage, treatment, transportation, processing,
<PAGE> 2
purchase, sale or other disposal of substances, including, but without
limitation by enumeration, all easements, servitudes, pooling and
unitization agreements, gas sale agreements, and surface leases, and
any and all other amendments, ratifications or extensions of the
foregoing.
LESS AND EXCEPT AND ASSIGNOR HEREBY EXCLUDES FROM THE FOREGOING ALL
2-D SEISMIC INFORMATION, LICENSES AND DATA RELATING TO THE PROPERTIES, TO THE
EXTENT THAT THE SAME IS NOT TRANSFERABLE WITHOUT CONSENT, PAYMENT OR PENALTY.
TO HAVE AND TO HOLD the Properties unto Assignee and its heirs,
successors and assigns, forever; provided, however, this Assignment is made
subject to the following terms and provisions:
ARTICLE II
DISCLAIMERS
2.1 Disclaimer. Except as provided below, the Properties are hereby
assigned by Assignor to Assignee without recourse, covenant or warranty of
title of any kind, express, implied or statutory, even to the return of the
purchase price. Any covenants or warranties implied by statute or law by the
use herein of the words "grant", "convey" or other similar words are hereby
expressly restrained, disclaimed, waived and negated. WITHOUT LIMITING THE
GENERALITY OF THE TWO PRECEDING SENTENCES, ASSIGNEE ACKNOWLEDGES THAT, EXCEPT
AS SET FORTH IN THE PURCHASE AGREEMENT DATED DECEMBER 31, 1997 BETWEEN ASSIGNOR
AND ASSIGNEE (THE "PURCHASE AGREEMENT"), ASSIGNOR HAS NOT MADE, AND ASSIGNOR
HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY EXPRESSLY WAIVES,
ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE
RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE
RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE PROPERTIES, (b) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE
BY OR ON BEHALF OF ASSIGNOR, (c) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES,
(d) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (e) ANY IMPLIED OR
EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (f) ANY IMPLIED OR
EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (g) ANY
RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION, (h) ANY CLAIMS BY ASSIGNEE FOR DAMAGES BECAUSE OF REDHIBITORY
VICES OR DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN AS OF THE
EFFECTIVE TIME, AND (i) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER
APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH ASSIGNEE AND ASSIGNOR
THAT, EXCEPT AS PROVIDED IN THE PURCHASE AGREEMENT, THE PROPERTIES ARE HEREBY
ASSIGNED TO ASSIGNEE IN
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<PAGE> 3
THEIR PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND "WHERE IS" WITH ALL
FAULTS, AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS
ASSIGNEE DEEMS APPROPRIATE. ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT
REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
2.2 Subrogation. Assignor hereby transfers and assigns unto
Assignee, its successors and assigns, all of its rights under and by virtue of
all covenants and warranties pertaining to the Properties, express or implied
(including, without limitation, title warranties and manufacturers', suppliers'
and contractors' warranties), that have heretofore been made by any of
Assignor's predecessors in title, or by any third party manufacturers,
suppliers and contractors (the "Prior Covenants and Warranties"). This
Assignment is made with full substitution and subrogation of Assignee, its
successors and assigns, in and to and under and by virtue of the Prior
Covenants and Warranties and with full subrogation to all rights accruing under
the statutes of limitation, prescription and repose under the laws of the
applicable jurisdictions in relation to the Properties and all causes of
action, rights of action or warranty of Assignor against all former owners of
the Properties.
ARTICLE III
MISCELLANEOUS
3.1 Further Assurances. Without creating any additional covenants,
warranties or representations of or by Assignor, Assignor covenants and agrees
to execute and deliver to Assignee all such other and additional assignments,
instruments and other documents and to do all such other acts and things as may
be necessary more fully to vest in Assignee record title to all of the
Properties and the respective properties, rights and interests herein and
hereby granted or intended to be granted, and to put Assignee in actual
possession and operating control of the Properties to the same extent as
Assignor was theretofore in, or was theretofore entitled to be in. Such
separate or additional assignments, if any: (a) shall evidence the assignment
of the Properties herein made or intended to be made; (b) shall not modify any
of the terms and covenants herein set forth and shall not create any additional
representations or covenants of or by Assignor to Assignee; (c) shall be deemed
to contain all of the terms and provisions hereof, as fully and to all intents
and purposes as though the same were set forth at length in the separate
assignments; and (d) to the extent required by law, shall be on forms
prescribed, or may otherwise be on forms suggested, by the appropriate
governmental entities and agencies. In the event any term or provision of any
additional assignment should be inconsistent with or conflict with the terms or
provisions of this Assignment, the terms and provisions of this Assignment
shall control and shall govern the rights, obligations and interests of the
parties hereto, their successors and assigns. Such additional assignments and
this Assignment shall, when taken together, be deemed to constitute the one
assignment by Assignor to Assignee of all of the Properties.
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<PAGE> 4
3.2 Approval. This Assignment, insofar as it affects any interest in
leases the transfer of which must be approved by any governmental entity or
agency, is made and accepted subject to the approval of the appropriate
governmental entity or agency and to the terms of such approval, if and to the
extent required by law.
3.3 Assumption. Assignee expressly assumes all of Assignor's
obligations relating to the Properties, including, without limitation, leases,
operating agreements, unit agreements and contracts.
3.4 Counterparts. This Assignment may be executed in any number of
counterparts, and each counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
conveyance.
3.5 Successors and Assigns. This Assignment shall bind and inure to
the benefit of Assignor and Assignee and their respective successors and
assigns.
3.6 Recording. To facilitate recording or filing of this Assignment,
the counterpart to be recorded in a given county or parish may contain only
that portion of the exhibits that describes Properties located in that county
or parish. Assignor and Assignee have each retained a counterpart of this
Assignment with complete exhibits.
3.7 Exhibits. Reference is made to all Exhibits attached hereto and
made a part hereof for all purposes. References in such Exhibit to instruments
on file in the public records are made a part hereof for all purposes.
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<PAGE> 5
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment as of the date of their respective acknowledgments below, but
effective as of 7:00 a.m. local time on September 1, 1997.
ASSIGNOR:
GRAND GULF PRODUCTION, L.L.C.
WITNESSES:
/s/ By: /s/ DONALD K. LEHTO
- ------------------------------ ---------------------------------
Name: Donald K. Lehto
-------------------------------
/s/ Title: C.E.O.
- ------------------------------ ------------------------------
ASSIGNEE:
WITNESSES: SHERIDAN ENERGY, INC.
/s/ By: /s/ B.A. BERILGEN
- ------------------------------ ---------------------------------
Name: B.A. Berilgen
-------------------------------
/s/ Title: President and C.E.O.
- ------------------------------ ------------------------------
ACKNOWLEDGMENTS
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 31st day of December, 1997, before me appeared Donald K. Lehto,
affirmed) did say that he is the C.E.O. of GRAND GULF PRODUCTION, L.L.C., a
Texas limited liability company, and that the instrument was signed on behalf of
the limited liability company by authority of its Board of Managers, and that he
acknowledged the instrument to be the free act and deed of GRAND GULF
PRODUCTION, L.L.C.
/s/ TERRI L. FREDERICK
-------------------------------------------
Notary Public in and for the State of Texas
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<PAGE> 6
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 31st day of December, 1997, before me appeared B.A. Berilgen,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the President and C.E.O. of SHERIDAN ENERGY, INC., a Delaware corporation,
and that the instrument was signed on behalf of the corporation by authority of
its Board of Directors and that he acknowledged the instrument to be the free
act and deed of SHERIDAN ENERGY, INC.
/s/ TERRI L. FREDERICK
-------------------------------------------
Notary Public in and for the State of Texas
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<PAGE> 1
EXHIBIT 8
WARRANT ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under the attached Warrant, with respect to
the number of shares of Sheridan Energy, Inc. $0.01 par value per share common
stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Joint Energy Development 1400 Smith Street 82,500
Investments Limited Partnership Houston, Texas 77002
and does hereby irrevocably constitute and appoint Attorney ___________________
to make such transfer on the books of Sheridan Energy, Inc., maintained for
the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that the attached Warrant and the shares of stock to be
issued upon exercise thereof or conversion thereof are being acquired for
investment and that the Assignee will not offer, sell or otherwise dispose of
the attached Warrant or any shares of stock to be issued upon exercise thereof
or conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.
December 31, 1997
GRAND GULF PRODUCTION, L.L.C.
By: /s/ DONALD K. LEHTO
--------------------------------
Name: Donald K. Lehto
------------------------------
Title: C.E.O.
-----------------------------
<PAGE> 1
EXHIBIT 9
STOCK TRANSFER AND TERMINATION AGREEMENT
THIS STOCK TRANSFER AND TERMINATION AGREEMENT (this "Agreement") is
made and entered into as of December 31, 1997 among JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership ("JEDI"), and
GRAND GULF PRODUCTION, L.L.C., a Texas limited liability company ("GGP").
RECITALS
A. JEDI and GGP entered into that certain Loan Agreement dated as
of May 3, 1995 (as amended, supplemented or otherwise modified, the "Loan
Agreement"), pursuant to which JEDI agreed, upon certain terms and conditions
stated therein, to make loans to GGP from time to time.
B. Pursuant to the terms and conditions of the Loan Agreement,
GGP and Donald K. Lehto ("Lehto") executed various Loan Documents, including,
without limitation, Security Instruments, Conveyances of Overriding Royalty and
Production Agreements (as all of such terms are hereinafter defined).
C. Pursuant to that certain Purchase Agreement dated December 31,
1997 (the "GGP/Sheridan Purchase Agreement"), GGP has agreed with Sheridan
Energy, Inc. ("Sheridan") to sell substantially all of its oil and gas
properties and all personal property, equipment, fixtures and data relating
thereto to Sheridan in exchange for Sheridan issuing 467,500 shares (the
"Shares") of Sheridan common stock, par value $.01 per share (the "Common
Stock") and warrants to purchase up to an aggregate of 82,500 shares of Common
Stock (the "Warrants") to GGP (the "Sheridan Transactions").
D. In exchange for the transfer by GGP to JEDI of the Shares,
Warrants and certain other rights, (i) JEDI has agreed to forgive the entire
balance of the Indebtedness (as hereinafter defined) remaining due after
application of the value of the Shares and the Warrants to the outstanding
balance of principal and interest owing on the Note (as hereinafter defined)
issued pursuant to the Loan Agreement, and (ii) to reassign the interests
acquired by JEDI under the Conveyances of Overriding Royalty (as hereinafter
defined).
E. In connection with the foregoing, GGP and Lehto have requested
that JEDI terminate the Loan Agreement, cancel the Note, release, cancel or
otherwise terminate the Security Instruments, and reconvey to GGP or its
designee, the interests held by JEDI under the Conveyances of Overriding
Royalty and Production Agreements, and JEDI has agreed to do so, subject to the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises, the transfer of the
Shares, Warrants and certain other rights and other good and valuable
consideration paid to JEDI, the receipt and sufficiency of which are hereby
acknowledged, JEDI and GGP hereby agree as follows:
1. Terms Defined in the Loan Agreement. Capitalized terms used
in this Agreement, but not defined herein, shall have the meanings assigned to
such terms in the Loan Agreement.
2. Transfer of Shares, Warrants and Purchase Rights.
Contemporaneously with closing of the Sheridan Transactions, GGP agrees to
deliver to JEDI (a) stock certificates representing all of the Shares(such
Shares being issued in JEDI's name as GGP's designee as directed by GGP to
Sheridan at the closing of the Sheridan Transactions) (b) warrant certificates
representing all of the Warrants endorsed
<PAGE> 2
in blank or accompanied by duly executed assignment documents, (c) an
assignment of all of GGP's rights under the GGP/Sheridan Purchase Agreement,
and (d) an assignment of all of GGP's rights under the Warrant Agreement (the
"Warrant Agreement") and the Registration Rights Agreement (the "Registration
Rights Agreement"), each of which agreements were entered into by Sheridan and
GGP in connection with the GGP/Sheridan Purchase Agreement. The rights to be
assigned pursuant to Section 2(c) and 2(d) above are collectively referred to
as the "Purchase Rights."
3. Representations, Warranties and Certain Covenants of GGP. (a)
GGP represents and warrants to JEDI that:
(i) Upon the consummation of the Sheridan Transactions
and when transferred to JEDI pursuant to the terms of this Agreement,
the Shares, the Warrants and the Purchase Rights will be free and
clear of any Liens created by GGP.
(ii) GGP has full right, power and authority to (i) enter
into this Agreement and the documents to be executed and delivered in
connection herewith and perform its obligations hereunder and
thereunder and (ii) transfer the Shares, the Warrants, and the
Purchase Rights to JEDI.
(iii) This Agreement and the other documents executed and
delivered in connection herewith, when executed and delivered, shall
each constitute a legal, valid and binding obligation of GGP
enforceable in accordance with its terms.
(b) GGP covenants with JEDI that, without the prior written
consent of JEDI:
(i) GGP shall not waive any conditions to the closing of
the Sheridan Transaction set forth in the GGP/Sheridan Purchase
Agreement; and.
(ii) GGP shall not amend, or waive any of its rights,
under the GGP/Sheridan Purchase Agreement.
4. Representations and Warranties of JEDI. JEDI represents and
warrants to GGP that:
(a) JEDI has full right, power and authority to enter
into this Agreement and the documents to be executed and delivered in
connection herewith and perform its obligations hereunder and
thereunder.
(b) This Agreement and the other documents executed and
delivered in connection herewith, when executed and delivered, shall
each constitute a legal, valid and binding obligation of JEDI
enforceable in accordance with its terms.
(c) JEDI is acquiring the Shares and the Warrants for its
own accounts and not with a view to the public resale of all or any
part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). JEDI acknowledges that the Shares and
Warrants have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available. JEDI if
familiar with investments of the nature of the Shares and Warrants,
understands that this investment involves substantial risks, has
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<PAGE> 3
adequately investigated Sheridan Energy, Inc. and has substantial
knowledge and experience in financial and business matters such that
it is capable of evaluating, and has evaluated, the merits and risks
inherent in acquiring the Shares and Warrants and is able to bear the
economic risks of such investment.
5. Termination of Loan Agreement. Effective only upon JEDI's
receipt of the Shares, Warrant and Purchase Rights, JEDI hereby terminates the
Loan Agreement and releases GGP from all obligations thereunder and GGP hereby
releases JEDI from all of its obligations and commitments under the Loan
Agreement and the other Loan Documents.
6. Termination of Guaranty Agreement. Contemporaneously with the
closing of the Sheridan Transactions, JEDI shall execute and deliver to Lehto
the Termination of the Guaranty Agreement in the form attached hereto as
Exhibit A, releasing Lehto from all obligations of the Guaranty Agreement dated
January 23, 1997 executed by Lehto in favor of JEDI in connection with the Loan
Documents.
7. Release of Security Instruments, Etc. Contemporaneously with
the closing of the Sheridan Transactions, JEDI shall execute and deliver to GGP
instruments, in recordable form if appropriate, to (i) release, cancel or
otherwise terminate the Security Instruments and (ii) reconvey to GGP any
interests held by JEDI as granted by the Conveyances of Overriding Royalty and
Production Agreements.
8. Receipt of Canceled Note and Releases. Contemporaneously with
the delivery of the Shares, Warrants and Purchase Rights, GGP shall acknowledge
receipt from JEDI of the original executed Note marked "CANCELED" and each of
the release and reconveyance documents described in paragraph 7 hereof.
9. Mutual Release. Contemporaneously with the closing of the
Sheridan Transactions, JEDI and GGP shall each execute a Mutual Release in the
form attached hereto as Exhibit B releasing each party from liabilities to the
other party in connection with the Loan Documents or any transactions
contemplated thereby.
10. Survival of Certain Provisions. (a) Notwithstanding anything
to the contrary in this Agreement or the documents executed and delivered
pursuant hereto, the parties hereto agree that:
(i) nothing herein or in the documents to be executed and
delivered pursuant hereto shall be deemed to release GGP from
liability resulting from the breach of the representations and
warranties made by GGP to JEDI herein or the indemnities by GGP
herein; and
(ii) the indemnities and provisions of Section 8.04 of the
Loan Agreement shall survive the consummation of the transaction
hereby pursuant to the terms of such Section 8.04 as if the Note had
been paid in full.
(b) The terms and provisions of this Agreement shall survive the
closing of the Sheridan Transactions.
11. Indemnification. GGP agrees to indemnify, release, defend,
and hold harmless JEDI, its partners, and affiliates, and their respective
officers, directors, employees and agents from, against, and
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<PAGE> 4
in respect of any and all claims, demands, losses, reasonable costs and
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties and reasonable attorneys' fees (collectively,
"Claims"), that JEDI shall incur or suffer, which arise, result from, or relate
to any breach of, or failure by GGP to perform, any of its representations,
warranties, covenants, or agreements in the GGP/Sheridan Purchase Agreement or
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by GGP to Sheridan in connection with the transactions contemplated by
the GGP/Sheridan Agreement, REGARDLESS, IN EACH CASE, OF WHETHER THE LOSS OR
CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW
OF OR BY SUCH INDEMNIFIED OR RELEASED PARTY.
12. Opinion. Contemporaneously with the transfer of the Shares,
Warrants and Purchase Rights, GGP shall cause to be delivered to JEDI an
opinion of Schully, Roberts, Slattery & Jaubert, dated as of the date of the
transfer of the Shares, Warrants and Purchase Rights, that addresses the
matters set forth in Sections 3(a)(ii) and (iii), including such exceptions and
assumptions as are customary in such opinions, in form and substance reasonably
acceptable to JEDI.
13. Termination. Notwithstanding anything herein to the contrary,
in the event the closing of the Sheridan Transactions has not occurred on or
before January 15, 1998, JEDI may terminate this Agreement by written notice to
GGP and neither party shall have any rights or obligations under this
Agreement.
14. Amendments; Waivers. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by GGP or JEDI therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance or for the specific purpose for which given.
15. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and permitted assigns of the parties hereto. This
Agreement and the rights and obligations of GGP shall not be assigned without
the prior written consent of JEDI. JEDI may not assign or transfer any or all
of its rights and obligations under this Agreement without the consent of GGP
except to an Affiliate.
16. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement unless the consummation of the transaction
contemplated hereby is materially and adversely affected thereby.
17. Governing Law. Each of the parties hereto hereby consents and
agrees that this Agreement shall be deemed a contract and instrument made under
the laws of the State of Louisiana and shall be construed and enforced in
accordance with and governed by the laws of the State of Louisiana, without
regard to principles of conflicts of law.
18. Notices. All notices, requests, and other communications to
any party hereunder shall be in writing (including telecopy) and shall be given
to such party at its address or telecopy number set
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<PAGE> 5
forth on the signature pages hereof or such other address or telecopy number as
such party may hereafter specify by notice to the other parties.
19. Dispute Resolution. (a) Any controversy, dispute or claim
arising out of or relating to this Agreement or the transactions contemplated
hereby (a "Dispute") shall be submitted to non-binding mediation upon the
request of GGP or JEDI on the following terms. Upon the request of either
party, a neutral mediator acceptable to both parties (the "Mediator") shall be
appointed within fifteen (15) days. The Mediator shall attempt, through
negotiations in any manner deemed reasonably appropriate by the Mediator, in
which the parties shall participate, to resolve the Dispute. The Mediator
shall be compensated at a rate agreeable to GGP, JEDI and the Mediator, and
each of GGP and JEDI shall pay its pro rata share of such compensation and
other expenses of the mediation.
(b) In the event that the Dispute has not been resolved within 30
days after the appointment of the Mediator, the Dispute shall be resolved by
arbitration administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Section 19, the Commercial Arbitration Rules
of the AAA, and, to the maximum extent applicable, the United States
Arbitration Act. Judgment on any matter rendered by arbitrators may be entered
in any court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable in the
subject matter of the Dispute. Each party shall select one arbitrator and the
two arbitrators so selected shall select the third arbitrator. If the third
arbitrator is not selected within thirty (30) days after the request for an
arbitration, then any party may request the AAA to select the third arbitrator.
The arbitrators may engage engineers, accountants or other consultants they
deem necessary to render a conclusion in the arbitration proceeding. To the
maximum extent practicable, an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in Houston, Texas. Arbitrators
shall be empowered to impose sanctions and to take such other actions as the
arbitrators deem necessary to the same extent a judge could impose sanctions or
take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and conclusions of
law. The arbitrators shall have the power to award recovery of all costs and
fees to the prevailing party. IN DECIDING THE SUBSTANCE OF ANY SUCH CLAIM,
DISPUTE OR DISAGREEMENT, THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD
CONSEQUENTIAL, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES (INCLUDING, WITHOUT
LIMITATION, ANY SPECIAL, EXEMPLARY DAMAGES, TREBLE DAMAGES, PUNITIVE DAMAGES,
PENALTIES, OR LOSS OF USE OR LOSS OF PROFITS OR INCOME), WHETHER BASED ON
STATUTE, IN TORT, CONTRACT OR OTHERWISE, UNDER ANY CIRCUMSTANCES, REGARDLESS OF
WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER LOUISIANA LAW, THE PARTIES HEREBY
WAIVING THEIR RIGHT, IF ANY, TO RECOVER SUCH DAMAGES IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(c) All fees of the arbitrators and any engineer, accountant or
other consultant engaged by the arbitrators, shall be shared equally unless
otherwise awarded by the arbitrators.
20. Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
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WITNESS THE EXECUTION HEREOF as of the date first set forth above.
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By:/s/ JAMES R. McBRIDE
-----------------------------------
Name: James R. McBride
---------------------------------
Title: Agent and Attorney-in-Fact
--------------------------------
Address: 1400 Smith Street
Houston, Texas 77002
Attn: Donna W. Lowry
GRAND GULF PRODUCTION, L.L.C.
By:/s/ DONALD K. LEHTO
-----------------------------------
Name: Donald K. Lehto
---------------------------------
Title: C.E.O.
--------------------------------
Address: 1111 Fannin, Suite 1464
Houston, Texas 77002
Attn: Donald K. Lehto
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EXHIBIT 10
================================================================================
PURCHASE AGREEMENT
by and between
SHERIDAN ENERGY, INC.
and
JEDI HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP
dated as of
December 31, 1997
================================================================================
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TABLE OF CONTENTS
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ARTICLE I.
Definitions
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II.
Sale and Purchase; Closing
2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Ownership, Revenues and Expenses of JEDI I Properties . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Certain Reassignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III.
Representations and Warranties of Sheridan
3.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 SEC Documents and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Liabilities; Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Title to Properties and Assets; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Intellectual Property and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 No Public Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23 Plugging and Abandonment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.24 No Material Misstatements or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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3.25 Material Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV.
Representations and Warranties of JEDI I Partnership
4.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Consents and Preferential Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Title to Properties and Assets; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.8 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.11 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.12 Material Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.13 Plugging and Abandonment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V.
Covenants
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Operation of Business by Sheridan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Operation of JEDI I Properties by JEDI I Partnership . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI.
Closing Conditions
6.1 Conditions to Obligation of JEDI I Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Conditions to Obligation of Sheridan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VII.
Other Provisions
7.1 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3 Certain Public Utility Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Business Opportunity Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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7.5 Indemnification . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Survival of Terms; Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Disclaimers of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.8 Transfer Taxes and Recording Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.9 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.10 Actions by Sheridan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII.
Miscellaneous
8.1 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Further Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 Exhibits; Schedules; Amendment of Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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EXHIBITS
Exhibit A - Form of Warrant Agreement
Exhibit B - Form of Assignment and Bill of Sale
Exhibit C - Form of Registration Rights Agreement
Schedule I - JEDI I Leases
Schedule II - JEDI I Wells
Schedule III - 3-D Seismic Data
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made as of December 31,
1997, by and between Sheridan Energy, Inc., a Delaware corporation
("Sheridan"), and JEDI Hydrocarbon Investments I Limited Partnership, a
Delaware limited partnership ("JEDI I Partnership").
RECITALS
Sheridan desires to issue and sell to JEDI I Partnership, subject to
the terms and conditions set forth herein, (i) 382,500 shares of Common Stock
(the "Shares"), and (ii) Warrants to purchase up to 67,500 shares of Common
Stock in exchange for all of the right, title and interest to those certain oil
and gas properties (the "JEDI I Leases") described in Schedule I hereto owned
by JEDI I Partnership, together with all of JEDI I Partnership's interest in
and to personal property, equipment, fixtures, contracts and data relating
thereto, including the 3-D seismic data described in Schedule III attached
hereto, LESS AND EXCEPT and JEDI I Partnership hereby excludes from the
foregoing all 2-D seismic information, licenses and data relating to the JEDI I
Leases, to the extent that the same is not transferable without consent,
payment or penalty (collectively such interests to be exchanged by JEDI
Partnership is hereinafter referred to as, the "JEDI I Properties").
Simultaneously herewith, (i) Sheridan is entering into an agreement
with Grand Gulf Production, L.L.C. ("GGP") (the "GGP/Sheridan Purchase
Agreement") pursuant to which Sheridan will acquire substantially all of the
oil and gas properties, together with all personal property, equipment,
fixtures and data relating thereto, and all other assets of GGP in exchange for
467,500 shares of Common Stock and warrants to purchase up to 82,500 shares of
Common Stock, (ii) GGP is entering into a termination agreement with JEDI I
Partnership (the "GGP/JEDI I Partnership Termination Agreement") pursuant to
which GGP and JEDI I Partnership will terminate the Farmout Agreement and the
Participation Agreement, and (iii) GGP and Donald K. Lehto are entering into an
agreement (the "GGP/JEDI Termination Agreement") with Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership ("JEDI"),
pursuant to which JEDI will terminate all of the outstanding debt obligations
of GGP to JEDI and the guaranty of Donald K. Lehto in exchange for the transfer
by GGP to JEDI under the JEDI Loan Agreement of 467,500 shares of Common Stock
and warrants to purchase up to 82,500 shares of Common Stock of Sheridan.
It is the desire of Sheridan and JEDI I Partnership that the
transactions contemplated by this Purchase Agreement, the GGP/Sheridan Purchase
Agreement, the GGP/JEDI I Partnership Termination Agreement, and the GGP/JEDI
Termination Agreement shall close simultaneously in accordance with the terms
and conditions set forth herein and therein.
<PAGE> 7
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the capitalized terms defined
elsewhere in this Agreement, the following capitalized terms shall have the
following respective meanings when used in this Agreement:
"AFFILIATE" as applied to any specified Person means any other
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such specified Person. The
term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly,
of 10% or more of the voting power (or in the case of a Person which
is not a corporation, 10% or more of the ownership interest,
beneficial or otherwise) of such Person or the power otherwise to
direct or cause the direction of the management and policies of that
Person, whether through voting, by contract or otherwise. For
purposes of this paragraph, "voting power" of any Person means the
total number of votes which may be cast by the holders of the total
number of outstanding shares of equity of any class or classes of such
Person in any election of directors (or Persons performing similar
functions) of such Person. For purposes of this Agreement (i) all
executive officers and directors of a Person shall be deemed to be
Affiliates of such Person, (ii) for avoidance of doubt, Enron Corp.
and its Affiliates shall be deemed to be Affiliates of JEDI I
Partnership, (iii) Sheridan and its Subsidiaries shall not be
considered Affiliates of JEDI I Partnership or its Affiliates, and
(iv) JEDI I Partnership and its Affiliates shall not be considered
Affiliates of Sheridan and its Subsidiaries.
"ASSIGNMENT" means the Assignment and Bill of Sale in the form
of Exhibit B hereto.
"CAPITALIZED LEASE OBLIGATIONS" means all payment obligations
arising under any lease of property which, in accordance with GAAP,
would be capitalized on Sheridan's or any of its Subsidiary's balance
sheet or for which the amount of the asset and liability thereunder as
if so capitalized should, in accordance with GAAP, be disclosed in a
note to such balance sheet.
"CHARTER" means, for any Person, such Person's certificate of
incorporation, articles of incorporation or other organizational
documents, as the same may be amended.
"CLAIMS" shall have the meaning assigned to such term in
Section 7.5(b).
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"CLOSING" shall have the meaning assigned to such term in
Section 2.2.
"CLOSING DATE" shall have the meaning assigned to such term in
Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and all rules and regulations promulgated
thereunder, and any successor statute.
"COMMISSION" shall have the meaning assigned to such term in
Section 3.6.
"COMMON STOCK" means the common stock, par value $.01 per
share, of Sheridan.
"CONSOLIDATED" refers to the consolidation of financial
statements in accordance with GAAP.
"ECT" means Enron Capital & Trade Resources Corp.
"ECT PURCHASE AGREEMENT" means that Stock Purchase Agreement
dated November 28, 1997, between Sheridan and ECT, as amended.
"EFFECTIVE DATE" means September 1, 1997.
"ENVIRONMENTAL LAWS" means any and all laws, statutes,
ordinances, rules, regulations, orders or determinations of any
Governmental Authority pertaining to health or the environment in
effect in any and all jurisdictions in which the Person identified
conducts business or at any time has conducted business, or where any
of its properties or operations are located, including without
limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous and Solid Waste Amendments Act
of 1984, as amended, the Hazardous Materials Transportation Act, as
amended, the Outer Continental Shelf Lands Act, as amended, the
Coastal Zone Management Act, as amended, and other environmental
conservation or protection laws. The terms "hazardous substance" and
"release" (or "threatened release") have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed")
have the meanings specified in RCRA; provided, however, that to the
extent the laws of the state in which any property or operation is
located has established a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
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"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) which together with Sheridan or a Subsidiary of Sheridan
would be deemed to be a "single employer" within the meaning of
Section 4001 of ERISA.
"EXCHANGE ACT" shall have the meaning assigned to such term in
Section 3.6.
"EXISTING LAWSUIT" means the pending cause of action described
in Section 4.6 of the JEDI I Partnership Disclosure Letter.
"FARMOUT AGREEMENT" means that certain letter agreement, dated
September 19, 1997, among JEDI, JEDI I Partnership and GGP.
"GAAP" means generally accepted accounting principles
(including principles of consolidation), in effect from time to time,
consistently applied.
"GGP" shall have the meaning assigned to such term in the
recitals.
"GGP/JEDI I PARTNERSHIP TERMINATION AGREEMENT" shall have the
meaning assigned to such term in the recitals.
"GGP/JEDI TERMINATION AGREEMENT" shall have the meaning
assigned to such term in the recitals.
"GGP/SHERIDAN PURCHASE AGREEMENT" shall have the meaning
assigned to such term in the recitals.
"GOOD TITLE" means that, subject to and except for the JEDI I
Encumbrances:
(a) JEDI I Partnership is (i) entitled to receive not
less than the percentage set forth in Schedule II hereto as the "Net
Revenue Interest" of all hydrocarbons produced, saved and marketed
from the JEDI I Well listed in Schedule II to which such interest
corresponds, all without reduction throughout the duration of the life
of such well, except as specifically set forth in Schedule II, and
(ii) obligated to bear the percentage of the costs and expenses
relating to the maintenance, development and operation of such well,
not greater than the "Working Interest" shown in Schedule II with
respect to such well, without increase throughout the duration of the
life of such well, except as specifically set forth in Schedule II;
and
(b) the title of JEDI I Partnership is free and clear of
all liens, encumbrances and material defects.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic
federal, state, county, municipal, or other governmental or regulatory
authority, agency, board, body, commission, instrumentality, court, or
any political subdivision thereof.
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<PAGE> 10
"GOVERNMENTAL REQUIREMENT" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other
direction or requirement (including but not limited to any of the
foregoing which relate to Environmental Laws, energy regulations and
occupational, safety and health standards or controls) of any
Governmental Authority.
"INDEBTEDNESS" means, with respect to any Person, the
principal of, premium, if any, and interest on: (a) indebtedness for
money borrowed from others whether or not evidenced by notes, bonds,
debentures or otherwise; (b) indebtedness of another Person
guaranteed, directly or indirectly, in any manner by such Person,
including, without limitation, through an agreement, contingent or
otherwise, (i) to purchase or pay any such indebtedness, (ii) to
advance or supply funds for the purchase or payment of such
indebtedness, (iii) to purchase and pay for property if not delivered
or pay for services if not performed, primarily for the purpose of
enabling such other Person to make payment of such indebtedness or to
assure the owners of the indebtedness against loss, or (iv) to
maintain working capital, equity capital or other financial condition
of such other Person so as to enable it to pay such indebtedness; (c)
all indebtedness secured by any Lien upon property owned by such
Person, even though such Person has not in any manner become liable
for the payment of such indebtedness; (d) all indebtedness of such
Person created or arising under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security
agreement with respect to property acquired by such Person even though
the rights and remedies of Sheridan, lessor or lender under such
agreement or lease in the event of default may be limited to
repossession or sale of such property; (e) all obligations of such
Person issued or assumed for the deferred purchase price of property
or services, including all trade credit, to the extent such
obligations have remained outstanding in excess of sixty days; (f)
Capitalized Lease Obligations and the present value of all future
lease payments under a lease other than Capitalized Lease Obligations;
(g) all unfunded post-retirement and post-employment benefits
including, without limitation, unfunded pension liabilities; (h)
mandatory redemption or mandatory dividend rights on ordinary shares
(or other equity); (i) obligations of discontinued businesses that are
subsumed within the single-sum amount of the net assets of the
discontinued operations being held for sale, and (j) all obligations
of such Person under or with respect to letters of credit.
"INTERIM BALANCE SHEET" shall have the meaning assigned to
such term in Section 3.6(a).
"INTERMEDIARY" shall have the meaning assigned to such term in
Section 7.1.
"JEDI I ENCUMBRANCES" means any of the following matters:
(a) the terms, conditions, restrictions, exceptions,
reservations, limitations and other matters contained in the recorded
agreements, instruments and documents that create or reserve to JEDI I
Partnership its interests in any of the JEDI I Properties;
(b) any (i) undetermined or inchoate Liens constituting
or securing the payment of expenses that were incurred incidental to
maintenance, development, production or
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<PAGE> 11
operation of the JEDI I Properties or for the purpose of developing,
producing or processing oil, gas or other hydrocarbons therefrom or
therein, excluding any Liens for borrowed money, and (ii) statutory
Liens (including materialman's, mechanics', repairman's, mineral
contractor's, mineral subcontractor's and similar Liens), to the
extent not shown in the applicable public records, and operators'
Liens, in each case arising in the ordinary course of business (x)
that JEDI I Partnership has agreed to assume or pay pursuant to the
terms hereof, (y) for which JEDI I Partnership is responsible for
paying or releasing at Closing, or (z) for which Sheridan has agreed
to assume or pay pursuant to the terms hereof;
(c) any Liens for taxes not yet due and payable;
(d) any Liens created by law or reserved in oil and gas
leases for royalty, bonus or rental, or created to secure compliance
with the terms of the agreements, instruments and documents that
create or reserve to JEDI I Partnership its interests in the JEDI I
Properties;
(e) any obligations or duties affecting the JEDI I
Properties to any municipality or public authority with respect to any
franchise, grant, license or permit, and all applicable laws, rules,
regulations and orders of any Governmental Authority;
(f) any (i) easements, rights-of-way, servitudes,
permits, licenses, surface leases and other rights in respect of
surface operations, pipelines, grazing, hunting, lodging, canals,
ditches, reservoirs or the like, and (ii) easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways
and other similar rights-of-way, on, over or in respect of property
owned or leased by JEDI I Partnership or over which JEDI I Partnership
owns rights-of-way, easements, permits or licenses;
(g) all lessors' royalties, overriding royalties, carried
interests, production payments, reversionary interests and other
burdens on or deductions from the proceeds of production created or in
existence as of the date hereof that do not operate to reduce the Net
Revenue Interests of JEDI I Partnership in the JEDI I Wells described
in Schedule II;
(h) preferential rights to purchase or similar
agreements;
(i) required third party consents to assignments or
similar agreements;
(j) all rights to consent by, required notices to,
filings with, or other actions by any Governmental Authority in
connection with the sale or conveyance of oil and gas leases or
interests therein;
(k) production sales contracts; division orders;
contracts for sale, purchase, exchange, refining or processing of
hydrocarbons; unitization and pooling designations, declarations,
orders and agreements; operating agreements; agreements of
development; area of mutual interest agreements; gas balancing or
deferred production agreements (but only to the extent Sheridan and
JEDI Partnership have agreed on, and balanced up, any imbalances
existing on the Closing Date, pursuant thereto); processing
agreements; plant agreements; pipeline, gathering and transportation
agreements; injection, repressuring and recycling
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agreements; carbon dioxide purchase or sale agreements; salt water or
other disposal agreements; seismic or geophysical permits or
agreements; tax partnership agreements (but only if there is
currently, and at the Closing Date, no capital account deficit which
would be required to be made up, in whole or in part, upon liquidation
or termination); and any and all other agreements that are ordinary
and customary in the oil, gas, sulphur and other mineral exploration,
development or extraction business, or in the business of processing
of gas and gas condensate production for the extraction of products
therefrom; and
(l) all defects and irregularities affecting the JEDI I
Properties which individually or in the aggregate do not operate to
reduce the Net Revenue Interests of JEDI I Partnership in the JEDI I
Wells described in Schedule II, increase the proportionate share of
costs and expenses of leasehold operations attributable to or to be
borne by the Working Interests of JEDI I Partnership in the JEDI I
Wells described in Schedule II, or otherwise interfere materially with
the operation, value or use of the JEDI I Properties, taken as a
whole.
"JEDI I LEASES" shall have the meaning assigned to such term
in the recitals.
"JEDI I PARTNERSHIP DISCLOSURE LETTER" means that certain
disclosure letter of even date herewith delivered to Sheridan by JEDI
I Partnership relating to JEDI I Partnership's disclosures in
connection with its representations and warranties hereunder.
"JEDI I PARTNERSHIP MATERIAL ADVERSE EFFECT" means any change
or event that, individually or in the aggregate, would or could
reasonably be expected to have a material adverse effect on (a) the
JEDI I Properties, taken as a whole, (b) the ability of JEDI I
Partnership to meet its obligations under this Agreement or the
Operative Documents to which JEDI I Partnership is a party, or (c) the
consummation of the transactions contemplated hereby; provided,
however, that any change or event resulting from (i) changes in the
prices of oil, gas, natural gas liquids or other hydrocarbon products,
(ii) changes in general economic conditions, including general stock
market conditions and interest rate changes or (iii) the adverse
determination of any pending litigation disclosed in the JEDI I
Partnership Disclosure Letter shall not constitute a JEDI I
Partnership Material Adverse Effect.
"JEDI I PROPERTIES" shall have the meaning assigned to such
term in the recitals.
"JEDI I WELLS" means the wells located on the JEDI I Leases
described in Schedule II.
"KNOWLEDGE" or "KNOWN" means with respect to Sheridan, those
individuals listed in Section 1.1 of the Sheridan Disclosure Letter
and with respect to the JEDI I Partnership, those individuals listed
in Section 1.1 of the JEDI I Partnership Disclosure Letter, in each
case, individually or collectively, have conducted such investigations
and inquiries as they reasonably believe to be most likely to confirm
the truth and accuracy of the matter being represented and warranted
(or have caused such investigations and inquiries to be made under
their supervision) and, after evaluating the findings of such
investigation and inquiries either (a) know that the matter being
represented and warranted is true and accurate or
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(b) have no reason to believe that the matter being represented and
warranted is not true and accurate.
"LIEN" means, with respect to any Person, any mortgage, deed
of trust, lien, security interest, pledge, lease, conditional sale
contract, claim, charge, easement, right of way, assessment,
restriction and other encumbrance of every kind.
"OPERATIVE DOCUMENTS" means this Agreement, the Warrant
Agreement, the Warrant Certificate, the Assignment, the GGP/Sheridan
Purchase Agreement (including the warrant agreement and warrant
certificates referred to therein), the GGP/JEDI I Partnership
Termination Agreement, the GGP/JEDI Termination Agreement, and the
Registration Rights Agreement.
"PARTICIPATION AGREEMENT" means that certain Participation
Agreement, dated February 27, 1995, between GGP and JEDI I
Partnership, as amended by that certain First Amendment to
Participation Agreement, dated January 1, 1996, between GGP and JEDI I
Partnership.
"PERMITS" means all licenses, permits, exceptions, franchises,
accreditations, privileges, rights, variances, waivers, approvals and
other authorizations (including, without limitation, those relating to
environmental matters) of, by or from Governmental Authorities
necessary for the conduct of the business of such Person as currently
conducted and as proposed to be conducted after the Closing.
"PERMITTED LIENS" means (a) Liens for taxes not yet due and
payable, (b) statutory Liens (including materialmen's, mechanic's,
repairmen's, landlord's, and other similar Liens) and operators'
Liens, in each case arising in connection with the ordinary course of
business securing payments not yet due and payable, (c) Liens created
pursuant to or under the Sheridan Senior Credit Facility and (d) such
imperfections or irregularities of title, if any, as (i) are not
substantial in character, amount, or extent and do not materially
detract from the value of the property subject thereto, (ii) do not
and will not materially interfere with either the present or intended
use of such property, and (iii) do not and will not, individually or
in the aggregate, materially interfere with the conduct of Sheridan's
or its Subsidiaries current or proposed operations.
"PERSON" means an individual or individuals, a partnership, a
corporation, a company, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization, any other form of legal entity, or a Governmental
Authority.
"PLAN" shall have the meaning assigned to such term in Section
3.12(a)(i).
"PROPERTIES EXPENSES" means all costs and expenses (including
royalties, production taxes, capital expenditures, lease operating
expenses and overhead) paid by JEDI I Partnership that are (x)
attributable to the JEDI I Properties, and (y) attributable to the
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period of time from and after the Effective Date including one-third
of the ad valorem taxes for 1997.
"PROPERTIES REVENUES" means the amount of all proceeds
actually received by JEDI I Partnership that are (x) attributable to
the JEDI I Properties, and (y) attributable to the period of time from
and after the Effective Time.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of Exhibit C hereto.
"SEC DOCUMENTS" shall have the meaning assigned to such term
in Section 3.6.
"SECURITIES ACT" shall have the meaning assigned to such term
in Section 3.6.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock
of Sheridan issued to ECT pursuant to the ECT Purchase Agreement.
"SHARES" shall have the meaning assigned to such term in
Section 2.1.
"SHERIDAN DISCLOSURE LETTER" means that certain disclosure
letter of even date herewith delivered to JEDI I Partnership by
Sheridan relating to Sheridan's disclosures in connection with its
representations and warranties hereunder.
"SHERIDAN MATERIAL ADVERSE EFFECT" means any change or event
that, individually or in the aggregate, would or could reasonably be
expected to have a material adverse effect on (a) the assets,
liabilities, condition (financial or otherwise), business, results of
operations or prospects of Sheridan and its Subsidiaries on a
Consolidated basis, (b) the ability of Sheridan to meet its
obligations under this Agreement or the Operative Documents to which
Sheridan is a party, or (c) the consummation of the transactions
contemplated hereby; provided, however, that any change or event
resulting from (i) changes in the prices of oil, gas, natural gas
liquids or other hydrocarbon products, (ii) changes in general
economic conditions, including general stock market conditions and
interest rate changes or (iii) the adverse determination of any
pending litigation disclosed in the Sheridan Disclosure Letter shall
not constitute a Sheridan Material Adverse Effect.
"SHERIDAN SENIOR CREDIT FACILITY" means that certain First
Amended and Restated Credit Agreement dated as of September 30, 1997
by Sheridan, as the borrower and Bank One Texas, N.A., as the lender.
"SUBSIDIARY" means, as to any Person, any corporation,
company, association, partnership, limited liability company or other
business entity of which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a
group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of
such entity, and any partnership, limited liability company or joint
venture if more than
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<PAGE> 15
a 50% interest in the profits or capital thereof is owned by such
Person or one or more of its Subsidiaries or such Person and one or
more of its Subsidiaries.
"WARRANT AGREEMENT" means the Warrant Agreement to be executed
by Sheridan and JEDI I Partnership, in the form of Exhibit A hereto,
as the same may be amended, supplemented, or otherwise modified from
time to time.
"WARRANT CERTIFICATE" means the certificate evidencing
Warrants, in the form of Exhibit A to the Warrant Agreement, as the
same may be amended, supplemented, or otherwise modified from time to
time.
"WARRANTS" means the Common Stock purchase warrants described
in the Warrant Agreement.
"WARRANT SHARES" means the shares of Common Stock issued or
issuable upon the exercise of the Warrants.
ARTICLE II.
SALE AND PURCHASE; CLOSING
2.1 SALE AND PURCHASE. Subject to the satisfaction of the terms
and conditions herein set forth and in reliance upon the respective
representations, warranties, and covenants of the parties set forth herein or
in any document delivered pursuant hereto, at the Closing (i) Sheridan agrees
to deliver to JEDI I Partnership, and JEDI I Partnership agrees to accept,
382,500 shares of Common Stock (the "Shares") and, pursuant to the terms of the
Warrant Agreement, Warrants to purchase 67,500 shares of Common Stock for $5.50
per share, and (ii) JEDI I Partnership agrees to deliver to Sheridan, and
Sheridan agrees to accept, all of JEDI I Partnership's right, title and
interest in and to the JEDI I Properties.
2.2 CLOSING. The closing of the exchange of the Shares and the
Warrants for the JEDI I Properties by the parties (the "Closing") will occur on
or before December 31, 1997, or on such other date as may be agreed by the
parties (the "Closing Date"), at the offices of Vinson & Elkins L.L.P. At the
Closing, (i) Sheridan will deliver to JEDI I Partnership (or its designee) the
Shares, duly executed and registered in the name of JEDI I Partnership or its
designee (such shares bearing an appropriate legend agreed to by the parties),
and the Warrant Agreement and the Warrant Certificates, (ii) JEDI I Partnership
will deliver to Sheridan the Assignment covering the JEDI I Properties, (iii)
each of Sheridan and JEDI I Partnership shall execute and deliver (and JEDI I
Partnership shall cause its Affiliate, ECT, to execute and deliver) the
Registration Rights Agreement, and (iv) JEDI I Partnership shall deliver such
letters in lieu or similar documents as Sheridan shall reasonably request in
order to evidence the transfer of the JEDI I Properties from JEDI I Partnership
to Sheridan.
2.3 OWNERSHIP, REVENUES AND EXPENSES OF JEDI I PROPERTIES. (a)
Subject to the other provisions of this Agreement, including without limitation
the indemnification provisions hereof, JEDI I Partnership shall be entitled to
all of the rights of ownership (including, without limitation,
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<PAGE> 16
the right to all production, proceeds of production and other proceeds), and
shall be responsible for costs and expenses, attributable to the period of time
prior to the Effective Date with respect to the JEDI I Properties. Subject to
the other provisions of this Agreement, Sheridan shall be entitled to all of
the rights of ownership (including, without limitation, the right to all
production, proceeds of production and other proceeds), and shall be
responsible for costs and expenses, attributable to the period of time from and
after the Effective Date with respect to the JEDI I Properties, except as set
forth in Sections 2.3(b)(i), (ii) and (iii) below.
(b) Notwithstanding anything herein to the contrary, including the
provisions of Section 2.3(a) hereof, (i) JEDI I Partnership shall pay to
Sheridan an amount equal to $9,641.61, being 50% of all delay rentals
attributable to the JEDI I Leases for the period of September 1, 1997 through
December 31, 1997, (ii) JEDI I Partnership shall pay to Sheridan an amount
equal to$83,192.70 for plugging and abandonment costs attributable to the
Georgia-Pacific Well #1, the Barton Well #A-1, and the Clayton Well #1 in
consideration of Sheridan's assumption of (and Sheridan hereby assumes) all
other plugging and abandonment costs attributable to such wells and any other
JEDI I Well, and (iii) JEDI I Partnership shall pay to Sheridan an amount equal
to $6,000.00 for certain damages relating to pipeline rights-of way on those
JEDI I Leases under which either John Barton, Sr., et al. or Ridge Road Land
Company Ltd., et al. is the lessor thereunder in consideration of Sheridan's
assumption of (and Sheridan hereby assumes) any additional damages associated
therewith.
(c) At Closing, JEDI I Partnership shall prepare, and shall
furnish to Sheridan, an accounting statement setting forth an estimate of the
Properties Revenues, the Properties Expenses and the actual amounts that JEDI I
Partnership has agreed to pay to Sheridan pursuant to Section 2.2(b) (the
"Other JEDI I Costs") as of the Closing Date. To the extent that the sum of
the Properties Revenues and the Other JEDI I Costs exceed the Properties
Expenses, JEDI I Partnership shall pay to Sheridan such excess amount at the
Closing. To the extent that the Properties Expenses exceed the sum of the
Properties Revenues and the Other JEDI I Costs, Sheridan shall pay to JEDI I
Partnership such excess amount at the Closing.
(d) Promptly after the Closing Date (but not later than 120 days
thereafter), Sheridan shall prepare, and shall furnish to JEDI I Partnership, a
final accounting statement setting forth the actual amounts provided in Section
2.3(a). As soon as reasonably practicable thereafter (but not later than 30
days thereafter), JEDI I Partnership shall deliver to Sheridan a written report
containing any changes that JEDI I Partnership proposes be made to such
statement. The parties shall undertake to agree on the final adjustment
amount, and such final adjustment amount shall be paid by JEDI I Partnership or
Sheridan, as appropriate, not later than 180 days after the Closing Date.
During said 180 day period, either party may at its own expense audit the other
party's books, accounts and records relating to production proceeds, operating
expenses and taxes paid that may have been adjusted on account of this
transaction. Such audit shall be conducted so as to cause a minimum of
inconvenience to the audited party.
2.4 CERTAIN REASSIGNMENTS. If the consent described in Section
4.5 of the JEDI I Partnership Disclosure Letter with respect to the Joseph T.
Howell lease has not been received by August 1, 1998, Sheridan may require,
upon written notice to JEDI I Partnership, a reassignment by JEDI I Partnership
of 38,250 Shares and 6,750 Warrants. Upon receipt of such notice, JEDI I
Partnership shall assign to Sheridan 38,250 Shares endorsed in blank or
accompanied by duly
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<PAGE> 17
executed assignment documents and 6,750 Warrants accompanied by duly executed
assignment documents and Sheridan shall reassign to JEDI I Partnership the JEDI
I Lease affected by such consent. Such assignments must be made not later than
November 1, 1998. In the event that the stock certificates representing the
Shares contain a restrictive legend referring to this Section 2.4, then upon
the request of JEDI I Partnership after the receipt of the consent referenced
in this Section 2.4 or the execution and delivery of assignments referred to
herein (whichever is earlier), Sheridan agrees to cause new stock
certificate(s) evidencing the Shares (less any Shares reassigned to Sheridan
pursuant to this Section 2.4) to be issued to JEDI I Partnership or its
designee without such restrictive legend.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SHERIDAN
Sheridan represents and warrants to JEDI I Partnership as follows:
3.1 CORPORATE EXISTENCE. Sheridan is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sheridan has full corporate power and authority to conduct its
business as it is now being conducted and to own, operate and lease the
properties and assets it currently owns, operates and holds under lease.
Sheridan is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business activities or its ownership or
leasing of property makes such qualification necessary, except where the
failure to be so qualified would not have a Sheridan Material Adverse Effect.
On or before the date hereof, Sheridan has delivered to JEDI I Partnership's
counsel true and complete copies of Sheridan's Certificate of Incorporation and
bylaws, together with all amendments thereto. No other amendments to
Sheridan's Certificate of Incorporation have been approved by the Board of
Directors or stockholders of the Corporation or filed with the Delaware
Secretary of State.
3.2 CORPORATE POWER AND AUTHORIZATION. Sheridan is duly
authorized and empowered to issue the Shares, the Warrants and the Warrant
Shares, and to execute, deliver, and perform this Agreement and to consummate
the transactions contemplated hereby and thereby. All action on Sheridan's
part requisite for the due issuance of the Shares and the Warrants and for the
due execution, delivery, and performance of this Agreement and the other
Operative Documents to which Sheridan is a party has been duly and effectively
taken. The execution and delivery of this Agreement and the other Operative
Documents to which Sheridan is a party and the consummation of the transactions
to be performed by Sheridan hereby and thereby have been duly and validly
authorized by all necessary action on the part of the Board of Directors of
Sheridan, and no other corporate proceedings are necessary to authorize the
execution and delivery of this Agreement or the other Operative Documents to
which Sheridan is a party by Sheridan or to consummate the transactions to be
performed by Sheridan hereby and thereby.
3.3 BINDING OBLIGATIONS. This Agreement and the other Operative
Documents to which Sheridan is a party, when executed and delivered, shall each
constitute a legal, valid and binding obligation of Sheridan enforceable in
accordance with its respective terms, except insofar as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by
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general principles of equity. When issued to JEDI I Partnership at the Closing
upon Sheridan's receipt of the Assignment, (i) the Shares will be validly
issued, fully paid and nonassessable and free and clear of any Liens, and (ii)
the Warrants will be validly issued and free and clear of any Liens. When
issued and paid for in accordance with the terms of the Warrant Agreement, the
Warrant Shares will be validly issued, fully paid and nonassessable and free
and clear of any Liens.
3.4 NO VIOLATION. The execution and delivery of this Agreement or
any of the other Operative Documents to which Sheridan is a party, the
consummation of the transactions provided for herein and therein and
contemplated hereby and thereby, and the fulfillment by Sheridan of the terms
hereof and thereof, will not (a) conflict with or result in a breach of any
provision of the Charter or bylaws or other organizational document of Sheridan
or any of its Subsidiaries, (b) except for consents described in Section 3.5 of
the Sheridan Disclosure Letter, result in any default or in any material
modification of the terms of any material contract, agreement, obligation,
commitment applicable to Sheridan or its Subsidiaries, or the creation of any
Lien upon any of the properties or assets owned by Sheridan or any of its
Subsidiaries, (c) except for consents described in Section 3.5 of the Sheridan
Disclosure Letter, require any consent or approval (which has not been obtained
or waived) under any Permit or any note, bond, mortgage, indenture, loan,
distribution agreement, license, agreement, lease or material instrument or
material obligation to which Sheridan or any of its Subsidiaries is a party or
by which Sheridan or any of its Subsidiaries may be bound, or (d) violate any
Governmental Requirement or Permit applicable to Sheridan or any of its
Subsidiaries, except in the case of subparagraphs (b), (c) and (d) above where
any such default, modification, consent, approval or violation that would not
have a Sheridan Material Adverse Effect.
3.5 CONSENTS. Except as set forth in Section 3.5 of the Sheridan
Disclosure Letter, all consents, approvals, qualifications, orders or
authorizations of, or filings with, any Governmental Authority, and all
consents under any contracts, agreements, or instruments by which Sheridan or
any of its Subsidiaries is bound or to which it or any of its Subsidiaries is
subject, and required in connection with Sheridan's valid execution, delivery,
or performance of this Agreement and the other Operative Documents to which
Sheridan is a party, and the consummation of the transactions contemplated
hereby and thereby has been obtained or made, except where the failure to have
obtained or made such consents, approvals, qualifications, orders,
authorizations or filings would not have a Sheridan Material Adverse Effect.
3.6 SEC DOCUMENTS AND FINANCIAL STATEMENTS. (a) Sheridan and its
predecessor, TGX Corporation ("TGX"), have filed with the Securities and
Exchange Commission (the "Commission") all forms, reports, schedules,
statements and other documents required to be filed by them since January 1,
1994 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or the Securities Act of 1933, as amended (the "Securities Act") (such
documents, as supplemented and amended since the time of filing, collectively,
the "SEC Documents"). The SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The financial
statements of Sheridan and
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TGX included in the SEC Documents at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission), and fairly present
(subject in the case of unaudited statements to normal, recurring audit
adjustments) the Consolidated financial position of Sheridan or TGX, as the
case may be, as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. The Consolidated balance
sheet for Sheridan included in its quarterly report on Form 10-Q dated
September 30, 1997 is referred to herein as the "Interim Balance Sheet".
(b) Since September 30, 1997, there has been no Sheridan Material
Adverse Effect with respect to Sheridan.
3.7 LIABILITIES; INDEBTEDNESS. Except for liabilities incurred in
the ordinary course of business and that would not, individually or in the
aggregate, have a Sheridan Material Adverse Effect, Sheridan and its
Subsidiaries do not have liabilities, direct or contingent (including but not
limited to liability with respect to any Plan or, to Sheridan's knowledge, any
Environmental Law) other than (i) those provided for in the Interim Balance
Sheet or disclosed in Section 3.7 of the Sheridan Disclosure Letter, (ii) the
borrowings under the Sheridan Senior Credit Facility or (iii) in connection
with the Series A Preferred Stock. Except as would not have a Sheridan
Material Adverse Effect, Sheridan and its Subsidiaries have no Indebtedness
other than (a) the Series A Preferred Stock, (b) the Indebtedness disclosed in
Section 3.7 of the Sheridan Disclosure Letter and (c) the borrowings under the
Sheridan Senior Credit Facility.
3.8 LITIGATION. Except as disclosed in Section 3.8 of the
Sheridan Disclosure Letter, there is no action, suit or proceeding, or any
governmental investigation or any arbitration, in each case pending or, to the
knowledge of Sheridan, threatened against Sheridan or any of its Subsidiaries
or any material property of Sheridan or any Subsidiary thereof before any
Governmental Authority (i) which challenges the validity of this Agreement or
any of the Operative Documents to which Sheridan is a party, or (ii) which, if
adversely determined, would have a Sheridan Material Adverse Effect.
3.9 TITLE TO PROPERTIES AND ASSETS; LEASES. (a) Except as set
forth in Section 3.9 of the Sheridan Disclosure Letter or as would not have a
Sheridan Material Adverse Effect, Sheridan or its Subsidiaries has defensible
title to (i) all of its properties and assets (real and personal, tangible and
intangible) reflected on the Interim Balance Sheet, and (ii) as of the Closing
Date, all properties acquired by Sheridan or its Subsidiaries after December 1,
1997, in each case free and clear of all liens except the Permitted Liens. All
equipment owned by Sheridan or its Subsidiaries which is necessary to the
business of Sheridan or its Subsidiaries is in good condition and repair
(ordinary wear and tear excepted), except where the failure to be in good
condition and repair would not have a Sheridan Material Adverse Effect.
(b) Except as set forth in Section 3.9 of the Sheridan Disclosure
Letter, the oil and gas leases in which Sheridan or its Subsidiaries own an
interest (i) have been maintained according to
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<PAGE> 20
their terms and in compliance with all material agreements to which such oil
and gas leases are subject, except where the failure to be so maintained or any
noncompliance therewith would not have a Sheridan Material Adverse Effect, and
(ii) are in full force and effect, except where the failure to be in full force
and effect would not have a Sheridan Material Adverse Effect.
(c) All royalties, overriding royalties, compensatory royalties
and other payments due with respect to the oil and gas properties of Sheridan
and its Subsidiaries have been properly and correctly paid, except where the
failure to make such payment would not have a Sheridan Material Adverse Effect.
3.10 COMPLIANCE WITH THE LAW. Except with respect to environmental
matters (which are exclusively covered by Section 3.18), neither Sheridan nor
any of its Subsidiaries (i) is in violation of any Governmental Requirement or
(ii) has failed to obtain any Permit, necessary to the ownership of any of
their respective properties or the conduct of their respective business, except
where a violation or failure would not have a Sheridan Material Adverse Effect.
3.11 TAXES. Sheridan and its Subsidiaries (i) have filed all tax
returns and reports ("Tax Returns") required to be filed by or with respect to
Sheridan or any of its Subsidiaries, (ii) have included all items of income,
gain, loss, deduction and credit or other items required to be included in each
such Tax Return, and (iii) have paid all taxes, assessments, fees, imposts,
duties or other charges, including any interest and penalties, (all
collectively referred to herein as "Taxes") due with respect to such Tax
Returns. There is no claim against Sheridan or any of its Subsidiaries for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to Sheridan or any
of its Subsidiaries which would have a Sheridan Material Adverse Effect.
3.12 EMPLOYEE BENEFIT MATTERS. (a) Definitions. Where the
following words and phrases appear in this Agreement, they shall have the
respective meanings set forth below, unless the context clearly indicates to
the contrary:
(i) Plan: Each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, but not limited to, any
employee benefit plan that may be exempt from some or all of the
provisions of ERISA, which is sponsored, maintained, or contributed to
by Sheridan or any of its Subsidiaries for the benefit of the
employees, former employees, independent contractors, or agents of
Sheridan or any of its Subsidiaries, or has been so sponsored,
maintained or contributed to since 1974.
(ii) Benefit Program or Agreement: Each personnel policy,
stock option plan, collective bargaining agreement, workers'
compensation agreement or arrangement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy, severance pay
plan, policy or agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental income
arrangement, consulting agreement, employment agreement, and each
other employee benefit plan, agreement, arrangement, program, practice
or understanding, which is not described in Section 3.12(a)(i) and
which is sponsored, maintained, or contributed to by Sheridan or any
of its Subsidiaries for the benefit of the
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employees, former employees, independent contractors, or agents of
Sheridan or any of its Subsidiaries, or has been so sponsored,
maintained, or contributed to since 1974.
(iii) Benefit Plans: Collectively, the Plans and Benefit
Programs or Agreements.
(b) Employee Benefit Plan Compliance.
(i) Neither Sheridan nor any corporation, trade,
business, or entity under common control with Sheridan, within the
meaning of Section 414(b), (c), (m), or (o) of the Code or Section
4001 of ERISA, ("Commonly Controlled Entity") contributes to or has an
obligation to contribute to, nor has Sheridan or any Commonly
Controlled Entity at any time within six years prior to the Closing
Date contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA or any
plan subject to Title IV of ERISA; and
(ii) All obligations, whether arising by operation of law
or by contract, required to be performed in connection with the
Benefit Plans have been performed, and there have been no defaults,
omissions, or violations by any party with respect to any Benefit Plan
or law applicable thereto.
(iii) Each Plan that is intended to be qualified under
Section 401(a) of the Code (A) satisfies the requirements of such
Section, (b) has received a favorable determination letter from the
Internal Revenue Service ("IRS") regarding such qualified status and
covering amendments required under the Tax Reform Act of 1986 ("TRA
'86"), the Unemployment Compensation Amendments of 1992, the Omnibus
Reconciliation Act of 1993, the final nondiscrimination regulations
under Section 401(a)(4) of the Code, and all other amendments required
to be filed within the TRA '86 remedial amendment period described in
Internal Revenue Procedure 95-12 (the "TRA '86 Amendments") (or the
TRA '86 Amendments to such Plans have been timely made and filed with
the IRS for such a determination letter), and (C) has not, since
receipt of the most recent favorable determination letter, been
amended or operated in a way that would adversely affect such
qualified status.
(c) NO ADDITIONAL RIGHTS OR OBLIGATIONS. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not (A) require Sheridan or any of its Subsidiaries to
make a larger contribution to, or pay greater benefits under, any Benefit Plan
than it otherwise would or (B) create or give rise to any additional vested
rights or service credits under any Benefit Plan.
(d) NO ADDITIONAL SEVERANCE. Except as set forth in Section
3.12(d) of the Sheridan Disclosure Letter, neither Sheridan nor any of its
Subsidiaries is a party to any agreement, nor has Sheridan or any of its
Subsidiaries established any policy or practice requiring it to make a payment
or provide any other form of compensation or benefit to any person performing
services for Sheridan upon termination of such services that would not be
payable or provided in the absence of the consummation of the transactions
contemplated by this Agreement.
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(e) NO EXCESS PARACHUTE PAYMENTS. In connection with the
consummation of the transaction contemplated by this Agreement, no payments
have or will be made under the Benefit Plans which, in the aggregate, would
result in imposition of the sanctions imposed under Section 280G or Section
4999 of the Code.
3.13 INVESTMENT COMPANY ACT. Neither Sheridan nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
3.14 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Sheridan nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
3.15 NO RESTRICTIONS ON AFFILIATES. Except for any existing
agreement between Sheridan (or a Subsidiary of Sheridan) and an Affiliate of
JEDI I Partnership that imposes restrictions or limitations on such Affiliate
of JEDI I Partnership, neither Sheridan nor any of its Subsidiaries is a party
to any agreement that would purport to impose restrictions or limitations on
JEDI I Partnership or any of its Affiliates.
3.16 CAPITALIZATION. The authorized capital stock of Sheridan
consists of (i) 20,000,000 shares of Common Stock, of which 5,881,471 shares
are issued and outstanding and an additional 450,000 shares are reserved for
issuance under the Sheridan 1997 Flexible Incentive Plan and (ii) 5,000,000
shares of preferred stock, par value $0.01 per share, of which 1,000,000 shares
of Series A Preferred Stock are issued and outstanding and an additional
900,000 shares of Series A Preferred Stock are reserved for issuance as
dividends to holders of Series A Preferred Stock. Section 3.16 of the Sheridan
Disclosure Letter sets forth the name and address of each person known to
Sheridan to be the beneficial owner of 5% or more of the outstanding shares of
Common Stock. Except as set forth in Section 3.16 of the Sheridan Disclosure
Letter and except for up to 450,000 shares of Common Stock reserved for
issuance upon purchases of shares of Common Stock under the Sheridan 1997
Flexible Incentive Plan, there are no outstanding subscriptions, warrants,
options, calls, commitments or other rights to purchase or acquire, or
securities convertible into or exchangeable for, any capital stock of Sheridan
or its Subsidiaries. All of the outstanding shares of Common Stock are validly
issued, fully paid, and nonassessable.
3.17 SUBSIDIARIES. (a) Section 3.17 of the Sheridan Disclosure
Letter contains (except as noted therein) a complete and correct list of
Sheridan's Subsidiaries and joint ventures, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by Sheridan and each other Subsidiary. Except for the
Subsidiaries, Sheridan does not own, directly or indirectly, any interest or
investment in any corporation, association, joint venture, partnership, limited
liability company or other business organization, firm or enterprise of any
character, other than interests under any joint operating agreement of oil and
gas property that expressly provides the relationship of the parties created by
such agreement is not intended to render the parties thereto liable as
partners. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has full corporate power and
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authority to conduct its business as it is now being conducted and to own,
operate or lease the properties and assets it currently owns, operates or holds
under lease. Each Subsidiary is duly qualified to do business and is in good
standing in each jurisdiction where the character of its business or the nature
of its properties makes such qualification necessary.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Section 3.17 of the Sheridan
Disclosure Letter as being owned by Sheridan and its Subsidiaries have been
validly issued, are fully paid and nonassessable, and are owned by Sheridan or
such other Subsidiaries free and clear of any Liens (except as otherwise
disclosed in Section 3.17 of the Sheridan Disclosure Letter).
(c) No Subsidiary of Sheridan is a party to, or otherwise subject
to any legal restriction or any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to Sheridan or any of its Subsidiaries that
owns outstanding shares of capital stock or similar equity interests of such
Subsidiary.
3.18 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.18 of
the Sheridan Disclosure Letter:
(a) to the knowledge of Sheridan and its Subsidiaries, the
properties and operations of Sheridan and its Subsidiaries are not in violation
of any Environmental Laws or any order or requirement of any court or
Governmental Authority to the extent pertaining to health or the environment,
except where a violation would not have a Sheridan Material Adverse Effect, nor
are there any conditions existing on such property or resulting from operations
thereon that may give rise to any on-site or off-site remedial obligations
under any Environmental Law, except for any condition that would not have a
Sheridan Material Adverse Effect;
(b) without limitation of Section 3.18(a) above, Sheridan and its
Subsidiaries are not subject to any pending or, to the knowledge of Sheridan,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority under any Environmental Law;
(c) except as would not have a Sheridan Material Adverse Effect,
to the knowledge of Sheridan all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by Sheridan and its
Subsidiaries under any Environmental Law, including without limitation those
relating to the treatment, storage, disposal or release of a hazardous
substance or solid waste into the environment, have been duly obtained or
filed, and Sheridan and its Subsidiaries are in compliance with the terms and
conditions of all such notices, permits, licenses and similar authorizations;
(d) except as would not have a Sheridan Material Adverse Effect,
all hazardous substances or solid wastes generated by or as a result of
operations on properties owned by Sheridan and its Subsidiaries and requiring
disposal have been transported only by carriers maintaining valid
authorizations under applicable Environmental Laws and treated and disposed of
only at treatment, storage and disposal facilities maintaining valid
authorizations under applicable Environmental
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<PAGE> 24
Laws, and, to the knowledge of Sheridan, such carriers and facilities have been
and are operating in compliance with such authorizations and are not the
subject of any pending or threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) except as would not have a Sheridan Material Adverse Effect,
to the knowledge of Sheridan there are no asbestos-containing materials on or
in any property owned or used by Sheridan and its Subsidiaries, and there are
no storage tanks or similar containers exceeding 55 gallons in size on or under
any such properties from which hazardous substances, petroleum products or
other contaminants may be released into the surrounding environment;
(f) without limiting the foregoing, to the knowledge of Sheridan
there is no material liability (accrued or contingent) to any non-governmental
third party in tort or under common law in connection with any release or
threatened release of any hazardous substances, solid wastes, petroleum,
petroleum products, and oil and gas exploration and production wastes into the
environment as a result of operations conducted on its properties; and
(g) Section 3.18 of the Sheridan Disclosure Letter also separately
lists for Sheridan and each Subsidiary any and all Claims against or affecting
it and relating to the release, discharge or emission of any hazardous
substance, or to the generation, treatment, storage or disposal of any wastes,
or otherwise relating to the protection of the environment or to the
non-compliance with any notices, permits, licenses, consent decrees or other
authorization and the disposition of each such Claim. With respect to each
such pending or prior matter, Section 3.18 of the Sheridan Disclosure Letter
hereto lists the date of the Claim, the claimant or investigating agency, the
nature and a brief description of the matter, the damages claimed or relief
sought, and the status or outcome of the matter. Except as set forth on
Section 3.18 of the Sheridan Disclosure Letter, neither Sheridan nor any
Subsidiary has received any written notice that it is a potentially responsible
party under any Environmental Laws.
3.19 INTELLECTUAL PROPERTY AND OTHER INTANGIBLE ASSETS. Sheridan
and its Subsidiaries (i) own or have the right to use, free and clear of all
Liens, all patents, trademarks, service marks, trade names, and copyrights, and
all applications, licenses, and rights with respect to the foregoing, and all
trade secrets, including know-how, inventions, designs, processes, works of
authorship, computer programs, and technical data and information
(collectively, "Intellectual Property") used and sufficient for use in the
conduct of its business, without infringing upon or violating any right, Lien,
or claim of others, and (ii) except as described in Section 3.19 of the
Sheridan Disclosure Letter, is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees, or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service mark, trade
name, copyright, or other intangible asset, with respect to the use thereof or
in connection with the conduct of its business or otherwise.
3.20 NO PUBLIC OFFER. Neither Sheridan nor anyone acting on its
behalf has offered to any Person securities of Sheridan, nor any part thereof,
nor any instruments convertible, exercisable, or exchangeable into such
securities, or has solicited from any Person any offer to acquire the same, in
a manner so as to make the transactions contemplated by this Agreement not
exempt from the registration requirements of Section 5 of the Securities Act.
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<PAGE> 25
3.21 INSURANCE. Sheridan has previously provided to JEDI I
Partnership true and complete copies of all of Sheridan's and its Subsidiaries'
insurance policies. Sheridan has given in a timely manner to its insurers all
notices required to be given under such insurance policies with respect to all
claims and actions covered by insurance, and no insurer has denied coverage of
any such claims or actions or reserved its rights in respect of or rejected any
of such claims. Sheridan has not received any notice or other communication
from any such insurer canceling or materially amending any of such insurance
policies, and no such cancellation is pending or threatened.
3.22 CERTAIN TRANSACTIONS. Except for the Series A Preferred Stock
and except as set forth on Section 3.22 of the Sheridan Disclosure Letter, (a)
neither Sheridan nor any of its Subsidiaries is indebted directly or indirectly
to any of its officers, directors or stockholders or to their respective
spouses or children in any amount whatsoever, (b) none of such officers,
directors or stockholders, or any members of their immediate families, are
indebted to Sheridan or any of its Subsidiaries, and (c) no officer, director
or stockholder, or any member of his immediate family, has a direct or indirect
financial interest in any material contract with Sheridan or any of its
Subsidiaries.
3.23 PLUGGING AND ABANDONMENT OBLIGATIONS. Except as set forth in
Section 3.23 of the Sheridan Disclosure Letter or as would not have a Sheridan
Material Adverse Effect, there is no well located upon any property owned by
Sheridan or its Subsidiaries that Sheridan or its Subsidiaries is currently
obligated by law or contract to plug and abandon.
3.24 NO MATERIAL MISSTATEMENTS OR OMISSIONS. Neither this
Agreement nor any certificates or documents made or delivered in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not
misleading, in view of the circumstances in which they were made.
3.25 MATERIAL CONTRACTS AND COMMITMENTS. (a) Except as set forth
in Section 3.25 of the Sheridan Disclosure Letter, Sheridan and its
Subsidiaries have no (i) employment or consulting contracts involving annual
payments by Sheridan or its Subsidiaries in excess of $100,000 and not
cancelable without liability on sixty days' notice or less; (ii) capital
redemption or purchase agreements other than in connection with the Series A
Preferred Stock; (iii) agreements providing for the indemnification of other
parties for such parties' negligence or other fault (except for such
obligations incurred in the ordinary course of business as an operator of oil
and gas properties, including obligations under master service agreements,
drilling contracts and similar agreements) or the sharing of the tax liability
of other parties; (iv) collective bargaining agreements; (v) gas sales or
purchase contract, gas marketing agreement or transportation agreement under
which Sheridan or its Subsidiaries is the seller, which contract or agreement
is for a term of greater than one year and provides for a fixed price; (vi)
agreement for capital expenditures, the acquisition of commodities, equipment
or material or the construction of fixed assets which requires aggregate future
payments by Sheridan or its Subsidiaries in excess of $250,000; (vii) agreement
for, or that contemplates, the sale of any interest in oil or gas leases which
involves payment (including property received in exchange or other non-cash
consideration) to Sheridan or its Subsidiaries in excess of $500,000; (viii)
agreement which requires future payments by Sheridan or its Subsidiaries in
excess of $500,000 which is not otherwise specifically disclosed herein; (ix)
agreements containing covenants limiting or restricting the freedom of Sheridan
or its Subsidiaries to compete in any line of business or territory or with any
person or entity; (x) area of mutual interest agreements binding Sheridan or
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its Subsidiaries, (xi) futures, hedge, swaps, collars, puts, calls, floors,
caps, options or other contracts that are intended to benefit from or reduce or
eliminate the risk of fluctuations in the price of commodities, including
hydrocarbons, or (xii) indentures, mortgages, promissory notes, loan
agreements, guaranties or other agreements or commitments for the borrowing of
money or any related security agreements (other than relating to the Sheridan
Senior Credit Facility or the Indebtedness described on Section 3.7 of the
Sheridan Disclosure Letter) (collectively, "Sheridan Material Contracts").
None of the Sheridan Material Contracts have been amended or modified except as
set forth in Section 3.25 of the Sheridan Disclosure Letter or as would not
have a Sheridan Material Adverse Effect.
(b) All of the Sheridan Material Contracts are in full force and
effect and constitute legal, valid and binding obligations of Sheridan or its
Subsidiaries, as applicable, and, to the knowledge of Sheridan, the other
parties thereto, enforceable in accordance with their respective terms, except
insofar as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
and except where the failure to be in full force and effect would not have a
Sheridan Material Adverse Effect. Neither Sheridan (or Sheridan's
Subsidiaries, if applicable) nor, to the knowledge of Sheridan, any other party
to any Sheridan Material Contract, is in default in complying with any
provisions thereof, and no condition or event or fact exists which, with
notice, lapse of time or both would constitute a default thereunder on the part
of Sheridan (or Sheridan's Subsidiaries, if applicable) or, to the knowledge of
Sheridan, any other party thereto, except for any such default, condition,
event or fact that, individually or in the aggregate, would not have a Sheridan
Material Adverse Effect.
Sheridan has provided counsel to JEDI I Partnership with a true and
complete copy of each contract, agreement and instrument listed in Section 3.25
of the Sheridan Disclosure Letter or has otherwise made such documents
available for JEDI I Partnership to review.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF JEDI I PARTNERSHIP
JEDI I Partnership represents and warrants to Sheridan as follows:
4.1 EXISTENCE. JEDI I Partnership is a limited partnership duly
formed and validly existing under the laws of the State of Delaware. JEDI I
Partnership has full power and authority to conduct its business as it is now
being conducted and to own, operate and lease the JEDI I Properties. JEDI I
Partnership is duly qualified to do business in each jurisdiction in which the
JEDI I Properties are located, except where the failure to be so qualified
would not have a JEDI I Partnership Material Adverse Effect.
4.2 POWER AND AUTHORIZATION. JEDI I Partnership is duly
authorized to execute, deliver and perform this Agreement and the Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. All action on JEDI I Partnership's part
requisite for the due execution, delivery, and performance of this Agreement
and the other Operative Documents to which it is a party has been duly and
effectively taken.
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4.3 BINDING OBLIGATIONS. This Agreement and the other Operative
Documents to which it is a party, when executed and delivered, shall each
constitute a legal, valid and binding obligation of JEDI I Partnership
enforceable in accordance with its respective terms, except insofar as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
4.4 NO VIOLATION. The execution and delivery of this Agreement or
any of the other Operative Documents to which it is a party, the consummation
of the transactions provided for herein and therein and contemplated hereby and
thereby, and the fulfillment by JEDI I Partnership of the terms hereof and
thereof, will not (a) conflict with or result in a breach of any provision of
the organizational document of JEDI I Partnership, (b) except for the consents
described in Section 4.5 of the JEDI I Partnership Disclosure Letter, result in
any default or in any material modification of the terms of any material
contract, agreement, obligation, commitment applicable to JEDI I Partnership,
(c) except as set forth in Section 4.5 of the JEDI I Partnership Disclosure
Letter, require any consent or approval (which has not been obtained or waived)
under any Permit or any note, bond, mortgage, indenture, loan, distribution
agreement, license, agreement, lease or material instrument or material
obligation to which JEDI I Partnership is a party or by which JEDI I
Partnership may be bound with respect to the JEDI I Properties, or (d) violate
any Governmental Requirement applicable to JEDI I Partnership with respect to
the JEDI I Properties, except in the case of subparagraphs (b), (c) and (d)
above, where any such default, modification consent, approval or violation
would not have a JEDI I Partnership Material Adverse Effect.
4.5 CONSENTS AND PREFERENTIAL PURCHASE RIGHTS. Except as set
forth in Section 4.5 of the JEDI I Partnership Disclosure Letter, all consents,
approvals, qualifications, orders or authorizations of, or filings with, any
Governmental Authority, and all consents or waivers of preferential purchase
rights under any contracts, agreements, or instruments by which JEDI I
Partnership is bound with respect to the JEDI I Properties, and required in
connection with JEDI I Partnership's valid execution, delivery, or performance
of this Agreement and the other Operative Documents to which it is a party, and
the consummation of the transactions contemplated hereby and thereby has been
obtained or made, except where the failure to have so obtained or made such
consents, approvals, qualifications, orders, authorizations, filings or
waivers, would not have a JEDI I Partnership Material Adverse Effect.
4.6 LITIGATION. Except as disclosed in Section 4.6 of the JEDI I
Partnership Disclosure Letter, there is no action, suit or proceeding, or any
governmental investigation or any arbitration, in each case pending or, to the
knowledge of JEDI I Partnership, threatened against JEDI I Partnership or any
of the JEDI I Properties before any Governmental Authority (i) which challenges
the validity of this Agreement or any of the Operative Documents to which it is
a party, or (ii) which, if adversely determined, would have a JEDI I
Partnership Material Adverse Effect.
4.7 TITLE TO PROPERTIES AND ASSETS; LEASES. (a) Except (i) as
set forth in Section 4.7 of the JEDI I Partnership Disclosure Letter, (ii) for
the Participation Agreement and Farmout Agreement to be terminated pursuant to
the GGP/JEDI I Partnership Termination Agreement, (iii) releases of
non-productive acreage in accordance with terms of the applicable JEDI I Leases
or
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(iv) as would not have a JEDI I Partnership Material Adverse Effect, JEDI I
Partnership has Good Title to all of the JEDI I Leases. All equipment owned by
JEDI I Partnership and included in the JEDI I Properties which is necessary to
the ownership and operation of the JEDI I Properties is in satisfactory
condition and repair (ordinary wear and tear excepted), except where the
failure to be in satisfactory condition and repair would not have a JEDI I
Partnership Material Adverse Effect.
(b) Except as set forth in Section 4.7 of the JEDI I Partnership
Disclosure Letter, the producing oil and gas leases included in the JEDI I
Properties in which JEDI I Partnership own an interest (i) have been maintained
by the operator thereof according to their terms and in compliance with all
material agreements to which such oil and gas leases are subject, except where
the failure to be so maintained or any noncompliance therewith would not have a
JEDI I Partnership Material Adverse Effect, and (ii) are in full force and
effect, except where the failure to be in full force and effect would not have
a JEDI I Partnership Material Adverse Effect.
(c) All royalties, overriding royalties, compensatory royalties
and other payments due with respect to the JEDI I Leases has been properly and
correctly paid by the operator of the JEDI I Leases, except where the failure
to make such payment would not have a JEDI I Partnership Material Adverse
Effect.
4.8 COMPLIANCE WITH THE LAW. Except with respect to
environmental matters (which are exclusively covered in Section 4.9), JEDI I
Partnership (i) is not in violation of any Governmental Requirement with
respect to the JEDI I Properties and (ii) has not failed to obtain any Permit
necessary to the ownership of the JEDI I Properties, except where a violation
or failure would not have a JEDI I Partnership Material Adverse Effect.
4.9 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.9 of
the JEDI I Partnership Disclosure Letter:
(a) to the knowledge of JEDI I Partnership, the JEDI I Properties
and the operations of JEDI I Partnership thereon are not in violation of any
Environmental Laws or any order or requirement of any court or Governmental
Authority to the extent pertaining to health or the environment, except where a
violation would not have a JEDI I Partnership Material Adverse Effect, nor are
there any conditions existing on such properties or resulting from its
operations thereon that may give rise to any on-site or off-site remedial
obligations under any Environmental Law, except for any condition that would
not have a JEDI I Partnership Material Adverse Effect;
(b) without limitation of Section 4.9(a) above, JEDI I Partnership
is not subject to any pending or, to the knowledge of JEDI I Partnership,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority under any Environmental Law;
(c) except as would not have a JEDI I Partnership Material Adverse
Effect, to the knowledge of JEDI I Partnership all notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed by JEDI I
Partnership under any Environmental Law with respect to the JEDI I Properties,
including without limitation those relating to the treatment, storage, disposal
or release of a hazardous substance or solid waste into the environment, have
been duly obtained or
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<PAGE> 29
filed, and JEDI I Partnership are in compliance with the terms and conditions
of all such notices, permits, licenses and similar authorizations;
(d) except as would not have a JEDI I Partnership Material Adverse
Effect, all hazardous substances or solid wastes generated by or as a result of
its operations on the JEDI I Properties and requiring disposal have been
transported only by carriers maintaining valid authorizations under applicable
Environmental Laws and treated and disposed of only at treatment, storage and
disposal facilities maintaining valid authorizations under applicable
Environmental Laws, and, to the knowledge of JEDI I Partnership, such carriers
and facilities have been and are operating in compliance with such
authorizations and are not the subject of any pending or threatened action,
investigation or inquiry by any Governmental Authority in connection with any
Environmental Laws;
(e) except as would not have a JEDI I Partnership Material Adverse
Effect, to the knowledge of JEDI I Partnership there are no asbestos-containing
materials on or in any JEDI I Property, and there are no storage tanks or
similar containers exceeding 55 gallons in size on or under any such properties
from which hazardous substances, petroleum products or other contaminants may
be released into the surrounding environment;
(f) without limiting the foregoing, to the knowledge of JEDI I
Partnership there is (there will be) no material liability (accrued or
contingent) to any non-governmental third party in tort or under common law in
connection with any release or threatened release of any hazardous substances,
solid wastes, petroleum, petroleum products, and oil and gas exploration and
production wastes into the environment as a result of operations conducted on
the JEDI I Properties; and
(g) Section 4.9 of the JEDI I Partnership Disclosure Letter also
separately lists for JEDI I Partnership any and all Claims against or affecting
it and relating to the release, discharge or emission of any hazardous
substance, or to the generation, treatment, storage or disposal of any wastes,
or otherwise relating to the protection of the environment or to the
non-compliance with any notices, permits, licenses, consent decrees or other
authorization and the disposition of each such Claim. With respect to each
such pending or prior matter, Section 4.9 of the JEDI I Partnership Disclosure
Letter hereto lists the date of the Claim, the claimant or investigating
agency, the nature and a brief description of the matter, the damages claimed
or relief sought, and the status or outcome of the matter. Except as set forth
on Section 4.9 of the JEDI I Partnership Disclosure Letter, JEDI I Partnership
has not received any written notice that it is a potentially responsible party
under any Environmental Laws.
4.10 PURCHASE FOR INVESTMENT. JEDI I Partnership is acquiring the
Shares and the Warrants for its own accounts and not with a view to the public
resale of all or any part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act. JEDI I Partnership
acknowledges that the Shares and Warrants have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available.
4.11 FEES AND COMMISSIONS. JEDI I Partnership has not retained any
Intermediary in connection with the transactions contemplated by this Agreement
and the Operative Documents.
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<PAGE> 30
4.12 MATERIAL CONTRACTS AND COMMITMENTS. (a) Except as set forth
in Section 4.12 of the JEDI I Partnership Disclosure Letter, JEDI I Partnership
has no (i) agreements included in or encumbering the JEDI I Properties
providing for the indemnification of other parties for such parties' negligence
or other fault (except for such obligations incurred in the ordinary course of
business as an owner or operator of oil and gas properties, including
obligations under master service agreements, drilling contracts and similar
agreements) or the sharing of the tax liability of other parties; (ii) gas
sales or purchase contract, gas marketing agreement or transportation agreement
included in or encumbering the JEDI I Properties, which contract or agreement
is for a term of greater than one year and provides for a fixed price; (iii)
agreement for capital expenditures, the acquisition of commodities, equipment
or material or the construction of fixed assets with respect to the JEDI I
Properties which requires aggregate future payments by JEDI I Partnership in
excess of $50,000; (iv) agreement included in or encumbering the JEDI I
Properties or that contemplates, the sale of any interest in oil or gas leases
included in the JEDI I Properties which involves payment (including property
received in exchange or other non-cash consideration) to JEDI I Partnership in
excess of $50,000; (v) agreement included in or encumbering the JEDI I
Properties which requires future payments by JEDI I Partnership in excess of
$50,000 which is not otherwise specifically disclosed herein; (vi) area of
mutual interest agreements binding the JEDI I Properties; and (vii) futures,
hedge, swaps, collars, puts, calls, floors, caps, options or other contracts
included in or encumbering the JEDI I Properties that are intended to benefit
from or reduce or eliminate the risk of fluctuations in the price of
commodities, including hydrocarbons, that are not terminated at Closing
(collectively, "JEDI I Material Contracts"). None of the JEDI I Material
Contracts have been amended or modified except as set forth in Section 4.12 of
the JEDI I Partnership Disclosure Letter or as would not have a JEDI I
Partnership Material Adverse Effect.
(b) All of the JEDI I Material Contracts are in full force and
effect and constitute legal, valid and binding obligations of JEDI I
Partnership, as applicable, and, to the knowledge of JEDI I Partnership, the
other parties thereto, enforceable in accordance with their respective terms,
except insofar as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and except where the failure to be in full force and
effect would not have a JEDI I Partnership Material Adverse Effect. Neither
JEDI I Partnership nor, to the knowledge of JEDI I Partnership or any other
party to any JEDI I Material Contract is in default in complying with any
provisions thereof, and no condition or event or fact exists which, with
notice, lapse of time or both would constitute a default thereunder on the part
of JEDI I Partnership or, to the knowledge of JEDI I Partnership, any other
party thereto, except for any such default, condition, event or fact that,
individually or in the aggregate, would not have a JEDI I Partnership Material
Adverse Effect.
JEDI I Partnership has provided counsel to Sheridan with a true and
complete copy of each contract, agreement and instrument listed in Section 4.12
of the JEDI I Partnership Disclosure Letter or has otherwise made such
documents available for Sheridan to review.
4.13 PLUGGING AND ABANDONMENT OBLIGATIONS. Except as set forth in
Section 4.13 of the JEDI I Partnership Disclosure Letter or as would not have a
JEDI I Partnership Material Adverse Effect, there is no well located upon any
JEDI I Lease that JEDI I Partnership is currently obligated by law or contract
to plug and abandon.
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ARTICLE V.
COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 GENERAL. Each of the parties will use all reasonable efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and to make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Article VI).
5.2 NOTICES AND CONSENTS. Each of Sheridan and JEDI I Partnership
will give any notices to third parties, and will use all reasonable efforts to
obtain all third party consents and waivers of preferential rights, that are
required for the consummation of the transactions contemplated hereby by such a
party (except for governmental consents customarily obtained after Closing).
5.3 OPERATION OF BUSINESS BY SHERIDAN. Sheridan covenants and
agrees that, unless otherwise expressly contemplated by this Agreement or
consented to in writing by JEDI I Partnership, (x) Sheridan will:
(a) operate its business only in the usual and ordinary
course consistent with past practices;
(b) preserve its business and properties, including its
present operations, leases, working conditions and relationships with
lessors, licensors, suppliers, customers and employees;
(c) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted; and
(d) keep in full force and effect insurance comparable in
amount and scope of coverage to that currently maintained;
and (y) Sheridan will not:
(a) make any declaration for setting aside or payment of
dividends or distributions in respect of shares of Common Stock or any
redemption, purchase or other acquisition of any of its securities;
(b) make any capital expenditures, or commit to make any
capital expenditures, other than in the ordinary course of business;
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(c) except for borrowings under the Sheridan Senior
Credit Facility or the incurrence of other obligations in the ordinary
course of business (other than debt for borrowed money), incur any
Indebtedness; and
(d) amend or modify its Charter or, without the written
consent of JEDI I Partnership, the GGP/Sheridan Purchase Agreement.
5.4 OPERATION OF JEDI I PROPERTIES BY JEDI I PARTNERSHIP. JEDI I
Partnership covenants and agrees that, unless otherwise expressly contemplated
by this Agreement or consented to in writing by Sheridan, JEDI I Partnership
will use its reasonable efforts to cause the operator of the JEDI I Properties
to:
(a) operate the JEDI I Properties only in the usual and
ordinary course consistent with past practices;
(b) preserve the JEDI I Properties, including its present
operations, leases, working conditions and relationships with lessors,
licensors, suppliers, customers and employees with respect to such
properties;
(c) maintain and keep the JEDI I Properties in as good
repair and condition as at present, ordinary wear and tear excepted;
(d) keep in full force and effect insurance comparable in
amount and scope of coverage to that currently maintained;
(e) submit to Sheridan for prior written approval, all
requests for operating or capital expenditures to be incurred after
the date hereof and all proposed contracts and agreements to be
entered into by JEDI I Partnership after the date hereof, in each case
relating to the JEDI I Leases and that involve individual commitments
of more than $5,000 or $10,000 in the aggregate; and
(f) obtain Sheridan's written approval prior to voting
under any operating, joint venture, partnership or similar agreement.
Sheridan acknowledges that JEDI I Partnership owns an undivided interest in the
JEDI I Properties, and Sheridan agrees that the acts or omissions of the other
working interests owners shall not constitute a violation of the provisions of
this Section 5.4, nor shall any action required by a vote of working interest
owners constitute such a violation so long as JEDI I Partnership has voted its
interest in a manner that complies with the provisions of this Section 5.4. To
the extent that JEDI I Partnership is not the operator of any of the JEDI I
Leases, the obligations of JEDI I Partnership in this Section 5.4 shall be
construed to require that JEDI I Partnership use reasonable efforts (without
being obligated to incur any expense or institute any cause of action) to cause
the operator of such leases to take such actions or render such performance
within the constraints of the applicable operating agreements and other
applicable agreements.
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5.5 FULL ACCESS. (a) Sheridan will permit representatives of JEDI
I Partnership to have full access at reasonable times during normal business
hours, in a manner that will not interfere with the normal business operations
of Sheridan, to all premises, properties, personnel, books, records (including
tax records), contracts and documents of or pertaining to Sheridan. JEDI I
PARTNERSHIP HEREBY AGREES TO DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD
HARMLESS SHERIDAN AND ITS OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS
AND ADVISORS FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO
THE ACCESS TO THE PROPERTY OF SHERIDAN PURSUANT TO THIS SECTION 5.5(a) AND ANY
OTHER DUE DILIGENCE ACTIVITY CONDUCTED BY JEDI I PARTNERSHIP OR ANY OF ITS
OFFICERS, EMPLOYEES, AGENTS OR ADVISORS, INCLUDING WITHOUT LIMITATION ANY
CLAIMS RESULTING, IN WHOLE OR IN PART, FROM THE CONCURRENT OR JOINT NEGLIGENCE
OR STRICT LIABILITY OF SHERIDAN OR ITS OFFICERS, DIRECTORS, AFFILIATES,
EMPLOYEES, AGENTS OR ADVISORS. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
(b) JEDI I Partnership will permit representatives of Sheridan to
have full access at reasonable times during normal business hours, in a manner
that will not interfere with the normal business operations of JEDI I
Partnership, to all personnel, books, records (including tax records),
contracts and documents of or pertaining to JEDI I Properties in JEDI I
Partnership's possession. SHERIDAN HEREBY AGREES TO DEFEND, INDEMNIFY,
RELEASE, PROTECT, SAVE AND HOLD HARMLESS JEDI I PARTNERSHIP AND ITS OFFICERS,
DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS AND ADVISORS FROM AND AGAINST ANY AND
ALL CLAIMS ARISING OUT OF OR RELATING TO THE ACCESS TO THE PROPERTY OF JEDI I
PARTNERSHIP PURSUANT TO THIS SECTION 5.5(b) AND ANY OTHER DUE DILIGENCE
ACTIVITY CONDUCTED BY SHERIDAN OR ANY OF ITS OFFICERS, EMPLOYEES, AGENTS OR
ADVISORS, INCLUDING WITHOUT LIMITATION ANY CLAIMS RESULTING, IN WHOLE OR IN
PART, FROM THE CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY OF JEDI I
PARTNERSHIP OR ITS OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, AGENTS OR
ADVISORS. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS
LEGEND.
(c) Except as required by law and except for information that is
public, all information relating to the JEDI I Properties obtained by or on
behalf of Sheridan in connection with its evaluation of the JEDI I Properties
under Section 5.5(b) shall be kept confidential and shall not be disclosed by
Sheridan or any of Sheridan's employees, agents, representatives or advisors
(collectively, "Sheridan Representatives") in any manner whatsoever, in whole
or in part, unless and until the Closing occurs. Sheridan shall indemnify,
defend and hold harmless JEDI I Partnership, its officers, partners,
Affiliates, employees, agents and advisors from any Claims incurred as the
result of the use of such information by Sheridan or the Sheridan
Representatives in contravention of the terms of this Agreement or the breach
by Sheridan or the Sheridan Representatives of the covenant contained in the
preceding sentence.
(d) Except as required by law and except for information that is
public, all information relating to the Sheridan's assets obtained by or on
behalf of JEDI I Partnership in connection with its evaluation of the Sheridan
under Section 5.5(a) shall be kept confidential and shall not be disclosed by
JEDI I Partnership or any of JEDI I Partnership's employees, agents,
representatives or advisors (collectively, "JEDI I Partnership
Representatives") in any manner whatsoever, in whole or in part, unless and
until the Closing occurs. JEDI I Partnership shall indemnify, defend and hold
harmless Sheridan, its officers, partners, Subsidiaries, employees, agents and
advisors from any
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Claims incurred as the result of the use of such information by JEDI I
Partnership or the JEDI I Partnership Representatives in contravention of the
terms of this Agreement or the breach by JEDI I Partnership or the JEDI I
Partnership Representatives of the covenant contained in the preceding
sentence.
5.6 NOTICE OF DEVELOPMENTS. Each party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its representations and warranties under this Agreement.
ARTICLE VI.
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATION OF JEDI I PARTNERSHIP. The
obligation of JEDI I Partnership to consummate the transactions contemplated
hereby is subject to satisfaction of the following conditions:
(a) the representations and warranties contained in
Article III, to the extent qualified as to materiality shall be
accurate in all respects, and, to the extent not so qualified, shall
be accurate in all material respects, as of the Closing Date as though
such representations and warranties had been made at and as of that
time;
(b) Sheridan shall have performed and complied with all
of the covenants and agreements hereunder in all material respects
through the Closing;
(c) no action suit, or proceeding shall be pending before
any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would prevent consummation
of any of the transactions contemplated by this Agreement; and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect;
(d) Sheridan shall have delivered to JEDI I Partnership
a certificate from an officer of Sheridan to the effect that each of
the conditions specified above in Section 6.1(a)-(c) is satisfied in
all respects;
(e) the conditions to the closing of the transactions
contemplated by the GGP/Sheridan Purchase Agreement shall have been
satisfied and such transaction shall have been consummated;
(f) the transaction contemplated by the GGP/JEDI
Termination Agreement shall have been consummated;
(g) GGP shall have executed and delivered to Sheridan the
Registration Rights Agreement in connection with the consummation of
the transactions under the GGP/Sheridan Purchase Agreement;
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(h) GGP shall have executed and delivered to JEDI I
Partnership the GGP/JEDI I Partnership Termination Agreement; and
(i) JEDI I Partnership shall have received an opinion of
Winstead Sechrest & Minick P.C., dated as of the Closing Date, that
addresses the matters set forth in Sections 3.1, 3.2, 3.3, 3.13, 3.14,
the first sentence in 3.16 and 3.20 hereof, including such exceptions
and assumptions as are customary in such opinions, in form and
substance reasonably acceptable to JEDI I Partnership.
6.2 CONDITIONS TO OBLIGATION OF SHERIDAN. The obligations of
Sheridan to consummate the transactions contemplated hereby is subject to
satisfaction of the following conditions:
(a) the representations and warranties contained in
Article IV, to the extent qualified as to materiality shall be
accurate in all respects, and, to the extent not so qualified, shall
be accurate in all material respects, as of the Closing Date as though
such representations and warranties had been made at and as of that
time;
(b) JEDI I Partnership shall have performed and complied
with all of the covenants and agreements hereunder in all material
respects through the Closing;
(c) no action, suit, or proceeding shall be pending
before any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would prevent consummation
of any of the transactions contemplated by this Agreement, and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect;
(d) JEDI I Partnership shall have delivered to Sheridan a
certificate to the effect that each of the conditions specified above
in Section 6.2(a)-(c) is satisfied in all respects;
(e) the conditions to the closing of the transactions
contemplated by the GGP/Sheridan Purchase Agreement shall have been
satisfied and such transaction shall have been consummated; and
(f) Sheridan shall have received an opinion of (i) Julia
Heintz Murray, General Counsel of JEDI I Partnership, addressing the
matters set forth in Section 4.1 and 4.2, and (ii) Vinson & Elkins
L.L.P. addressing the matters set forth in Section 4.3, in each case,
dated as of the Closing Date and including such exceptions and
assumptions as are customary in such opinions, in form and substance
reasonably acceptable to Sheridan.
ARTICLE VII.
OTHER PROVISIONS
7.1 FEES AND COMMISSIONS. Sheridan agrees to pay, and to
indemnify and hold harmless JEDI I Partnership from and against liability for,
any compensation to any finder, broker, agent, financial advisor, or other
intermediary (collectively, an "Intermediary") that it has retained in
connection with the transactions contemplated by this Agreement , and the fees
and expenses of
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defending against such liability or alleged liability. Each party shall be
responsible for all expenses, including due diligence expenses, incurred by it
in connection with the consummation of the transactions contemplated by this
Agreement.
7.2 NO RESTRICTIONS ON AFFILIATES. As long as JEDI I Partnership
or any of its Affiliates hold any shares of Common Stock, neither Sheridan nor
any of its Subsidiaries will enter into any agreement that would purport to
impose restrictions or limitations on the business, operations or assets of
JEDI I Partnership or its Affiliates.
7.3 CERTAIN PUBLIC UTILITY MATTERS. Except as contemplated
herein, Sheridan will not take any action that would be inconsistent with the
representations contained in Sections 3.14 and 3.15 hereof so long as the JEDI
I Partnership or its Affiliates holds any shares of Common Stock.
7.4 BUSINESS OPPORTUNITY MATTERS. (a) Sheridan and JEDI I
Partnership acknowledge and agree that neither JEDI I Partnership nor any of
its Affiliates shall be expressly or implicitly restricted or proscribed
pursuant to this Agreement, the relationship that exists between JEDI I
Partnership and Sheridan or otherwise, from engaging in any type of business
activity or owning an interest in any type of business entity, regardless of
whether such business activity is (or such business entity engages in
businesses that are) in direct or indirect competition with the businesses or
activities of Sheridan or any of its Affiliates. Without limiting the
foregoing, JEDI I Partnership and Sheridan acknowledge and agree that (i)
neither Sheridan nor its Affiliates nor any other Person shall have any rights,
by virtue of this Agreement, the relationship that exists between JEDI I
Partnership and Sheridan or otherwise, in any business venture or business
opportunity of JEDI I Partnership or any of its Affiliates, and neither JEDI I
Partnership nor its Affiliates shall have any obligation to offer any interest
in any such business venture or business opportunity to Sheridan, any Affiliate
of Sheridan or any other Person, or otherwise account to any of such Persons in
respect of any such business ventures, (ii) the activities of JEDI I
Partnership or any of its Affiliates that are in direct or indirect competition
with the activities of Sheridan or any of its Affiliates are hereby approved by
Sheridan, and (iii) it shall be deemed not to be a breach of any fiduciary or
other duties, if any and whether express or implied, that may be owed by JEDI I
Partnership or its Affiliates to Sheridan or its Affiliates for JEDI I
Partnership to permit itself or one of its Affiliates to engage in a business
opportunity in preference or to the exclusion of Sheridan, its Affiliates or
any other Person.
(b) Neither Sheridan or its Affiliates shall enter into any "area
of mutual interest" agreement of similar agreement that could or would have the
effect of binding JEDI I Partnership or any of its Affiliates or their
respective properties.
(c) Except for duties and obligations (i) owed by a corporation to
its stockholders pursuant to applicable law and (ii) owed by Sheridan to JEDI I
Partnership or any of its Affiliates pursuant to this Agreement, any of the
Operative Documents to which JEDI I Partnership or any of its Affiliates is a
party, or any other existing or prospective contract or agreement between
Sheridan and JEDI I Partnership or any of its Affiliates, nothing in the
relationship between Sheridan and JEDI I Partnership and its Affiliates created
by this Agreement shall be deemed to create any duty or obligation of Sheridan
to offer any interest in any business venture or business opportunity to JEDI I
Partnership or its Affiliates.
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7.5 INDEMNIFICATION. Subject to Sheridan's rights hereunder with
respect to a Claim made under the indemnity of JEDI I Partnership set forth in
Section 7.5(c) hereof, as of the Closing, Sheridan hereby assumes (i) all
obligations to properly plug and abandon all wells and remove all related
equipment now located on the JEDI I Properties or hereafter placed on the JEDI
I Properties by Sheridan, its successors and assigns, and cleanup and restore
the lands related to such JEDI I Properties, and (ii) except with respect to
the Existing Lawsuit, all other liabilities attributable to the JEDI I
Properties, including liabilities arising from, attributable to, or alleged to
be arising from or attributable to, personal injury or property damage and any
violation of, or the failure to perform any obligation imposed by, any
Environmental Laws (in each case the assumption by Sheridan is made regardless
of whether any such obligation or liability is attributable to events or
periods of time prior to or after the Effective Date) (such assumed obligations
and liabilities being hereinafter collectively referred to as the "Assumed
Obligations").
(b) Sheridan agrees to indemnify, release, defend, and hold
harmless JEDI I Partnership, its partners, and Affiliates, and their respective
officers, directors, employees and agents from, against, and in respect of any
and all claims, demands, losses, reasonable costs and expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties and reasonable attorneys' fees (collectively, "Claims"), that JEDI I
Partnership shall incur or suffer, which arise, result from, or relate to (i)
any breach of, or failure by Sheridan or any of its Subsidiaries to perform,
any of its representations, warranties, covenants, or agreements in this
Agreement or in any schedule, certificate, exhibit, or other instrument
furnished or to be furnished by Sheridan or any of its Subsidiaries in
connection with the transactions contemplated by this Agreement, or (ii) the
Assumed Obligations.
(c) JEDI I Partnership agrees to indemnify, release, defend, and
hold harmless Sheridan and its Subsidiaries and their respective officers,
directors, employees and agents from, against, and in respect of any and all
Claims, that Sheridan shall incur or suffer, which arise, result from, or
relate to (i) other than with respect to its covenant under Section 7.5(c)(iii)
hereof, any breach of, or failure by JEDI I Partnership to perform, any of its
representations, warranties, covenants, or agreements in this Agreement or in
any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by JEDI I Partnership in connection with the transactions
contemplated by this Agreement, (ii) the Existing Lawsuit or (iii) the
ownership or operation of the JEDI I Properties prior to the Effective Date.
(d) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION
AND EXCULPATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN INDEMNIFIED OR
RELEASED PARTY SHALL BE ENTITLED TO INDEMNIFICATION OR EXCULPATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW
OF OR BY SUCH INDEMNIFIED OR RELEASED PARTY. THE PARTIES AGREE THAT THIS
PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
(e) With respect to the representations, warranties, covenants and
agreements that survive the Closing pursuant to Section 7.6, in no event shall
any amounts be recovered from the indemnifying party under this Section 7.5 or
otherwise for any matter for which a written notice of
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claim specifying in reasonable detail the specific nature of the claim ("Claim
Notice") is not delivered to the indemnifying party prior to the time provided
in Section 7.6; provided, however, that such indemnities shall survive with
respect only to the specific matter that is the subject of any Claim Notice
delivered in good faith in compliance with the requirements of this Section
7.5(e) until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such Claim Notice has been
reached or (B) the date on which the matter described in such Claim Notice has
otherwise reached final resolution. The indemnifications provided by Sections
7.5(b) and 7.5(c) of this Agreement are expressly subject to the following: in
case any legal proceeding or claim, including any investigatory proceeding, is
brought or made against a party (the "Indemnified Party") in a matter for which
indemnification may be provided under Sections 7.5(b) and 7.5(c), the
Indemnified Party shall within 20 business days notify the other party (the
"Indemnifying Party") with the delivery of the Claim Notice. The Indemnifying
Party shall have the right to control and assume the defense of any such legal
proceeding or claim, including the employment of counsel satisfactory to the
Indemnifying Party. If the Indemnifying Party controls and assumes the defense
of any proceeding or claim, the Indemnified Party shall have the right to
employ separate counsel, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party unless the representation of both parties
by the same counsel would be inappropriate due to any actual or potential
conflicts of interest as determined by counsel to the Indemnifying Party. The
Indemnifying Party shall not be liable for the fees and expenses of more than
one separate firm of attorneys at any one time for the Indemnified Party in
connection with any one legal proceeding or claim or substantially similar
related proceedings and claims. The indemnification obligations of this
Section 7.5 shall not apply to any settlements effected without the consent of
the Indemnifying Party. The indemnification obligations of this Section 7.5
shall not be deemed to create any rights of subrogation or other rights in any
insurer or third party.
(f) Except for the parties' rights pursuant to the Registration
Rights Agreement, the Warrant Agreement and the Assignment, each of the parties
hereto acknowledges and agrees that its sole and exclusive remedy with respect
to any and all Claims relating to this Agreement or the transactions
contemplated hereby shall be limited to the indemnification provisions set
forth in this Agreement, and, in furtherance of the forgoing, each party hereby
waives, to the fullest extent permitted under any applicable law, any and all
other rights, claims and causes of action it may have against the other party
with respect to this Agreement or the transactions contemplated hereby.
(g) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN CONNECTION
WITH ANY CLAIM MADE BY A PARTY AGAINST ANOTHER PARTY HEREUNDER, THE CLAIMING
PARTY SHALL NOT BE ENTITLED TO RECOVER ANY PUNITIVE, CONSEQUENTIAL, SPECIAL,
INCIDENTAL OR INDIRECT DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY EXEMPLARY
DAMAGES, TREBLE DAMAGES, PENALTIES, OR LOSS OF PROFITS OR INCOME), WHETHER
BASED ON STATUTE, IN TORT, CONTRACT OR OTHERWISE, REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER APPLICABLE LAW OR OTHERWISE, AND WHETHER OR NOT
ARISING FROM A PARTY'S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT, THE PARTIES HERETO HEREBY WAIVING THEIR RIGHT, IF ANY, TO
RECOVER SUCH DAMAGES IN CONNECTION WITH ANY CLAIMS HEREUNDER.
(h) Notwithstanding anything herein to the contrary and except for
the matters set forth in Section 7.5(c)(ii), (i) neither Sheridan nor JEDI I
Partnership shall be required to indemnify the
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other party hereto (or such party's related indemnified parties) unless the
total amount of all payments required to be made by such party pursuant to the
indemnification provisions hereof exceeds, in the aggregate, $100,000, in which
event the party required to indemnify the other party shall be liable under
such indemnification provisions for the entire amount and not merely the excess
over $100,000, and (ii) neither Sheridan nor JEDI I Partnership shall be
required to indemnify the other party hereto (or such party's related
indemnified parties) under this Agreement in any amount exceeding in the
aggregate $2,250,000.
(i) Notwithstanding anything herein to the contrary, JEDI I
Partnership shall not be obligated to indemnify Sheridan (or such party's
related indemnified parties) pursuant to the provisions of Section 7.5(c)(iii)
unless (i) the Claim by Sheridan for indemnification under Section 7.5(c)(iii)
is made as a result of a Claim brought against Sheridan by a Person that is not
an Affiliate of Sheridan, or (ii) the Claim by Sheridan for indemnification
under Section 7.5(c)(iii) is made on account of the JEDI I Properties being in
violation of a Governmental Requirement.
7.6 SURVIVAL OF TERMS; FAILURE TO CLOSE. All representations,
warranties, indemnities, and covenants contained herein or made in writing by
any party in connection herewith will survive the execution and delivery of
this Agreement and any investigation made at any time by or on behalf of
Sheridan and JEDI I Partnership; provided, however, that any Claim with respect
to the breach thereof may be made only if the party claiming such breach shall
have delivered a Claim Notice to the responsible party hereunder (a) in the
case of the representations, warranties and covenants of Sheridan contained in
Sections 2.3 and 2.4 and Articles 3 and 5 and of JEDI I Partnership contained
in Sections 2.3 and 2.4 and Articles 4 and 5, on or before first anniversary of
the Closing Date, (b) in the case of the covenant by JEDI I contained in
Section 7.5(c)(iii), on or before the third anniversary date of the Closing
Date, and (c) at any time, in the case of all other provisions.
Notwithstanding anything herein to the contrary, in the event the Closing has
not occurred on or before January 15, 1998, because one or more conditions set
forth in Section 6.1 has not been satisfied, Sheridan or JEDI I Partnership may
terminate its obligations under this Agreement by written notice to the other
party; provided, however, that the provisions of Sections 7.1 and 7.6 shall
survive any such termination.
7.7 DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES. The express
representations and warranties of the parties contained in this Agreement are
exclusive and are in lieu of all other representations and warranties, express,
implied or statutory. SHERIDAN ACKNOWLEDGES THAT JEDI I PARTNERSHIP HAS NOT
MADE, AND JEDI I PARTNERSHIP HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND
SHERIDAN HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS,
IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (A) PRODUCTION
RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR
THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY,
ATTRIBUTABLE TO THE JEDI I PROPERTIES, AND (B) THE ACCURACY, COMPLETENESS OR
MATERIALITY OR ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW,
HERETOFORE OR HEREAFTER FURNISHED TO SHERIDAN BY OR ON BEHALF OF JEDI I
PARTNERSHIP. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, JEDI
I PARTNERSHIP EXPRESSLY DISCLAIMS AND NEGATES, AND SHERIDAN HEREBY WAIVES, AS
TO PERSONAL PROPERTY, EQUIPMENT AND FIXTURES CONSTITUTING A PART OF THE JEDI I
PROPERTIES (I) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (II) ANY
IMPLIED
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<PAGE> 40
OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (III) ANY IMPLIED OR
EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (IV) ANY
RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION, (V) ANY CLAIMS BY SHERIDAN FOR DAMAGES BECAUSE OF REDHIBITORY
VICES OR DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN AS OF THE
EFFECTIVE DATE OR THE CLOSING DATE, AND (VI) ANY AND ALL IMPLIED WARRANTIES
EXISTING UNDER APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH SHERIDAN
AND JEDI I PARTNERSHIP THAT THE PERSONAL PROPERTY, EQUIPMENT AND FIXTURES
INCLUDED WITHIN THE JEDI I PROPERTIES ARE HEREBY CONVEYED TO SHERIDAN IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND "WHERE IS" WITH ALL FAULTS,
AND THAT SHERIDAN HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS SHERIDAN
DEEMS APPROPRIATE. JEDI I PARTNERSHIP AND SHERIDAN AGREE THAT, TO THE EXTENT
REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
7.8 TRANSFER TAXES AND RECORDING FEES. All sales, use or other
taxes (other than taxes on gross income, net income or gross receipts) and
duties, levies or other governmental charges incurred by or imposed with
respect to the property transfers undertaken pursuant to this Agreement and all
costs of recording the Assignment shall be the responsibility of, and shall be
paid by Sheridan.
7.9 STANDSTILL. JEDI I Partnership acknowledges that it is
subject to the provisions of Section 8.5 of the ECT Purchase Agreement.
7.10 ACTIONS BY SHERIDAN. Notwithstanding anything herein to the
contrary, JEDI I Partnership shall not be liable for, or in breach of its
representations or covenants hereunder on account of, any actions taken by
Sheridan on or with respect to the JEDI I Properties prior to the Closing Date.
ARTICLE VIII.
MISCELLANEOUS
8.1 AMENDMENTS; WAIVERS. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by Sheridan or JEDI I
Partnership therefrom, shall in any event be effective unless the same shall be
in writing and signed by the parties hereto, and then such waiver or consent
shall be effective only in the specific instance or for the specific purpose
for which given.
8.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors of the parties hereto, whether so expressed or not
and the permitted assigns of the parties hereto including, without limitation
and without need of any express assignment. This Agreement and the rights and
obligations of Sheridan shall not be assigned without the prior written consent
of JEDI I Partnership. JEDI I Partnership may not assign or transfer any or
all of its rights and obligations under this Agreement without the
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<PAGE> 41
consent of Sheridan except (i) prior to the Closing, to an Affiliate with
respect to which it has the power to direct or cause the direction of the
management and policies of such Affiliate (whether through voting, by contract
or otherwise), and (ii) following the Closing, to an Affiliate.
8.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement unless the consummation of the transaction
contemplated hereby is materially and adversely affected thereby.
8.4 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute
a part of and shall not be utilized in interpreting this Agreement.
8.5 GOVERNING LAW. Each of the parties hereto hereby consents and
agrees that this Agreement shall be deemed a contract and instrument made under
the laws of the State of Texas and shall be construed and enforced in
accordance with and governed by the laws of the State of Texas, without regard
to principles of conflicts of law.
8.6 ENTIRE AGREEMENT. This Agreement, the Operative Documents and
each of the disclosure letters delivered by the parties hereto constitutes the
entire agreement between Sheridan and JEDI I Partnership concerning the matters
referred to herein and therein, and, supersede all prior agreements and
understandings among Sheridan and JEDI I Partnership relating to the subject
matter hereof and thereof. There are no unwritten oral agreements between the
parties.
8.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
8.8 FURTHER COOPERATION. At any time and from time to time, and
at its own expense, each party shall promptly execute and deliver all such
documents and instruments, and do all such acts and things, as the other party
may reasonably request in order to further effect the purposes of this
Agreement.
8.9 NOTICES. All notices, requests, and other communications to
any party hereunder shall be in writing (including telecopy) and shall be given
to such party at its address or telecopy number set forth on the signature
pages hereof or such other address or telecopy number as such party may
hereafter specify by notice to the other parties.
8.10 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in exercising any right or remedy under this
Agreement and no course of dealing among the parties hereto shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right or remedy under this Agreement. No notice to or
demand on any party hereto not otherwise required by this Agreement shall
entitle such party to any other or further notice or demand
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<PAGE> 42
in similar or other circumstances or constitute a waiver of the rights of such
party to any other or further action in any circumstances without notice or
demand.
8.11 EXHIBITS; SCHEDULES; AMENDMENT OF DISCLOSURE LETTER. (a) The
exhibits attached to this Agreement and the Sheridan Disclosure Letter and the
JEDI I Partnership Disclosure Letter are incorporated herein and shall be
considered to be a part of this Agreement for the purposes stated herein,
except that in the event of any conflict between any of the provisions of such
exhibits or schedules and the provisions of this Agreement, the provisions of
this Agreement shall prevail.
(b) Each of Sheridan and JEDI I Partnership may, from time to
time, prior to the Closing, by written notice to the other party, supplement or
amend such party's disclosure letter delivered hereunder to correct any matter
that would constitute a breach of any representation or warranty of such party
herein contained; provided, however, except as provided in the following
sentence, no such supplement or amendment will affect the rights or obligations
of the parties to this Agreement (including without limitation hereof) until
after the Closing Date. Notwithstanding any other provision hereof, if the
Closing occurs, any such supplement or amendment of such Disclosure Letter will
be effective to cure and correct for indemnification purposes (but only for
such purposes) any breach of any representation, warranty or covenant that
would have existed by reason of not having made such supplement or amendment.
8.12 DISPUTE RESOLUTION. (a) Any controversy, dispute or claim
arising out of or relating to this Agreement or the transactions contemplated
hereby (a "Dispute") shall be submitted to non-binding mediation upon the
request of Sheridan or JEDI I Partnership on the following terms. Upon the
request of either party, a neutral mediator acceptable to both parties (the
"Mediator") shall be appointed within fifteen (15) days. The Mediator shall
attempt, through negotiations in any manner deemed reasonably appropriate by
the Mediator, in which the parties shall participate, to resolve the Dispute.
The Mediator shall be compensated at a rate agreeable to Sheridan, JEDI I
Partnership and the Mediator, and each of Sheridan and JEDI I Partnership shall
pay one-half of such compensation and other expenses of the mediation.
(b) In the event that the Dispute has not been resolved within 30
days after the appointment of the Mediator, the Dispute shall be resolved by
arbitration administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Section 8.12, the Commercial Arbitration
Rules of the AAA, and, to the maximum extent applicable, the United States
Arbitration Act. Judgment on any matter rendered by arbitrators may be entered
in any court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable in the
subject matter of the Dispute. Each party shall select one arbitrator and the
two arbitrators so selected shall select the third arbitrator. If, within 10
days after notice, a party fails to select an arbitrator, the party's
arbitrator shall be selected by the AAA pursuant to Rule 14 of the Commercial
Arbitration Rules. If the third arbitrator is not selected within thirty (30)
days after the request for an arbitration, then any party may request the AAA
to select the third arbitrator. The arbitrators may engage engineers,
accountants or other consultants they deem necessary to render a conclusion in
the arbitration proceeding. To the maximum extent practicable, an arbitration
proceeding hereunder shall be concluded within 180 days of the filing of the
Dispute with the AAA. Arbitration proceedings shall be conducted in Houston,
Texas. Arbitrators shall be
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<PAGE> 43
empowered to impose sanctions and to take such other actions as the arbitrators
deem necessary to the same extent a judge could impose sanctions or take such
other actions pursuant to the Federal Rules of Civil Procedure and applicable
law. At the conclusion of any arbitration proceeding, the arbitrators shall
make specific written findings of fact and conclusions of law. The arbitrators
shall have the power to award recovery of all costs and fees to the prevailing
party. All fees of the arbitrators and any engineer, accountant or other
consultant engaged by the arbitrators, shall be shared equally unless otherwise
awarded by the arbitrators.
(c) Nothing in this Section 8.12 shall limit or delay the right of
JEDI I Partnership to exercise the remedies available to it under the Warrant
Agreement or the Registration Rights Agreement.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SHERIDAN ENERGY, INC.
By: /s/ B. A. BERILGEN
--------------------------------------
B. A. Berilgen, President
Address for Notice:
1000 Louisiana, Suite 800
Houston, Texas 77002
Attention: B.A. Berilgen
Telecopy:
--------------------------------
JEDI HYDROCARBON INVESTMENTS I
LIMITED PARTNERSHIP,
a Delaware limited partnership,
by its General Partner, JEDI Capital L.L.C.
By: /s/ JAMES R. McBRIDE
--------------------------------------
Name: James R. McBride
------------------------------------
Title: Agent and Attorney-in-Fact
-----------------------------------
Address for Notice:
-----------------------------------------
Attn:
------------------------------------
-----------------------------------------
-----------------------------------------
Phone:
-----------------------------------
Fax:
-------------------------------------
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<PAGE> 45
EXHIBIT A
FORM OF WARRANT
EXHIBIT A
Page 1
<PAGE> 46
EXHIBIT B
FORM OF ASSIGNMENT AND BILL OF SALE
EXHIBIT B
Page 1
<PAGE> 1
EXHIBIT 11
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of December 31, 1997, is made by and
between SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan") and JEDI HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP, a limited
partnership organized under the laws of Delaware ("JEDI I"). JEDI I, together
with any transferee of Warrants or Warrant Shares, are referred to herein as
the "Warrant Holder."
WHEREAS, Sheridan and JEDI I have entered into that certain Purchase
Agreement (the "Purchase Agreement") dated December 31, 1997; and
WHEREAS, Sheridan proposes to issue to JEDI I as partial consideration
for JEDI I entering into the Purchase Agreement, 67,500 common stock purchase
warrants (the "Warrants") to purchase shares (the "Warrant Shares") of
Sheridan's common stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the holder thereof to purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Purchase Agreement set forth and for other good
and valuable consideration, the parties hereto agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. Sheridan will issue
and deliver the Warrants to JEDI I, or to an affiliate thereof designated by
JEDI I, on the date of Closing referred to in the Purchase Agreement. The
aggregate number of Warrants to be issued and delivered shall be 67,500. The
Warrants shall be exercisable on or after the date of Closing referred to in
the Purchase Agreement. The text of the Warrant, the purchase form and
assignment form to be printed on the reverse thereof shall be substantially as
set forth in the Warrant Certificate attached as Exhibit A hereto. The
Warrants shall be executed on behalf of Sheridan by the manual or facsimile
signature of the President or a Vice President of Sheridan, attested by the
manual or facsimile signature of the Secretary or an Assistant Secretary of
Sheridan. A Warrant bearing the manual or facsimile signature of individuals
who were at any time the proper officers of Sheridan shall bind Sheridan
notwithstanding that such individuals or any of them shall have ceased to hold
such offices prior to the delivery of such Warrant or did not hold such offices
on the date of this Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by
Sheridan either upon initial issuance or upon division, exchange, substitution
or transfer.
2. REPRESENTATIONS AND WARRANTIES OF SHERIDAN. Sheridan hereby
represents and warrants as follows:
(a) POWER AND AUTHORITY. Sheridan has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue and deliver the Warrants and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price, to
issue and deliver the
<PAGE> 2
shares of Common Stock or other securities issuable upon exercise of
the Warrants. This Warrant Agreement has been duly executed and
delivered by Sheridan.
(b) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK.
There have been reserved for issuance, and Sheridan shall at all times
keep reserved, out of the authorized and unissued shares of Common
Stock, a number of shares sufficient to provide for the exercise of
the rights of purchase represented by the Warrants, and such shares,
when issued upon receipt of payment therefor or upon a net exercise in
accordance with the terms of the Warrants and of this Warrant
Agreement, will be legally and validly issued, fully paid and
nonassessable and will be free of any preemptive rights of
stockholders or any restrictions.
3. CONDITIONS TO PURCHASE. JEDI I's obligations hereunder shall
be subject to satisfaction of the following conditions upon the Closing, in
addition to such other conditions as are set forth in the Purchase Agreement:
(a) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Warrant
Agreement and the Warrants and all other legal matters relating to
this Warrant Agreement, the Warrants and the transactions contemplated
hereby shall be satisfactory in all respects to JEDI I.
(b) There shall have been duly tendered to JEDI I or upon
the order of JEDI I a certificate or certificates representing the
Warrants.
4. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of Sheridan (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as JEDI I has specified to Sheridan.
5. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to Sheridan or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to Sheridan, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, Sheridan shall execute and deliver to the person entitled thereto a
new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of Sheridan, evidencing the same generic rights
and entitled to the same generic benefits under this Warrant Agreement as the
Warrants surrendered for such exchange, transfer or exercise.
6. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to Sheridan of the Warrant certificate or certificates duly endorsed
by the Warrant Holder or by his duly authorized attorney-in-fact or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney-in-fact, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with Sheridan. In case
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<PAGE> 3
of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with Sheridan in its discretion.
Upon any registration of transfer, Sheridan shall deliver a new Warrant or
Warrants to the person entitled thereto.
7. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to purchase
one share of Common Stock during the time period and subject to the conditions
set forth in the Warrant Certificate at an exercise price of $5.50 per share,
subject to adjustment in accordance with Section 12 hereof (the "Exercise
Price"). Each Warrant terminates at 5:00 p.m. Houston time on the fifth
anniversary of the Closing Date as defined in the Purchase Agreement (the
"Expiration Date").
(b) The Exercise Price and the number of shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 12 of this Warrant Agreement.
Subject to the provisions of this Warrant Agreement, each Warrant Holder shall
have the right, which may be exercised as expressed in such Warrants, to
purchase from Sheridan (and Sheridan shall issue and sell to such Warrant
Holder) the number of fully paid and nonassessable shares of Common Stock
specified in such Warrants, upon surrender to Sheridan, or its duly authorized
agent, of such Warrants, and upon payment to Sheridan of the Exercise Price, as
adjusted in accordance with the provisions of Section 12 of this Warrant
Agreement or upon a net exercise pursuant to this subsection of this Warrant
Agreement, for the number of shares in respect of which such Warrants are then
exercised. The Warrant Holder may (i) pay the Exercise Price in cash, by
certified or official bank check payable to the order of Sheridan, or by the
surrender to Sheridan of securities of Sheridan having a Market Price equal to
the Exercise Price or (ii) make an exercise of Warrants for "Net Warrant
Shares." The number of Net Warrant Shares will be determined as described by
the following formula: Net Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the
number of Warrant Shares issuable upon exercise of the Warrants or portion of
Warrants in question. "MP" is the Market Price of the Common Stock on the last
trading day preceding the date of the request to exercise the Warrants.
"Market Price" shall mean the then current market price per share of Common
Stock, as determined in paragraph 12.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise Price,
with cash or securities, or upon a net exercise as aforesaid, Sheridan at its
expense shall issue and cause to be delivered with all reasonable dispatch to
or upon the written order of the Warrant Holder and in such name or names as
the Warrant Holder may designate, a certificate or certificates for the number
of full shares of Common Stock so purchased upon the exercise of such Warrants,
together with cash, as provided in Section 12 of this Warrant Agreement, in
respect of any fraction of a share of such stock otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such shares, as of the date of the surrender
of such Warrants and payment of the Exercise Price or receipt of shares by net
exercise as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the Warrant Holders thereof, either in
full or from time to time in part and, in the event that any Warrant is
exercised in respect of less than all of the shares
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<PAGE> 4
purchasable on such exercise at any time prior to the Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants will be issued.
8. COMPLIANCE WITH GOVERNMENT REGULATIONS. Sheridan covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any U.S. federal or state or
other law or applicable governing rule or regulation of any securities
exchange, registration with or approval of any governmental authority, or
listing on any such securities exchange, before such shares may be issued upon
exercise, Sheridan will use its best efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.
9. PAYMENT OF TAXES. Sheridan will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 12 hereof;
provided, however, that Sheridan shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issue or
delivery of any Warrants or certificates for Warrant Shares and any securities
issued pursuant to Section 12 hereof in a name other than that of the Warrant
Holder of such Warrants.
10. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, Sheridan shall issue and deliver
in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest.
11. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. Sheridan shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the Common Stock ("Transfer Agent") and every subsequent
transfer agent for any shares of Sheridan's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. Sheridan will keep a copy of this Warrant Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of
Sheridan's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. Sheridan will supply the Transfer Agent and any
such subsequent transfer agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be issuable as provided by Section 13 of this Warrant Agreement. Sheridan will
furnish to the Transfer Agent and any such subsequent transfer agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Warrant Holder pursuant to Section 12.3 hereof. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be canceled, and such
canceled Warrants shall constitute sufficient evidence of the number of shares
of stock which have been issued upon the exercise of such Warrants (subject to
adjustment as herein provided). No shares of stock shall be subject to
reservation in respect of the Warrants subsequent to the Expiration Date except
to the extent necessary to comply with the terms of this Warrant Agreement.
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<PAGE> 5
12. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as hereafter defined.
12.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case Sheridan shall (i) pay a dividend to
holders of Common Stock in shares of Common Stock or make a
distribution to holders of Common Stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of Sheridan
(including any such reclassification in connection with a
consolidation or merger in which Sheridan is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other
securities of Sheridan which he would have owned or have been
entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with
respect thereto regardless of whether the Warrants are
exercisable at the time of the happening of such event or at
the time of any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case Sheridan shall issue rights, options
or warrants to holders of its outstanding Common Stock,
without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price
per share which is lower at the record date mentioned below
than the greater of (a) the Exercise Price or (b) the then
current market price per share of Common Stock (as determined
in accordance with paragraph (e) below) (the "Greater Price"),
then in each such case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares which
the aggregate offering price of the total number of shares of
common stock so offered would purchase at the Greater Price.
Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
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<PAGE> 6
(c) In case Sheridan shall distribute to holders
of its shares of Common Stock evidences of its indebtedness or
assets (including cash dividends or other cash distributions)
or rights, options or warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of
each Warrant by a fraction, of which the numerator shall be
the then current market price per share of Common Stock (as
determined in accordance with paragraph (e) below) on the date
of such distribution, and of which the denominator shall be
the then current market price per share of Common Stock, less
the then fair value (as determined in good faith by the Board
of Directors of Sheridan) of the portion of the assets or
evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
In the event of distribution by Sheridan to holders
of its shares of Common Stock of stock of a subsidiary or
securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from Sheridan, such
subsidiary or both, as Sheridan shall determine, the stock or
other securities to which such Warrant Holder would have been
entitled if such Warrant Holder had exercised such Warrant
immediately prior thereto regardless of whether the Warrants
are exercisable at such time, all subject to further
adjustment as provided in this subsection 12.1; provided,
however, that no adjustment in respect of dividends or
interest on such stock or other securities shall be made
during the term of a Warrant or upon the exercise of a
Warrant.
(d) [intentionally left blank]
(e) For the purpose of any computation under
paragraphs (b) or (c) of this Section, the current market
price per share of Common Stock at any date shall be the
average of the daily closing prices of Sheridan's Common
Stock, for 10 consecutive trading days commencing 30 trading
days before the date of such computation. The closing price
for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices
regular way for such day, in each case on the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or
admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over- the-counter market as
reported by NASDAQ or any comparable system. In the absence
of one or more such quotations,
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<PAGE> 7
the Board of Directors of Sheridan shall determine the current
market price, in good faith, on the basis of such quotations
as it considers appropriate.
(f) In any case in which this Section 12.1 shall
require that any adjustment in the number of Warrant Shares be
made effective as of or immediately after a record date for a
specified event, Sheridan may elect to defer until the
occurrence of the event the issuing to the holder of any
Warrant exercised after that record date the shares of Common
Stock and other securities of Sheridan, if any, issuable upon
the exercise of any Warrant over and above the shares of
Common Stock and other securities of Sheridan, if any,
issuable upon the exercise of any Warrant prior to such
adjustment; provided, however, that Sheridan shall deliver to
such Warrant Holder a due bill or other appropriate instrument
evidencing the holder's right to receive such additional
shares or securities upon the occurrence of the event
requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share.
(h) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon the exercise
of each Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately after
such adjustment.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made
under paragraphs (b) and (c) if Sheridan issues or distributes
to each Warrant Holder the rights, options, warrants, or
convertible or exchangeable securities, or evidences of
indebtedness or assets referred to in those paragraphs which
each Warrant Holder would have been entitled to receive had
the Warrants been exercised prior to the happening of such
event or the record date with respect thereto regardless of
whether the Warrants are exercisable at the time of the
happening of such event or at the time of any record date with
respect thereto.
(j) For the purpose of this Section 12.1, the
terms "shares of Common Stock" shall mean (i) the class of
stock designated as the Common Stock of Sheridan at the date
of this Agreement, or (ii) any other class of stock resulting
from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In
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<PAGE> 8
the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Warrant Holders shall
become entitled to purchase any securities of Sheridan other
than shares of Common Stock, thereafter the number of such
other securities so purchasable upon exercise of each Warrant
and the Exercise Price of such securities shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in paragraphs (a)
through (i), inclusive, above, and the provisions of Section 7
and Section 12.2 through 12.5, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(k) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof
shall not have been exercised, the Warrant Price and the
number of shares of Common Stock purchasable upon the exercise
of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (A) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange rights and (B)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by Sheridan upon such
exercise plus the aggregate consideration, if any, actually
received by Sheridan for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
rights whether or not exercised; provided, however, that no
such readjustment shall have the effect of increasing the
Warrant Price or decreasing the number of Warrant Shares by an
amount in excess of the amount of the adjustment initially
made with respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
12.2. VOLUNTARY ADJUSTMENT BY SHERIDAN. Sheridan may, at
its option, at any time during the term of the Warrants, reduce the
then current Exercise Price to any amount determined appropriate by
the Board of Directors of Sheridan.
12.3. NOTICE OF ADJUSTMENT. When the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, Sheridan
shall promptly mail by first class, postage prepaid, to each Warrant
Holder notice of such adjustment or adjustments and a certificate of a
firm of independent public accountants selected by the Board of
Directors of Sheridan (who may be the regular accountants employed by
Sheridan) setting forth the number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price of such Warrant
Shares after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation
by which such adjustment was made. Such certificate, absent manifest
error, shall be conclusive evidence of the correctness of such
adjustment.
12.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of Sheridan with or
merger of Sheridan into another person or in case of any sale,
transfer or lease to another person of all of or substantially all the
assets of
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<PAGE> 9
Sheridan, Sheridan or such successor or purchaser, as the case may be,
shall execute with each Warrant Holder an agreement that each Warrant
Holder shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other
securities and property which the Warrant Holder would have owned or
have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such Warrant been
exercised immediately prior to such action regardless of whether the
Warrants are exercisable at the time of such action. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 12.
The provisions of this Section 12.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
12.5. STATEMENT ON WARRANTS. Even though Warrants
heretofore or hereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement; the parties understand
and agree that such Warrants will represent rights consistent with any
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.
13. FRACTIONAL INTERESTS. Sheridan shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares which shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
13, be issuable on the exercise of any Warrant (or specified portion, thereof),
Sheridan shall pay an amount in cash equal to the closing price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
14. REGISTRATION UNDER THE SECURITIES ACT OF 1933. JEDI I
represents and warrants to Sheridan that it will not dispose of the Warrant or
Warrant Shares except pursuant to (i) an effective registration statement, or
(ii) an applicable exemption from registration under the Securities Act of
1933, as amended (the "Act"). In connection with any sale by JEDI I pursuant
to clause (ii) of the preceding sentence, JEDI I shall furnish to Sheridan an
opinion of counsel reasonably satisfactory to Sheridan to the effect that such
exemption from registration is available in connection with such sale.
15. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE
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<PAGE> 10
SECURITIES ACT OF 1933, AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii)
OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT SUCH EXEMPTION
FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY SALE
PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED
BY AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH EXEMPTION FROM
REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
16. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of Sheridan or any other matter, or any rights whatsoever as
stockholders of Sheridan. If, however, at any time prior to the expiration of
the Warrants and prior to their exercise, any of the following events shall
occur:
(a) Sheridan shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock, or
(b) Sheridan shall offer to the holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe to or purchase any thereof, or
(c) a dissolution, liquidation or winding up of Sheridan
(other than in connection with a consolidation, merger, sale, transfer
or lease or all or substantially all of its property, assets, and
business as an entirety) shall be proposed,
then in any one or more of said events Sheridan shall give notice in writing of
such event to the Warrant Holders as provided in Section 20 hereof, with such
notice to be completed at least 15 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding
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<PAGE> 11
up. Such notice shall specify such record date or the date of closing the
transfer books, as the case may be. Failure to provide or receive such notice
or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such dividend, distribution or
subscription rights, or such proposed dissolution, liquidation or winding up.
17. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on Sheridan
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows:
Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
Attention: President
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by registered mail, return receipt requested, postage prepaid, addressed to
such Warrant Holder at the address of such Warrant Holder as shown on the
Warrant Register or the Stock Register, as the case may be.
18. GOVERNING LAW; DISPUTES. This Warrant Agreement, the Warrants
and all related documents shall be deemed to be contracts made under and shall
be construed in accordance with and governed by the laws of the State of Texas
without giving effect to principles of conflicts of law; provided, however,
that any matter involving the internal corporate affairs of Sheridan shall be
governed by the provisions of Delaware law.
19. SUPPLEMENTS AND AMENDMENTS. Sheridan and the Warrant Holders
may from time to time supplement or amend this Warrant Agreement in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which Sheridan and the Warrant Holder may deem necessary or desirable and which
shall not be inconsistent with the provisions of the Warrants and which shall
not adversely affect the interests of the Warrant Holders. Any amendment to
this Warrant Agreement may be effected with the consent of Warrant Holders of
at least a majority of the total then outstanding Warrants (for this purpose
Warrant Shares shall be deemed to be Warrants in the proportion that Warrant
Shares are then issuable upon the exercise of Warrants); provided that, any
amendment which shall have the effect of materially adversely affecting the
interests of any Warrant Holder shall not be effective with respect to such
Warrant Holder if such Warrant Holder shall not have consented thereto.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sheridan and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration Date
of all Warrants.
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<PAGE> 12
21. SUCCESSORS. All representations and warranties of Sheridan
and all covenants and agreements of this Warrant Agreement by or for the
benefit of Sheridan or the Warrant Holders shall bind and inure to the benefit
of their respective successors and assigns hereunder.
22. MERGER OR CONSOLIDATION OF SHERIDAN. So long as this Warrant
Agreement remains in effect, Sheridan will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not Sheridan), shall expressly assume, by supplemental
agreement executed and delivered to the Warrant Holders, the due and punctual
performance and observance of each and every covenant and condition of this
Warrant Agreement to be performed and observed by Sheridan.
23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
Sheridan and the Warrant Holders, any legal or equitable right, remedy or claim
under this Warrant Agreement, but this Warrant Agreement shall be for the sole
and exclusive benefit of Sheridan and the holders of the Warrants and Warrant
Shares.
24. CAPTIONS. The captions of the sections and subsections of
this Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
25. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
SHERIDAN ENERGY, INC.
By: /s/ B.A. BERILGEN
-------------------------------
B.A. Berilgen, President
[Warrant Agreement -- Signature Page 1]
<PAGE> 14
JEDI HYDROCARBON
INVESTMENTS I
LIMITED PARTNERSHIP
BY: JEDI CAPITAL L.L.C., ITS
GENERAL PARTNER
By:/s/ JAMES R. McBRIDE
---------------------------------
Name: James R. McBride
-------------------------------
Title: Agent and Attorney-in-Fact
------------------------------
Address for Notice:
JEDI Hydrocarbon Investments I
Limited Partnership
c/o JEDI Capital L.L.C.
1400 Smith Street
Houston, Texas 77002
Attention: Jeremy Blachman
Telecopy:
[Warrant Agreement -- Signature Page 2]
<PAGE> 15
EXHIBIT A
TO
WARRANT AGREEMENT
(FORM OF WARRANT CERTIFICATE)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE Common Stock OR OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY
SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS AND THE COMMON STOCK UNDERLYING SUCH
WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
Warrant No. _____ 67,500 Warrants
VOID AFTER 5:00 P.M. HOUSTON TIME
ON DECEMBER 31, 2002
SHERIDAN ENERGY, INC.
WARRANT CERTIFICATE
THIS CERTIFIES THAT for value received JEDI HYDROCARBON INVESTMENTS I
LIMITED PARTNERSHIP ("JEDI I"), the registered holders hereof or registered
assigns (the "Warrant Holders") are the owners of the number of Warrants set
forth above, each of which entitles the owners thereof to purchase at any time
from 9:00 A.M., Houston time, on December 31, 1997, until 5:00 P.M., Houston
time on December 31, 2002, one fully paid and nonassessable share of common
stock (subject to adjustment), par value $0.01 per share (the "Common Stock"),
of SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan"), at the exercise price of $5.50 per share, subject to adjustment
as described in the Warrant Agreement referred to below (the "Exercise Price").
The Warrant Holders may pay the Exercise Price in cash, or by certified or
official bank check or make a net exercise for Net Warrant Shares as described
in the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated December
31, 1997 (the "Warrant Agreement"), by and among Sheridan and JEDI I, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of Sheridan and the Warrant Holders of the Warrant
Certificates. Copies of the Warrant Agreement are on file at the principal
office of Sheridan.
A-1
<PAGE> 16
The Warrant Holders hereof may be treated by Sheridan and all other
persons dealing with this Warrant Certificate as the absolute owners hereof for
any purpose and as the persons entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of Sheridan, any notice to the
contrary notwithstanding, and until such transfer on such books, Sheridan may
treat the Warrant Holders hereof as the owners for all purposes.
The Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of Sheridan, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the Warrant Holders to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled the Warrant Holders to
purchase. If this Warrant Certificate shall be exercised in part, the Warrant
Holders shall be entitled to receive upon surrender hereof, another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
Neither the Warrants nor the Warrant Certificate entitles any Warrant
Holders hereof to any of the rights of a shareholder of Sheridan.
THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER,
THAT ANY MATTER INVOLVING THE INTERNAL CORPORATE AFFAIRS OF SHERIDAN SHALL BE
GOVERNED BY THE PROVISIONS OF THE DELAWARE LAW.
A-2
<PAGE> 17
IN WITNESS WHEREOF, SHERIDAN ENERGY, INC. has caused the signature of
its President and Secretary to be printed hereon.
SHERIDAN ENERGY, INC.
By:
---------------------------------------
B.A. Berilgen, President
ATTEST:
- ----------------------------------
Name:
Secretary/Assistant Secretary
A-3
<PAGE> 1
EXHIBIT 12
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (this "Assignment") is from JEDI
HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP, a Delaware limited partnership,
whose address is 1400 Smith, Houston, Texas 77002, Attn: Donna W. Lowry, as
"Assignor" to SHERIDAN ENERGY, INC., a Delaware corporation whose address is
1000 Louisiana, Suite 800, Houston, Texas 77002, Attn: Bill Berilgen, as
"Assignee."
ARTICLE I.
For and in consideration of $1,000, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor has granted, bargained, sold, conveyed, assigned, transferred, set
over and delivered and hereby grants, bargains, sells, conveys, assigns,
transfers, sets over and delivers unto Assignee, all of Assignor's right, title
and interest in and to the following properties (such interest is collectively
referred to herein as the "Properties"):
(a) the oil and gas leases and leasehold interests,
working interests, net revenue interests, operating rights, overriding
royalty interest, net profits interests or similar interests in the
properties, described on Exhibit A, and any other rights that may
arise from operation of the properties and lands pooled, unitized,
communitized or consolidated with such properties (the "Oil and Gas
Properties"); and
(b) the oil, condensate or natural gas wells, water
source wells, salt water disposal wells and other types of injection
wells either located on the Oil and Gas Properties or held for use in
connection with the Oil and Gas Properties, and whether producing,
operating, shut-in, temporarily abandoned, abandoned, standing or
otherwise; and
(c) the severed crude oil, natural gas, casinghead gas,
drip gasoline, natural gasoline, petroleum, petroleum gas liquids,
condensate, products, liquids and other hydrocarbons and other
minerals or material of every kind and description produced from the
Oil and Gas Properties; and
(d) the physical facilities, equipment, personal
property, rights-of-way and easements or interest therein that are
used or held for use in connection with the ownership or operation of
the properties described in subparagraphs (a) through (c), inclusive,
whether located on or off such properties, including without
limitation the rights-of-way and easements described on Exhibit B; and
(e) all contracts and agreements that in any way relate
to the properties described in subparagraphs (a) through (d),
inclusive, including operating agreements, agreements relating to the
production, storage, treatment, transportation, processing, purchase,
sale or other disposal of Substances, including, but without
limitation by enumeration, all easements, servitudes, pooling and
unitization agreements, gas sale agreements, and surface leases, and
any and all other amendments, ratifications or extensions of the
foregoing.
<PAGE> 2
LESS AND EXCEPT and Assignor hereby excludes from the foregoing all
2-D seismic information, licenses and data relating to the Properties, to the
extent that the same is not transferable without consent, payment or penalty.
TO HAVE AND TO HOLD the Properties unto Assignee and its heirs,
successors and assigns, forever; provided, however, this Assignment is made
subject to the following terms and provisions:
ARTICLE II
DISCLAIMERS
2.1 Disclaimer. Except as provided below, the Properties are
hereby assigned by Assignor to Assignee without recourse, covenant or warranty
of title of any kind, express, implied or statutory, even to the return of the
purchase price. Any covenants or warranties implied by statute or law by the
use herein of the words "grant", "convey" or other similar words are hereby
expressly restrained, disclaimed, waived and negated. WITHOUT LIMITING THE
GENERALITY OF THE TWO PRECEDING SENTENCES, ASSIGNEE ACKNOWLEDGES THAT, EXCEPT
AS SET FORTH IN THE PURCHASE AGREEMENT DATED DECEMBER 31, 1997 BETWEEN ASSIGNOR
AND ASSIGNEE (THE "PURCHASE AGREEMENT"), ASSIGNOR HAS NOT MADE, AND ASSIGNOR
HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY EXPRESSLY WAIVES,
ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE
RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE
RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE PROPERTIES, (b) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE
BY OR ON BEHALF OF ASSIGNOR, (c) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES,
(d) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (e) ANY IMPLIED OR
EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (f) ANY IMPLIED OR
EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (g) ANY
RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION, (h) ANY CLAIMS BY ASSIGNEE FOR DAMAGES BECAUSE OF REDHIBITORY
VICES OR DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN AS OF THE
EFFECTIVE TIME, AND (i) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER
APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH ASSIGNEE AND ASSIGNOR
THAT, EXCEPT AS PROVIDED IN THE PURCHASE AGREEMENT, THE PROPERTIES ARE HEREBY
ASSIGNED TO ASSIGNEE IN THEIR PRESENT CONDITION AND STATE OF REPAIR, "AS IS"
AND "WHERE IS" WITH ALL FAULTS, AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE
SUCH INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE. ASSIGNOR AND ASSIGNEE AGREE
THAT, TO THE EXTENT
-2-
<PAGE> 3
REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
2.2 Subrogation. Assignor hereby transfers and assigns unto
Assignee, its successors and assigns, all of its rights under and by virtue of
all covenants and warranties pertaining to the Properties, express or implied
(including, without limitation, title warranties and manufacturers', suppliers'
and contractors' warranties), that have heretofore been made by any of
Assignor's predecessors in title, or by any third party manufacturers,
suppliers and contractors (the "Prior Covenants and Warranties"). This
Assignment is made with full substitution and subrogation of Assignee, its
successors and assigns, in and to and under and by virtue of the Prior
Covenants and Warranties and with full subrogation to all rights accruing under
the statutes of limitation, prescription and repose under the laws of the
applicable jurisdictions in relation to the Properties and all causes of
action, rights of action or warranty of Assignor against all former owners of
the Properties.
ARTICLE III
MISCELLANEOUS
3.1 Further Assurances. Without creating any additional
covenants, warranties or representations of or by Assignor, Assignor covenants
and agrees to execute and deliver to Assignee all such other and additional
assignments, instruments and other documents and to do all such other acts and
things as may be necessary more fully to vest in Assignee record title to all
of the Properties and the respective properties, rights and interests herein
and hereby granted or intended to be granted, and to put Assignee in actual
possession and operating control of the Properties to the same extent as
Assignor was theretofore in, or was theretofore entitled to be in. Such
separate or additional assignments, if any: (a) shall evidence the assignment
of the Properties herein made or intended to be made; (b) shall not modify any
of the terms and covenants herein set forth and shall not create any additional
representations or covenants of or by Assignor to Assignee; (c) shall be deemed
to contain all of the terms and provisions hereof, as fully and to all intents
and purposes as though the same were set forth at length in the separate
assignments; and (d) to the extent required by law, shall be on forms
prescribed, or may otherwise be on forms suggested, by the appropriate
governmental entities and agencies. In the event any term or provision of any
additional assignment should be inconsistent with or conflict with the terms or
provisions of this Assignment, the terms and provisions of this Assignment
shall control and shall govern the rights, obligations and interests of the
parties hereto, their successors and assigns. Such additional assignments and
this Assignment shall, when taken together, be deemed to constitute the one
assignment by Assignor to Assignee of all of the Properties.
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3.2 Approval. This Assignment, insofar as it affects any interest
in leases the transfer of which must be approved by any governmental entity or
agency, is made and accepted subject to the approval of the appropriate
governmental entity or agency and to the terms of such approval, if and to the
extent required by law.
3.3 Assumption. Assignee expressly assumes all of Assignor's
obligations relating to the Properties, including, without limitation, leases,
operating agreements, unit agreements and contracts.
3.4 Counterparts. This Assignment may be executed in any number
of counterparts, and each counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
conveyance.
3.5 Successors and Assigns. This Assignment shall bind and inure
to the benefit of Assignor and Assignee and their respective successors and
assigns.
3.6 Recording. To facilitate recording or filing of this
Assignment, the counterpart to be recorded in a given county or parish may
contain only that portion of the exhibits that describes Properties located in
that county or parish. Assignor and Assignee have each retained a counterpart
of this Assignment with complete exhibits.
3.7 Exhibits. Reference is made to all Exhibits attached hereto
and made a part hereof for all purposes. References in such Exhibit to
instruments on file in the public records are made a part hereof for all
purposes.
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment as of the date of their respective acknowledgments below, but
effective as of 7:00 a.m. local time on September 1, 1997.
ASSIGNOR:
JEDI HYDROCARBON INVESTMENTS I
LIMITED PARTNERSHIP
WITNESSES:
By: JEDI CAPITAL L.L.C. Its
General Partner
/s/ By: /s/ D. R. Rollins, Jr.
- ----------------------------- ----------------------------------
Name: D. R. Rollins, Jr.
----------------------------------
/s/ Title: Manager
- ----------------------------- ----------------------------------
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ASSIGNEE:
WITNESSES: SHERIDAN ENERGY, INC.
/s/ By: /s/ B. A. Berilgen
- ----------------------------- ------------------------------
Name: B. A. Berilgen
------------------------------
/s/ Title: President and CEO
- ----------------------------- ------------------------------
ACKNOWLEDGMENTS
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 31st day of December, 1997, before me appeared D. R. Rollins,
Jr., to me personally known, who, being by me duly sworn (or affirmed) did say
that he is the Manager of JEDI CAPITAL L.L.C., a Delaware limited liability
company, as general partner of JEDI HYDROCARBON INVESTMENTS I LIMITED
PARTNERSHIP, a Delaware limited partnership, and that the instrument was signed
on behalf of the company by authority of its Members in its capacity as the
general partner of JEDI HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP, and that
he acknowledged the instrument to be the free act and deed of the company, the
general partner of JEDI HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP.
/s/ Terri L. Frederick
-----------------------------------------------
Notary Public in and for
The State of TEXAS
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 31st day of December, 1997, before me appeared B. A. Berilgen,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the President and CEO of SHERIDAN ENERGY, INC., a Delaware corporation,
and that the instrument was signed on behalf of the corporation by authority of
its Board of Directors and that he acknowledged the instrument to be the free
act and deed of the corporation.
Terri L. Frederick
-----------------------------------------------
Notary Public in and for
The State of TEXAS
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EXHIBIT 13
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into
and made effective as of December 31, 1997, by and among Sheridan Energy, Inc.,
a Delaware corporation (the "Company"), and the stockholders of the Company
whose signatures appear on the signature pages of this Agreement under the
caption "Stockholders" (referred to herein, together with all permitted
transferees, individually as a "Stockholder" and collectively as the
"Stockholders").
WITNESSETH:
WHEREAS, in connection with the purchase and sale of shares of common
stock pursuant to (i) the ECT Agreement (as defined below), (ii) the Grand Gulf
Agreement (as defined below), and (iii) the JEDI I Agreement (as defined
below), it was contemplated that the Company would grant certain registration
rights to the Stockholders, and the Company agreed to grant such registration
rights.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms have the meanings indicated:
"Agreement" shall have the meaning set forth above.
"Business Day" shall mean any day other than a Saturday, Sunday or
legal holiday for banks in the State of Texas.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean the Company's Common Stock, par value $.01
per share, or any successor class of the Company's Common Stock.
"Company" shall have the meaning set forth above.
"ECT" shall mean Enron Capital Trade & Resources Corp.
"ECT Agreement" shall mean that certain Stock Purchase Agreement
between the Company and ECT dated November 28, 1997.
"Enron Entities" means ECT, JEDI and JEDI I.
<PAGE> 2
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Grand Gulf" shall mean Grand Gulf Production, L.L.C.
"Grand Gulf Agreement" shall mean that certain Purchase Agreement
between Grand Gulf and the Company dated December 31, 1997.
"Holders" means the holders of Registrable Shares and shall include
transferees to whom Holders are permitted to assign rights hereunder pursuant
to Section 4.1.
"JEDI" shall mean Joint, Energy Development Investments Limited
Partnership.
"JEDI I" shall mean JEDI Hydrocarbon Investments I Limited
Partnership.
"JEDI I Agreement" shall mean that certain Purchase Agreement between
JEDI I and the Company dated December 31, 1997.
"Initiating Holders" shall mean Holders holding no less than 250,000
Registrable Shares.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or a political subdivision, agency or instrumentality thereof or
other entity or organization of any kind.
"Register," "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the Securities
Act and the declaration or ordering by the Commission of effectiveness of such
registration statement.
"Registrable Shares" shall mean the shares of Common Stock issued by
Company pursuant to the ECT Agreement, JEDI I Agreement, and the Grand Gulf
Agreement, and any shares of Common Stock (including shares of Common Stock
issuable upon the exercise of options, warrants or other convertible or
exchangeable securities) received on or after December 15, 1997 by the
Stockholders (other than Grand Gulf) from Company or otherwise in a transaction
not involving a public offering within the meaning of the Securities Act,
including without limitation, the acquisition of shares of Common Stock by JEDI
from Grand Gulf.
"Stockholder" and "Stockholders" shall have the meaning set forth
above.
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<PAGE> 3
SECTION 2. REGISTRATION RIGHTS.
2.1 PIGGY-BACK REGISTRATION. If Company at any time proposes to
register any shares of Common Stock (or securities convertible into or
exercisable or exchangeable for Common Stock), other than in a demand
registration pursuant to Section 2.2(a) of this Agreement and other than in a
registration on Form S-4 or Form S-8, it shall give notice to the Holders of
such intention 20 days prior to the filing of a registration statement with
respect to such shares. Upon the written request of any Holder given within 20
days after receipt of any such notice, Company shall include in such
registration all of the Registrable Shares indicated in such request, so as to
permit the disposition of the shares so registered. Notwithstanding any other
provision of this Section 2.1, if the managing underwriter advises Company that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of shares that may
be included in such registration and the reduced number of shares, if any, to
be sold shall be allocated among the Company, participating Holders and other
persons participating in such registration in proportion to the number of
shares proposed to be sold by each party prior to the imposition of a
limitation by the managing underwriter. The rights of a Holder to participate
in a registration pursuant to this Section 2.1 shall terminate at such time as
such Holder holds less than 2% of the outstanding shares of Common Stock.
2.2 DEMAND REGISTRATION. (a) At any time and from time to time,
one or more Initiating Holders may request in writing that all or part of the
Registrable Shares shall be registered for sale under the Securities Act.
Within 5 days after receipt of any such request, Company shall give written
notice of such request to the other Holders and shall include in such
registration all Registrable Shares held by all such Holders who wish to
participate in such demand registration and provide Company with written
requests for inclusion therein within 15 days after the receipt of Company's
notice. Thereupon, Company shall effect the registration of all Registrable
Shares as to which it has received requests for registration specified in the
request for registration. Company shall not be required to effect any such
registration prior to November 28, 1998; provided, however, that the Initiating
Holders may request registration hereunder prior to November 28, 1998 and in
such event Company shall undertake to issue the notices referred to herein
prior to November 28, 1998 so as to permit the filing of registration statement
promptly after November 28, 1998. Notwithstanding any other provision of this
Section 2.2(a), if the managing underwriter advises the Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then there shall be excluded from such registration and
underwriting to the extent necessary to satisfy such limitation, first shares
to be offered by Company or by shareholders other than the Holders, and second,
to the extent necessary, and only if all shares to be offered by Company and by
shareholders other than Holders have been excluded, Registrable Shares and the
number of shares of Registrable Shares that may be included in the registration
and underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Shares held by
such Holders. Company may not cause any other registration of securities for
sale for its own account (other than a registration effected solely to
implement an
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<PAGE> 4
employee benefit plan) to be initiated after a registration requested pursuant
to this Section 2.2(a) and to become effective less than 90 days after the
effective date of any registration requested pursuant to this Section 2.2(a).
Company shall not be required to effect more than an aggregate of three
registrations pursuant to this Section 2.2(a).
(b) If Company shall furnish to the Holders a certificate signed
by the President of Company stating that in the good faith judgment of the
Board of Directors of Company it would be seriously detrimental to Company for
a registration statement to be filed at such time or would materially adversely
affect a pending or proposed public offering of Company's securities, Company
shall have the right to defer the filing of a registration statement requested
pursuant to Section 2.2(a) hereof for a period of not more than 90 days after
receipt of the request of the Holders under Section 2.2(a); provided, however,
that (i) Company shall not utilize this right more than once in any 12-month
period and (ii) except with respect to the first deferment of the filing of a
registration statement required pursuant to Section 2.2(a) because of any
pending or proposed public offering of Company's securities, in the event of
any such pending or proposed public offering of Company's securities, up to 25%
of the shares to be included in the registration for such public offering shall
be Registrable Shares at the request of such Holders and the number of shares
of Registrable Shares that may be included in the registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Shares held by such
Holders.
2.3 LOCKUPS. Each Holder agrees, so long as such Holder holds 2%
or more of the outstanding shares of Common Stock, that upon request by the
managing underwriter in any underwriting of Common Stock or securities
convertible into or exchangeable for Common Stock, it will agree not to sell or
otherwise dispose of its shares of Common Stock without the consent of such
managing underwriter for such period of time (which may not exceed 180 days)
from the effective date of the registration statement as may be requested by
such underwriters; provided, however, that the obligations of such Holders
pursuant to this Section 2.3 shall be conditioned upon the receipt by such
underwriters of lockup agreements for the same period of time and on the same
terms as the time period and terms requested of such Holders from each
executive officer or director of the Company or holder of 10% or more of the
outstanding shares of Common Stock.
2.4 REGISTRATION PROCEDURES. Whenever any Registrable Shares are
to be registered pursuant to Section 2.1 or 2.2 of this Agreement, the Company
will use reasonable efforts to effect the registration of such Registrable
Shares on the same terms and conditions as any similar securities of the
Company included therein. In connection with any registration pursuant to
Section 2.1 or Section 2.2 the Company will, subject to Section 2.1 or 2.2
respectively, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective;
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<PAGE> 5
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by such registration statement;
(c) furnish to the Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Shares owned by them;
(d) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering; each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(e) notify each Holder of Registrable Shares covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material act or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(f) cause all Registrable Shares registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by
Company are then listed;
(g) provide a transfer agent and registrar for all Registrable
Shares registered pursuant hereunder and a CUSIP number for all such
Registrable Shares in each case not later than the effective date of such
registration; and
(h) furnish, at the request of any Holder requesting registration
of Registrable Shares pursuant to this Section, on the date that such
Registrable Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Shares and (ii) a letter dated such date, from the
independent certified public accountants of Company, in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Shares.
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<PAGE> 6
If any registration statement provided for hereunder refers to any
Holder by name or otherwise as the holder of any securities of the Company then
such Holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation of such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to such Holder by name or otherwise is
not required by the 1933 Act or any similar federal statute then in force, the
deletion of the reference to such Holder.
2.5 REGISTRATION EXPENSES. All expenses incurred in connection
with any registration under Sections 2.1 or 2.2 shall be borne by Company;
provided, however, that (i) each of the Holders participating in such
registration shall pay its pro rata portion of the fees, discounts or
commissions payable to any underwriter, and (ii) the Holders participating in a
third registration made pursuant to Section 2.2 shall bear their proportionate
part of all Commission and NASD filing fees and one-half of all other expenses
incurred in connection with any such registration.
2.6 INDEMNIFICATION; CONTRIBUTION.
(a) Company will indemnify and hold harmless, to the fullest
extent permitted by law, any Holder and any underwriter for such Holder, and
each person, if any, who controls the Holder or such underwriter, from and
against any and all losses, damages, claims, liabilities, joint or several,
costs and expenses (including any amounts paid in any settlement effected with
Company's consent) to which the Holder or any such underwriter or controlling
person may become subject under applicable law or otherwise, insofar as such
losses, damages, claims, liabilities (or actions or proceedings in respect
thereof), costs or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement or included in the prospectus, as amended or
supplemented, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, and Company will reimburse the Holder, such underwriter and each
such controlling person of the Holder or the underwriter, promptly upon demand,
for any reasonable legal or any other expenses incurred by them in connection
with investigating, preparing to defend or defending against or appearing as a
third party witness in connection with such loss, claim, damage, liability,
action or proceeding; provided, however, that Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in strict conformity with written
information furnished by a Holder to the managing underwriter specifically for
inclusion therein; provided, further, that the indemnity agreement contained in
this subsection 2.6(a) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected
without the consent of Company, which consent shall not be unreasonably
withheld. Such indemnity
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<PAGE> 7
shall remain in full force and effect regardless of any investigation made by
or on behalf of the selling Holder, the underwriter or any controlling person
of the selling Holder or the underwriter, and regardless of any sale in
connection with such offering by the selling Holder. Such indemnity shall
survive the transfer of securities by a selling Holder.
(b) Each Holder participating in a registration hereunder will
indemnify and hold harmless Company, any underwriter for Company, and each
person, if any, who controls Company or such underwriter, from and against any
and all losses, damages, claims, liabilities, costs or expenses (including any
amounts paid in any settlement effected with the selling Holder's consent) to
which Company or any such controlling person and/or any such underwriter may
become subject under applicable law or otherwise, insofar as such losses,
damages, claims, liabilities (or actions or proceedings in respect thereof),
costs or expenses arise out of or are based on (i) any untrue or alleged untrue
statement of any material fact contained in the registration statement or
included in the prospectus, as amended or supplemented, or (ii) the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and each such Holder
will reimburse Company, any underwriter and each such controlling person of
Company or any underwriter, promptly upon demand, for any reasonable legal or
other expenses incurred by them in connection with investigating, preparing to
defend or defending against or appearing as a third party witness in connection
with such loss, claim, damage, liability, action or proceeding; in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in strict
conformity with written information furnished by such Holder to the managing
underwriter specifically for inclusion therein; provided, however, that the
indemnity agreement contained in this subsection 2.6(b) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability, or
action if such settlement is effected without the consent of such Holder, which
consent shall not be unreasonably withheld. In no event shall the liability of
any Holder exceed the gross proceeds received by such Holder from the offering.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of subsections 2.6(a) or (b) of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said subsections 2.6(a) or
(b), promptly notify the indemnifying party of the commencement thereof; but
the omission to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than to the
extent the party to be notified is actually prejudiced thereby. In case such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and there is a conflict of
interests which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall have
the right to select one
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<PAGE> 8
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said subsections 2.6(a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed counsel in
accordance with the provision of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action and within 15 days after
written notice of the indemnified party's intention to employ separate counsel
pursuant to the previous sentence, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) If recovery is not available under the foregoing
indemnification provisions with respect to a matter referred to in Sections 2.6
(a) or(b) hereof, for any reason other than as specified therein, the parties
entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses as more fully set forth in an
underwriting agreement to be executed in connection with such registration. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the parties' relative knowledge and access
to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, and
any other equitable considerations appropriate under the circumstances;
provided that no party shall be required to contribute an amount in excess of
the amount it would have been required to pay pursuant to the foregoing
indemnification provisions if they had been available.
2.7 DESIGNATION OF UNDERWRITER. In the case of any registration
effected pursuant to Section 2.2, the managing underwriter shall be reasonably
acceptable to the Initiating Holders and Company.
2.8 RULE 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder (or, if the Company
is not required to file such reports, it will, upon the request of any Holder
of Registrable Shares, make publicly available other nonconfidential
information so long as necessary to permit sales under Rule 144 under the 1933
Act), and it will take such other action as any Holder of Registrable Shares
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Shares without registration under the 1933 Act
within the limitation of the exemptions provided by (a) Rule 144 under the 1933
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter
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<PAGE> 9
adopted by the Commission. Upon the request of any Holder of Registrable
Shares, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 3. REPRESENTATION AND WARRANTY. The Company hereby
represents and warrants to the Stockholders that (a) other than the
registration rights granted pursuant to this Agreement, the Company has not
granted registration rights to any Person; and (b) no consent, approval,
authorization or waiver of any Person is required to permit the Company to
execute or deliver this Agreement or perform this Agreement in accordance with
its terms and upon execution this Agreement will not conflict with Company's
constituent documents or any material contract.
SECTION 4. ASSIGNMENT AND SUBSEQUENT GRANTS.
4.1 ASSIGNMENT OF REGISTRATION RIGHTS. Any Holder may assign all
or part of its rights under this Agreement to any transferee who acquires
100,000 or more Registrable Shares. The transferor shall, within 20 days after
such transfer, furnish Company with written notice of the name and address of
such transferee and the securities with respect to which such registration
rights are being assigned.
4.2 SUBSEQUENT GRANTS OF REGISTRATION RIGHTS. After the date
hereof, Company will not enter into any agreement granting any holder or
prospective holder of any securities of Company registration rights (i) unless
such registration rights include lockup provisions which are the same as those
provisions set forth in Section 2.3 hereof, and (ii) unless any demand
registration rights granted to such holders or prospective holders expressly
permit the Holders to participate in any such demand registration and provide
for cutbacks as requested by a managing underwriter on a pro rata basis among
such holders or prospective holders and any Holders electing to participate in
such offering on a pro rata basis based on the number of shares for which
registration is requested.
SECTION 5. MISCELLANEOUS.
5.1 RECAPITALIZATION, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to the
Registrable Shares, to any and all shares of equity capital of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) which may be issued in respect of, in exchange for, or
in substitution of the Registrable Shares, in each case as the amounts of such
securities outstanding are appropriately adjusted for any equity dividends,
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date of this Agreement.
5.2 NOTICES. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by
United States registered or certified mail, return receipt requested,
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postage prepaid, addressed (i) if to Company, to: 1000 Louisiana, Suite 800,
Houston, Texas 77002, Attention: B.A. Berilgen, (ii) if to a Stockholder, at
such Stockholder's address as shown on the stock transfer records of the
Company, or to such other address (as to a Stockholder) as such Stockholder may
furnish to the Company, or (as to the Company) as the Company may furnish to
the Stockholders except that notices of changes of address shall be effective
only upon receipt.
5.3 APPLICABLE LAW. This contract is entered into under, and
shall be governed for all purposes by, the laws of the State of Texas without
giving effect to any conflict of law rules which would require the application
of the law of another jurisdiction; provided, however, that any matter
involving the internal corporate affairs of the Company shall be governed by
the provisions of Delaware law.
5.4 AMENDMENT AND WAIVER. This Agreement may be amended, and the
provisions hereof may be waived, only by a written instrument signed by the
Holders (at the time of such amendment or waiver) or their designees and the
Company. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
5.5 REMEDY FOR BREACH OF CONTRACT. The parties agree that in the
event there is any breach or asserted breach of the terms, covenants or
conditions of this Agreement, the remedy of the parties hereto shall be in law
and in equity and injunctive relief shall lie for the enforcement of or relief
from any provisions of this Agreement. If any remedy or relief is sought and
obtained by any party against one of the other parties pursuant to this Section
5.5, the other party shall, in addition to the remedy of relief so obtained, be
liable to the party seeking such remedy or relief for the reasonable expenses
incurred by such party in successfully obtaining such remedy or relief,
including the fees and expenses of such party's counsel.
5.6 SEVERABILITY. It is a desire and intent of the parties that
the terms, provisions, covenants and remedies contained in this Agreement shall
be enforceable to the fullest extent permitted by law. If any such term,
provision, covenant or remedy of this Agreement or the application thereof to
any Person or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant or
remedy shall be construed in a manner so as to permit its enforceability under
the applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any Person
or circumstances other than those to which they have been held invalid or
unenforceable, shall remain in full force and effect.
5.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
-10-
<PAGE> 11
5.8 HEADINGS. The section and paragraph headings have been
inserted for purposes of convenience and shall not be used for interpretive
purposes.
5.9 BINDING EFFECT. Unless otherwise provided herein, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns, and is not intended to confer upon any other
Person any right or remedies hereunder; provided, however, that a transferee of
a Holder shall be deemed to be a Holder for purposes of obtaining the benefits
or enforcing the rights of a Holder and, if requested by the Company, shall
execute such documents as may reasonably be requested by the Company to
evidence such transferee's agreement to be bound by this Agreement as if a
party hereto.
5.10 ENTIRE AGREEMENT. This Agreement, together with the other
agreements referenced herein, constitutes the entire agreement and supersedes
all prior agreements, understandings, both written and oral, among the parties
with respect to the registration rights pertaining to Common Stock acquired by
the Holders, expressly including the provisions of Article VII of the ECT
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
SHERIDAN ENERGY, INC.
By: /s/ B.A. BERILGEN
------------------------------------
Name: B.A. Berilgen
----------------------------------
Title: President and C.E.O.
---------------------------------
-11-
<PAGE> 12
STOCKHOLDERS
SHARES OWNED AT
STOCKHOLDERS TIME OF EXECUTION
ENRON CAPITAL & TRADE
RESOURCES CORP.
By: /s/ JAMES R. McBRIDE
------------------------------------
Name: James R. McBride
----------------------------------
Title: Vice President
---------------------------------
GRAND GULF PRODUCTION, L.L.C.
By: /s/ DONALD K. LEHTO
------------------------------------
Name: Donald K. Lehto
----------------------------------
Title: CEO
---------------------------------
JEDI HYDROCARBON INVESTMENTS I
LIMITED PARTNERSHIP
By: JEDI CAPITAL L.L.C., its general partner
By: /s/ JAMES R. McBRIDE
------------------------------------
Name: James R. McBride
----------------------------------
Title: Agent and Attorney-in-Fact
---------------------------------
<PAGE> 1
EXHIBIT 14
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), is
entered into on December 31, 1997 by and among GRAND GULF PRODUCTION, L.L.C., a
Texas limited liability company ("Grand Gulf"), SHERIDAN ENERGY, INC., a
Delaware corporation ("Sheridan"), and JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP, a Delaware limited partnership ("JEDI").
W I T N E S S E T H:
WHEREAS, Grand Gulf and JEDI have as of December 31, 1997 entered into
a Stock Transfer and Termination Agreement ("Stock Transfer") providing, among
other things, the assignment of certain capital stock and contract rights from
Grand Gulf to JEDI;
WHEREAS, pursuant to the Stock Transfer, Grand Gulf and JEDI are
required to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Conveyance and Assignment of Assets. Grand Gulf hereby
grants, conveys, assigns, transfers, bargains and delivers unto JEDI and its
successors and assigns, all its right, title and interest in and to (i) the
Purchase Agreement between Sheridan and Grand Gulf dated as of December 31,
1997 (the "Purchase Agreement"), (ii) Registration Rights Agreement among Grand
Gulf, JEDI Hydrocarbon Investments I Limited Partnership, a Delaware limited
partnership, Enron Capital & Trade Resources Corp., a Delaware corporation, and
Sheridan dated as of December 31, 1997 (the "Rights Agreement") and (iii)
Warrant Agreement between Grand Gulf and Sheridan dated as of December 31, 1997
(the "Warrant Agreement" and together with the Rights Agreement and the
Purchase Agreement, are collectively referred to herein as, the "Agreements").
2. Subsequent Actions. Grand Gulf hereby covenants to and with
JEDI, its successors and assigns, to execute and deliver to JEDI, its
successors and assigns, all such other and further instruments of conveyance,
assignment and transfer, and all such notices, releases and other documents,
that would more fully and specifically convey, assign, and transfer to and vest
in JEDI, its successors and assigns, the title of Grand Gulf in and to all and
singular the Agreements hereby conveyed, assigned, and transferred, or intended
to be conveyed, assigned or transferred.
3. Assumption. JEDI has and by these presents does hereby fully
assume from and after the date hereof all liabilities, duties, and obligations
of Grand Gulf under the Rights Agreement and the Warrant Agreement and agrees
to be bound by the terms, conditions and covenants thereunder. JEDI has and
does hereby fully assume from and after the date hereof all indemnity
obligations of Grand Gulf under the Purchase Agreement.
<PAGE> 2
4. Acknowledgments and Agreements. Sheridan hereby acknowledges
the assignment of the Purchase Agreement from Grand Gulf to JEDI. JEDI and
Sheridan agree that as between Sheridan and JEDI that JEDI shall be primarily
responsible for the Grand Gulf indemnity obligations under the Purchase
Agreement subject to the limitations applicable to such indemnity obligations
(including, without limitation, the aggregate liability under such indemnity
and the survival period of such indemnity) as set forth in the Purchase
Agreement. Notwithstanding the foregoing or the provisions of Section 3
hereof, Grand Gulf hereby acknowledges that the assumption by JEDI of its
indemnity obligations under the Purchase Agreement will in no way obviate,
diminish or reduce the indemnity obligations of Grand Gulf under the Stock
Transfer and such indemnity obligations under the Stock Transfer shall operate
as if Grand Gulf has retained all of its indemnity obligations under the
Purchase Agreement.
5. Governing Law. THIS ASSIGNMENT SHALL BE CONSTRUED, PERFORMED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF LOUISIANA
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW RULES OR STATUTES WHICH WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
6. Conflict and Inconsistency; No Merger. To the extent any
conflict or inconsistency exists between the provisions of this Assignment and
the Stock Transfer, the provisions of the Stock Transfer shall be controlling.
The terms and provisions of the Stock Transfer (including, without limitation,
the representations, warranties, covenants and indemnities therein) shall not
merge, be extinguished or otherwise affected by the delivery and execution of
this Assignment or any other document delivered pursuant to Paragraph 2 of this
Assignment.
7. Binding Effect. This Assignment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
8. Counterparts. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, Grand Gulf and JEDI have executed this Assignment
as of the day and year first above written.
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By: /s/ JAMES R. McBRIDE
------------------------------
Name: James R. McBride
----------------------------
Title: Agent and Attorney-in-Fact
---------------------------
SHERIDAN ENERGY, INC.
By: /s/ B.A. BERILGEN
----------------------------------------
Name: B.A. Berilgen
--------------------------------------
Title: President and CEO
-------------------------------------
GRAND GULF PRODUCTION, L.L.C.
By: /s/ DONALD K. LEHTO
----------------------------------------
Name: Donald K. Lehto
--------------------------------------
Title: CEO
-------------------------------------
3
