EXHIBIT 10.2
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SHERIDAN ENERGY, INC.
AND
ENRON CAPITAL TRADE & RESOURCES CORP.
DATED
NOVEMBER 28, 1997
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TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
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1.1 DEFINITIONS............................................................. 1
ARTICLE II.
SALE AND PURCHASE OF SHARES; CLOSING
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2.1 SALE AND PURCHASE OF SHARES............................................. 7
2.2 CLOSING................................................................. 7
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
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3.1 CORPORATE EXISTENCE..................................................... 7
3.2 CORPORATE POWER AND AUTHORIZATION....................................... 7
3.3 BINDING OBLIGATIONS..................................................... 8
3.4 NO VIOLATION............................................................ 8
3.5 CONSENTS................................................................ 8
3.6 SEC DOCUMENTS AND FINANCIAL STATEMENTS.................................. 8
3.7 LIABILITIES; INDEBTEDNESS............................................... 9
3.8 LITIGATION.............................................................. 9
3.9 MATERIAL CONTRACTS AND COMMITMENTS...................................... 9
3.10 TITLE TO PROPERTIES AND ASSETS; LEASES..................................11
3.11 COMPLIANCE WITH THE LAW.................................................11
3.12 TAXES...................................................................11
3.13 EMPLOYEE BENEFIT MATTERS................................................12
3.14 INVESTMENT COMPANY ACT..................................................13
3.15 PUBLIC UTILITY HOLDING COMPANY ACT......................................13
3.16 NO RESTRICTIONS ON AFFILIATES...........................................13
3.17 CAPITALIZATION..........................................................13
3.18 SUBSIDIARIES............................................................14
3.19 ENVIRONMENTAL MATTERS...................................................14
3.20 INTELLECTUAL PROPERTY AND OTHER INTANGIBLE ASSETS.......................16
3.21 NO PUBLIC OFFER.........................................................16
3.22 INSURANCE...............................................................16
3.23 CERTAIN TRANSACTIONS....................................................16
3.24 USE OF PROCEEDS; MARGIN REGULATIONS.....................................17
3.25 PLUGGING AND ABANDONMENT OBLIGATIONS....................................17
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3.26 NO MATERIAL MISSTATEMENTS OR OMISSIONS..................................17
3.27 PIONEER TRANSACTIONS....................................................17
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
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4.1 CORPORATE EXISTENCE.....................................................17
4.2 CORPORATE POWER AND AUTHORIZATION.......................................17
4.3 BINDING OBLIGATIONS.....................................................18
4.4 NO VIOLATION............................................................18
4.5 PURCHASE FOR INVESTMENT.................................................18
4.6 FEES AND COMMISSIONS....................................................18
ARTICLE V.
COVENANTS
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5.1 GENERAL.................................................................18
5.2 NOTICES AND CONSENTS....................................................18
5.3 OPERATION OF BUSINESS...................................................18
5.4 FULL ACCESS.............................................................19
5.5 NOTICE OF DEVELOPMENTS..................................................19
ARTICLE VI.
CLOSING CONDITIONS
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6.1 CONDITIONS TO OBLIGATION OF BUYER.......................................20
6.2 CONDITIONS TO OBLIGATION OF SELLER......................................21
ARTICLE VII.
REGISTRATION RIGHTS
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7.1 DEFINITIONS.............................................................22
7.2 PIGGYBACK REGISTRATION..................................................22
7.3 DEMAND REGISTRATION.....................................................22
7.4 DELAY IN REGISTRATION...................................................23
7.5 DESIGNATION OF UNDERWRITER..............................................23
7.6 EXPENSES................................................................23
7.7 INDEMNITIES.............................................................24
7.8 OBLIGATIONS OF SELLER...................................................26
7.9 ASSIGNMENT OF REGISTRATION RIGHTS.......................................27
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7.10 LOCKUPS.................................................................27
7.11 SUBSEQUENT GRANTS OF REGISTRATION RIGHTS................................27
ARTICLE VIII.
OTHER PROVISIONS
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8.1 FEES AND COMMISSIONS....................................................28
8.2 USE OF PROCEEDS.........................................................28
8.3 NO RESTRICTIONS ON AFFILIATES...........................................28
8.4 CERTAIN PUBLIC UTILITY MATTERS..........................................28
8.5 STANDSTILL..............................................................28
8.6 BUSINESS OPPORTUNITY MATTERS............................................29
8.7 INDEMNIFICATION.........................................................29
8.8 SURVIVAL OF TERMS; FAILURE TO CLOSE.....................................30
8.9 INFORMATION AND MEETINGS................................................30
8.10 COMMODITY PRICE RISK PROGRAM............................................30
8.11 NUMBER OF BOARD OF DIRECTORS............................................30
8.12 OPTION..................................................................31
ARTICLE IX.
MISCELLANEOUS
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9.1 AMENDMENTS; WAIVERS.....................................................31
9.2 SUCCESSORS AND ASSIGNS..................................................31
9.3 SEVERABILITY............................................................31
9.4 DESCRIPTIVE HEADINGS....................................................32
9.5 GOVERNING LAW...........................................................32
9.6 ENTIRE AGREEMENT........................................................32
9.7 EXECUTION IN COUNTERPARTS...............................................32
9.8 FURTHER COOPERATION.....................................................32
9.9 NOTICES.................................................................32
9.10 NO WAIVER; REMEDIES CUMULATIVE..........................................32
9.11 EXHIBITS; SCHEDULES; AMENDMENT OF DISCLOSURE LETTER.....................32
9.12 DISPUTE RESOLUTION......................................................33
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EXHIBITS
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Exhibit A - Form of Certificate of Designation
Exhibit B - Form of Shareholders' Agreement
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of November 28,
1997, by and between Sheridan Energy, Inc., a Delaware corporation ("Seller"),
and Enron Capital Trade & Resource Corp., a Delaware corporation ("Buyer").
RECITALS
Seller desires to issue and sell to Buyer, and Buyer desires to purchase,
subject to the terms and conditions set forth herein, (i) up to 1,765,000 shares
of Common Stock (as hereinafter defined), and (ii) 1,000,000 shares of a new
series of senior cumulative preferred stock of Seller as hereinafter described.
Seller and Pioneer Natural Resources, Inc. ("Pioneer") have entered into a
Purchase and Sale Agreement dated November 13, 1997 (as the same may be amended
as permitted under this Agreement, the "Pioneer Purchase Agreement"), pursuant
to which Seller will purchase from Pioneer certain of the oil and gas properties
located in Oklahoma and the Gulf Coast Region owned by Pioneer, together with
all of Pioneer's interest in and to all personal property, equipment, fixtures
and data relating thereto, all as is more particularly described therein
(collectively, the "Pioneer Properties"). Seller has agreed to use the
consideration to be paid by Buyer for the Shares (as hereinafter defined) for,
among other things, part of the purchase price under the Pioneer Purchase
Agreement.
It is the desire of Seller and Buyer that the transactions contemplated by
this Purchase Agreement and the Pioneer Purchase 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 I.
DEFINITIONS
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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, and (ii) for avoidance of doubt, Enron Corp. and
its Affiliates shall be deemed to be Affiliates of Buyer.
"CAPITALIZED LEASE OBLIGATIONS" means all payment obligations arising
under any lease of property which, in accordance with GAAP, would be
capitalized on Seller'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.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation
relating to the Series A Preferred Stock, a form of which is attached
hereto as Exhibit A.
"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 8.7.
"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.
"COMMODITY PRICE RISK PROGRAM" means a program designed to benefit
from, or reduce or eliminate the risk of, fluctuations in the price of
hydrocarbons produced and sold from properties that are now or hereafter
owned by Seller or its Subsidiaries that are or could be classified as
"proved developed producing" by an independent petroleum engineering
consulting firm.
"COMMON STOCK" means the common stock, par value $.01 per share, of
Seller.
"CONSOLIDATED" refers to the consolidation of financial statements in
accordance with GAAP.
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"DISCLOSURE LETTER" means that certain disclosure letter of even date
herewith delivered to Buyer by Seller relating to Seller's disclosures in
connection with its representations and warranties hereunder.
"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 Seller or any Subsidiary conducts business or at any
time has conducted business, or where any of their properties or operations
or the Pioneer Properties 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.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) which together with Seller or a Subsidiary of Seller 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.
"FEE LETTER" means that certain letter agreement of even date herewith
regarding Seller's agreement to pay a structuring fee to ECT Securities
Corp.
"GAAP" means generally accepted accounting principles (including
principles of consolidation), in effect from time to time, consistently
applied.
"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.
"GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization
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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.
"GRAND GULF LOI" means that certain letter of intent dated October 31,
1997 among Seller, the JEDI Entities and Grand Gulf Production L.L.C.
"GRAND GULF TRANSACTIONS" means the transactions contemplated by the
Grand Gulf LOI.
"INADVERTENT PURCHASE" means any purchase of Common Stock, or
securities convertible into or exchangeable for shares of Common Stock, by
any Subsidiary of Buyer or the JEDI Entities on or prior to the second
anniversary of the Closing Date that is made (a) without the actual
knowledge of such Subsidiary with respect to the restriction set forth in
Section 8.5 hereof, and (b) without any purpose or intent to increase the
percentage of the Common Stock owned or controlled by Buyer and its
Affiliates.
"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 Seller,
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 postemployment 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.
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"INTERMEDIARY" shall have the meaning assigned to such term in Section
8.1.
"JEDI ENTITIES" means Joint Energy Development Investments Limited
Partnership and JEDI Hydrocarbons Investments I Limited Partnership
"KNOWLEDGE" or "KNOWN" means, with respect to Seller, those
individuals listed in Section 1.1 of the Disclosure Letter, individually or
collectively, have conducted such investigations and inquiries that 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 is true and accurate or (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.
"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
Seller and its Subsidiaries on a Consolidated basis assuming the
consummation of the Pioneer Transactions, (b) the ability of Seller to meet
its obligations under this Agreement or with respect to the payment of
dividends on, or redemption of, the Series A Preferred Stock on a timely
basis 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 Disclosure Letter shall not
constitute a Material Adverse Effect.
"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 Seller and its Subsidiaries as currently
conducted and as proposed to be conducted by Seller and its Subsidiaries
after the Closing.
"PERMITTED LIENS" means (a) Liens created pursuant to the Seller
Senior Credit Facility, (b) Liens for taxes not yet due and payable, (c)
statutory Liens (including materialmen's, mechanic's, repairmen's,
landlord's, and other similar liens) arising in connection with the
ordinary course of business securing payments not yet due and payable, 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 Seller's or its Subsidiaries
current or proposed operations.
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"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.
"PIONEER" shall have the meaning assigned to such term in the recitals
hereof.
"PIONEER PURCHASE AGREEMENT" shall have the meaning assigned to such
term in the recitals hereof.
"PIONEER PROPERTIES" shall have the meaning assigned to such term in
the recitals hereof.
"PIONEER TRANSACTIONS" means the transactions contemplated by the
Pioneer Purchase Agreement.
"PLAN" shall have the meaning assigned to such term in Section
3.13(a)(i).
"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.
"SELLER SENIOR CREDIT FACILITY" means that certain First Amended and
Restated Credit Agreement to be entered into by Seller, as the borrower and
Bank One Texas, N.A., as the lender, in connection with the funding of the
acquisition of the Pioneer Properties.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock, par
value $0.01, having the relative rights, preferences, privileges and
limitations set forth in the Certificate of Designation.
"SHARES" shall have the meaning assigned to such term in Section 2.1.
"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.
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ARTICLE II.
SALE AND PURCHASE OF SHARES; CLOSING
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2.1 SALE AND PURCHASE OF SHARES. 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 (a) Seller agrees to
deliver to Buyer, and Buyer agrees to accept, 1,600,000 shares of Common Stock
for $6.25 per share, and (b) Seller agrees to deliver to Buyer, and Buyer agrees
to accept, 1,000,000 shares of Series A Preferred Stock for $10.00 per share of
such Series A Preferred Stock. The shares of Common Stock and Series A
Preferred Stock to be acquired by Buyer hereunder are hereinafter referred to as
the "Shares."
2.2 CLOSING. The closing of the sale and purchase of the Shares (the
"Closing") will occur on the earlier to occur of (i) January 15, 1998, and (ii)
the date of the closing of the Pioneer Transactions (the "Closing Date"), or on
such other date as may be agreed by the parties, at the offices of ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P. At the Closing, Seller will, upon receipt of the purchase price
for the Shares by wire transfer of immediately available funds to an account
designated by Seller, or by such other method as is mutually agreed to by the
Buyer and Seller, deliver to Buyer (or its designee) the Shares, duly executed
and registered in the name of Buyer or its designee. Prior to the Closing,
Seller shall have filed with the Secretary of State of Delaware the Certificate
of Designation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller represents and warrants to Buyer as follows:
3.1 CORPORATE EXISTENCE. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
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. Seller 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 Material Adverse Effect. On or before the date hereof Seller has
delivered to Buyer's counsel true and complete copies of Seller's Certificate of
Incorporation and bylaws, together with all amendments thereto. Except for the
Certificate of Designation, no other amendment to Seller's Certificate of
Incorporation has 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. Seller is duly authorized and
empowered to issue the Shares and to execute, deliver, and perform this
Agreement and to consummate the transactions contemplated hereby and thereby.
All action on Seller's part requisite for the due issuance of the Shares and for
the due execution, delivery, and performance of this Agreement has been duly
and effectively taken. The execution and delivery of this Agreement and the
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consummation of the transactions to be performed by Seller have been duly and
validly authorized by all necessary action on the part of the Board of Directors
of Seller, and no other corporate proceedings are necessary to authorize the
execution and delivery of this Agreement by Seller or to consummate the
transactions to be performed by Seller, other than filing the Certificate of
Designation with the Secretary of State of Delaware prior to the Closing Date.
3.3 BINDING OBLIGATIONS. This Agreement, when executed and delivered,
shall constitute a legal, valid and binding obligation of Seller enforceable in
accordance with its 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 Buyer at the Closing upon
payment therefor as provided in this Agreement, the 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, the
consummation of the transactions provided for herein and contemplated hereby,
and the fulfillment by Seller of the terms hereof, will not (a) conflict with or
result in a breach of any provision of the Charter or bylaws or other
organizational document of Seller or any of its Subsidiaries, (b) result in any
default or in any material modification of the terms of any material contract,
agreement, obligation, commitment applicable to Seller or its Subsidiaries, or
the creation of any Lien upon any of the properties or assets owned by Seller or
any of its Subsidiaries, (c) 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 Seller or any of its Subsidiaries is a party or
by which Seller or any of its Subsidiaries may be bound, or (d) violate any
Governmental Requirement or Permit applicable to Seller or any of its
Subsidiaries.
3.5 CONSENTS. 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 Seller or any of its
Subsidiaries is bound or to which it or any of its Subsidiaries is subject, and
required in connection with Seller's valid execution, delivery, or performance
of this Agreement, and the consummation of the transactions contemplated hereby
has been obtained or made. To the knowledge of Seller and its Subsidiaries and
except as would not have a Material Adverse Effect, upon the consummation of the
Pioneer Transactions, 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 Seller or any of its
Subsidiaries will be bound or to which it or any of its Subsidiaries will be
subject, with respect to the Pioneer Properties, shall have been obtained or
made.
3.6 SEC DOCUMENTS AND FINANCIAL STATEMENTS. (a) Seller 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
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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 Seller 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 Seller 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 Seller 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 Material Adverse Effect
with respect to Seller.
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 Material Adverse Effect, Seller and its Subsidiaries do not
have (and, to the knowledge of Seller and its Subsidiaries, upon the
consummation of the Pioneer Transactions, will not have) any liabilities, direct
or contingent (including but not limited to liability with respect to any Plan
or, to Seller's knowledge, any Environmental Law) other than those provided for
in the Interim Balance Sheet or disclosed in Section 3.7 of the Disclosure
Letter. Except as would not have a Material Adverse Effect, Seller and its
Subsidiaries have (and to the knowledge of Seller and its Subsidiaries, upon the
consummation of the Pioneer Transactions, will have) no Indebtedness other than
the Indebtedness disclosed in Section 3.7 of the Disclosure Letter.
3.8 LITIGATION. Except as disclosed in Section 3.8 of the 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
Seller, threatened against Seller or any of its Subsidiaries or any material
property of Seller or any Subsidiary thereof before any Governmental Authority
(i) which challenges the validity of this Agreement, or (ii) which, if adversely
determined, would have a Material Adverse Effect. To the knowledge of Seller,
there is no action, suit or proceeding, or any governmental investigation or any
arbitration, in each case pending or threatened affecting the Pioneer Properties
before any Governmental Authority which if adversely determined, would have a
Material Adverse Effect.
3.9 MATERIAL CONTRACTS AND COMMITMENTS. (a) Except as set forth in
Section 3.9 of the Disclosure Letter and except for the Pioneer Purchase
Agreement and the agreements relating to the Grand Gulf Transactions, Seller and
its Subsidiaries have no (i) employment or consulting contracts involving annual
payments by Seller or its Subsidiaries in excess of $100,000 and not cancelable
without liability on sixty days' notice or less; (ii) capital redemption or
purchase
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agreements; (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) any gas sales or purchase
contract, gas marketing agreement or transportation agreement under which Seller
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) any agreement for
capital expenditures, the acquisition of commodities, equipment or material or
the construction of fixed assets which requires aggregate future payments by
Seller or its Subsidiaries in excess of $250,000; (vii) any 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 Seller or its Subsidiaries in excess of $500,000; (viii) any
agreement which requires future payments by Seller 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 Seller 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 Seller 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 Indebtedness described
on Section 3.7 of the Disclosure Letter) (collectively, "Material Contracts").
Except as set forth in Section 3.9 of the Disclosure Letter hereof or as
specifically disclosed in the Pioneer Purchase Agreement, Seller has no
knowledge of any agreements of the types described in subsections (i)-(xii)
above that will be applicable to Seller or its Affiliates upon the consummation
of the Pioneer Transactions. None of the Material Contracts have been amended or
modified except as set forth in Section 3.9 of the Disclosure Letter.
(b) All of the Material Contracts and the Pioneer Purchase Agreement are
in full force and effect and constitute legal, valid and binding obligations of
Seller or its Subsidiaries, as applicable, and, to the knowledge of Seller, 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. Neither Seller (or Seller's Subsidiaries, if applicable)
nor, to the knowledge of Seller, any other party to any Material Contract or the
Pioneer Purchase Agreement, 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 Seller (or
Seller's Subsidiaries, if applicable) or, to the knowledge of Seller, any other
party thereto, except for any such default, condition, event or fact that,
individually or in the aggregate, would not have a Material Adverse Effect.
(c) Neither Seller nor its Subsidiaries has any government contracts or
subcontracts.
Seller has provided counsel to Buyer with a true and complete copy of each
contract, agreement and instrument listed in Section 3.9 of the Disclosure
Letter or has otherwise made such documents available for Buyer to review.
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3.10 TITLE TO PROPERTIES AND ASSETS; LEASES. (a) Except as set forth in
Section 3.10 of the Disclosure Letter or as would not have a Material Adverse
Effect, (i) Seller or its Subsidiaries has defensible title to all of its
properties and assets (real and personal, tangible and intangible) reflected on
the Interim Balance Sheet, and (ii) to the knowledge of Seller, upon the
consummation of the Pioneer Transactions and the filing of the assignments from
Pioneer to Seller covering the Pioneer Properties in the appropriate
county/parish records, Seller will have defensible title to the Pioneer
Properties, in each case free and clear of all Liens except the Permitted Liens.
To Seller's knowledge, all equipment now owned by Seller or its Subsidiaries (or
included in the Pioneer Properties) which is necessary to the business of Seller
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 Material Adverse Effect.
(b) Except as set forth in Section 3.10 of the Disclosure Letter, but only
to the knowledge of Seller or its Subsidiaries with respect to oil and gas
leases not operated by any of Seller or its Subsidiaries and the Pioneer
Properties, the oil and gas leases in which Seller or its Subsidiaries own an
interest (and, upon the acquisition of the Pioneer Properties, will own an
interest) (i) have been (and, upon the acquisition of the Pioneer Properties, to
the knowledge of Seller will 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 would
not have a Material Adverse Effect, and (ii) are (and, upon the acquisition of
the Pioneer Properties, will be) in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect.
(c) All royalties, overriding royalties, compensatory royalties and other
payments due with respect to the oil and gas properties of Seller and its
Subsidiaries have been properly and correctly paid, except where the failure to
make such payment would not have a Material Adverse Effect. To the knowledge of
Seller and its Subsidiaries, upon the acquisition of the Pioneer Properties, all
royalties, overriding royalties, compensatory royalties and other payments due
with respect to such properties shall have been properly and correctly paid,
except where the failure to make such payment would not have a Material Adverse
Effect.
3.11 COMPLIANCE WITH THE LAW. Neither Seller nor any of its Subsidiaries
(i) is (or to the knowledge of Seller and its Subsidiaries, upon the
consummation of the Pioneer Transactions, will be) 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
Material Adverse Effect. Upon the consummation of the Pioneer Transactions,
Seller will have obtained all Permits known to Seller to be necessary to the
ownership of the Pioneer Properties, except where the failure to obtain such
Permits would not have a Material Adverse Effect.
3.12 TAXES. Seller and its Subsidiaries (i) have filed all tax returns and
reports ("Tax Returns") required to be filed by or with respect to Seller 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 Seller or any of its
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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 Seller
or any of its Subsidiaries which would have a Material Adverse Effect.
3.13 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 Seller or any of its
Subsidiaries for the benefit of the employees, former employees,
independent contractors, or agents of Seller 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
3.13(a)(i) and which is sponsored, maintained, or contributed to by Seller
or any of its Subsidiaries for the benefit of the employees, former
employees, independent contractors, or agents of Seller 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 Seller nor any corporation, trade, business, or entity
under common control with Seller, 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 Seller 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
-12-
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 Seller 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. Neither Seller nor any of its Subsidiaries is
a party to any agreement, nor has Seller 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 Seller 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.
3.14 INVESTMENT COMPANY ACT. Neither Seller 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.
3.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Seller 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.
3.16 NO RESTRICTIONS ON AFFILIATES. Except for any existing agreement
between Seller (or a Subsidiary of Seller) and an Affiliate of Buyer that
imposes restrictions or limitations on such Affiliate of Buyer, neither Seller
nor any of its Subsidiaries is (and, to the knowledge of Seller and its
Subsidiaries, upon consummation of the Pioneer Transactions, will be) a party to
any agreement that would purport to impose restrictions or limitations on Buyer
or any of its Affiliates.
3.17 CAPITALIZATION. The authorized capital stock of Seller consists of
(i) 20,000,000 shares of Common Stock, of which 4,281,471 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, none of which have been
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issued or are outstanding. Section 3.17 of the Disclosure Letter sets forth the
name and address of each person known to Seller to be the beneficial owner of 5%
or more of the outstanding shares of Common Stock. Except for the shares of
Common Stock and warrants to purchase Common Stock to be issued in connection
with the Grand Gulf Transactions and 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 Seller or
its Subsidiaries. All of the outstanding shares of Common Stock are validly
issued, fully paid, and nonassessable.
3.18 SUBSIDIARIES. (a) Section 3.18 of the Disclosure Letter contains
(except as noted therein) a complete and correct list of Seller's Subsidiaries,
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 Seller and each other
Subsidiary. Except for the Subsidiaries, Seller does not own (and, upon the
consummation of the Pioneer Transactions will 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 3.18 of the Disclosure Letter as
being owned by Seller and its Subsidiaries have been validly issued, are fully
paid and nonassessable, and are owned by Seller or such other Subsidiaries free
and clear of any Liens (except as otherwise disclosed in Section 3.18 of the
Disclosure Letter).
(c) No Subsidiary of Seller 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 Seller or any of its Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.19 of the
Disclosure Letter:
(a) to the knowledge of Seller and its Subsidiaries, the properties
and operations of Seller and its Subsidiaries are not, and upon the
consummation of the Pioneer Transactions, the Pioneer Properties will not
be, 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 Material Adverse
-14-
Effect, nor are there, and upon consummation of the Pioneer Transactions
will there be, 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 Material Adverse Effect;
(b) without limitation of Section 3.19(a) above, Seller and its
Subsidiaries are not subject to any pending or, to the knowledge of Seller,
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 Material Adverse Effect, to the
knowledge of Seller all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by Seller 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 Seller 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 Material Adverse Effect, all hazardous
substances or solid wastes generated by or as a result of operations on
properties owned by Seller and its Subsidiaries (and to the knowledge of
Seller, upon the consummation of the Pioneer Transactions, on the Pioneer
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 Seller, 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 Material Adverse Effect, to the
knowledge of Seller there are (and, upon consummation of the Pioneer
Transactions, there will be) no asbestos-containing materials on or in any
property owned or used by Seller and its Subsidiaries, and there are (and,
upon consummation of the Pioneer Transactions, there will be) 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 Seller there
is (and upon consummation of the Pioneer Transactions, 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 its properties and
the Pioneer Properties; and
(g) Section 3.19 of the Disclosure Letter also separately lists for
Seller and each Subsidiary any and all Claims against or affecting it and
relating to the release, discharge or
-15-
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
3.19 of the 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 3.19 of the Disclosure Letter,
neither Seller nor any Subsidiary has received any written notice that it
is a potentially responsible party under any Environmental Laws.
3.20 INTELLECTUAL PROPERTY AND OTHER INTANGIBLE ASSETS. Seller 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 as now conducted and as proposed to be conducted following the
consummation of the Pioneer Transactions, without infringing upon or violating
any right, Lien, or claim of others, and (ii) except as described in Section
3.20 of the 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 ▇▇▇▇,
trade name, copyright, or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise.
3.21 NO PUBLIC OFFER. Neither Seller nor anyone acting on its behalf has
offered to any Person securities of Seller, 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.
3.22 INSURANCE. Seller has previously provided to Buyer true and complete
copies of all of Seller's and its Subsidiaries' insurance policies. Seller 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. Seller 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.
3.23 CERTAIN TRANSACTIONS. Except as set forth on Section 3.24 of the
Disclosure Letter, (a) neither Seller 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 Seller 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 Seller or any of its
Subsidiaries.
-16-
3.24 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds from the issuance
of Shares will be used by Seller only in accordance with the provisions of
Section 8.2 hereof. No part of the proceeds from the issuance of Shares will be
used by Seller to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock. Neither the
purchase of the Shares nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
3.25 PLUGGING AND ABANDONMENT OBLIGATIONS. Except as set forth in Section
3.25 of the Disclosure Letter and as would not have a Material Adverse Effect,
there is no well located upon any property owned by Seller or its Subsidiaries
(and to the knowledge of Seller and its Subsidiaries, upon the acquisition of
the Pioneer Properties, there will be no well located upon the Pioneer
Properties) that Seller or its Subsidiaries is currently obligated (or would be
obligated immediately following the acquisition of the Pioneer Properties) by
law or contract to plug and abandon.
3.26 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. To the knowledge of Seller, there is
no fact or information relating to the business, prospects, condition (financial
or otherwise), affairs, operations, or assets of Seller or any of its
Subsidiaries or the Pioneer Transactions that has not been disclosed to Buyer in
writing by Seller which would result in a Material Adverse Effect.
3.27 PIONEER TRANSACTIONS. Except as set forth in Section 3.27 of the
Disclosure Letter or as would not have a Material Adverse Effect, neither Seller
nor its Subsidiaries has any knowledge of any fact, event, condition or
circumstance that would cause (i) the representations (without regard to any
materiality or material adverse effect qualifications in such representations)
made by Pioneer under the Pioneer Purchase Agreement to be untrue, or (ii) the
representations (without regard to any materiality or material adverse effect
qualifications in such representations) made by Seller in this Article III to be
untrue upon the consummation of the transactions contemplated by the Pioneer
Purchase Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
4.1 CORPORATE EXISTENCE. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
4.2 CORPORATE POWER AND AUTHORIZATION. Buyer is duly authorized and
empowered to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby and thereby. All action on Buyer's part
requisite for the due execution, delivery, and performance of this Agreement
has been duly and effectively taken. The execution and delivery of this
Agreement and the consummation of the transactions to be performed by Buyer have
been duly and validly authorized by all necessary action on the part of the
Board of Directors of Buyer, and no
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other corporate proceedings are necessary to authorize the execution and
delivery of this Agreement by Buyer or to consummate the transactions to be
performed by Buyer.
4.3 BINDING OBLIGATIONS. This Agreement, when executed and delivered,
shall constitute a legal, valid and binding obligation of Buyer enforceable in
accordance with its 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, the
consummation of the transactions provided for herein and contemplated hereby,
and the fulfillment by Buyer of the terms hereof, will not (a) conflict with or
result in a breach of any provision of the Charter or bylaws or other
organizational document of Buyer, (b) result in any default or in any material
modification of the terms of any material contract, agreement, obligation,
commitment applicable to Buyer, (c) require any consent or approval (which has
not been obtained or waived) under any material instrument or material
obligation to which Buyer is a party or by which Buyer may be bound, or (d)
violate any Governmental Requirement applicable to Buyer.
4.5 PURCHASE FOR INVESTMENT. Buyer is acquiring the Shares 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. Buyer acknowledges that the Shares 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.
4.6 FEES AND COMMISSIONS. Buyer has not retained any Intermediary in
connection with the transactions contemplated by this Agreement.
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. Seller will give any notices to third
parties, and will use all reasonable efforts to obtain all third party
consents, that are required for the consummation of the transactions
contemplated hereby.
5.3 OPERATION OF BUSINESS. Seller covenants and agrees that, unless
otherwise expressly contemplated by this Agreement (including Seller's
performance under the terms of the Pioneer Purchase Agreement, the execution of
the Seller Senior Credit Facility and the execution and
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consummation of agreements relating to the Grand Gulf Transactions) or consented
to in writing by Buyer, (x) Seller 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) Seller 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 Seller 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 (except as set forth in the
Certificate of Designation) or, without the written consent of Buyer, the
Pioneer Purchase Agreement.
5.4 FULL ACCESS. Seller will permit representatives of Buyer to have full
access at reasonable times during normal business hours, in a manner that will
not interfere with the normal business operations of Seller, to all premises,
properties, personnel, books, records (including tax records), contracts and
documents of or pertaining to Seller and, to the extent it has the right to do
so, the Pioneer Properties.
5.5 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. Seller shall give Buyer
prompt written notice of any breach by Pioneer of its representations,
warranties or covenants under the Pioneer Purchase Agreement.
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ARTICLE VI.
CLOSING CONDITIONS
------------------
6.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer 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) Seller 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) the conditions to the closing of the Pioneer Transactions set
forth in the Pioneer Purchase Agreement shall have been satisfied without
having been waived, no event or circumstance shall exist that would give
Seller the right to terminate the Pioneer Purchase Agreement and the
Pioneer Transactions shall have been consummated;
(e) the terms of the transactions contemplated by the Seller Senior
Credit Facility shall be in accordance with the terms and conditions set
forth in the commitment dated November 20, 1997 from Bank One Texas, N.A.
to Seller and such transactions shall have been consummated and the amounts
thereunder that are necessary for the acquisition of the Pioneer Properties
shall have been funded by the lender;
(f) the Certificate of Designation shall have been filed with the
Secretary of State of Delaware prior to the Closing Date.
(g) there shall have not occurred any events or developments,
individually or in the aggregate, resulting in a Material Adverse Effect;
(h) Seller shall have paid all amounts payable pursuant to the Fee
Letter;
(i) if requested by Buyer, two designees of Buyer shall have been
appointed to the Board of Directors of Seller;
(j) all consents and approvals required for the consummation of the
transactions contemplated hereby shall have been obtained;
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(k) the Board of Directors of Seller shall have adopted and approved
a Commodity Price Risk Program covering a period of one to three years,
which program shall be in written form and shall be mutually acceptable to
Seller and Buyer;
(l) Seller shall have delivered to Buyer a certificate from an
officer of Seller to the effect that each of the conditions specified above
in Section 6.1(a)-(k) is satisfied in all respects;
(m) Seller and Buyer shall have entered a Shareholders' Agreement
with Seller's shareholder, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and his spouse (the
"Susskinds"), providing for an agreement by the Susskinds not to sell,
transfer or otherwise dispose of more than 10% of their shares of Common
Stock for a period of one year after the Closing Date and to vote their
shares for Buyer's nominees to Seller's Board of Directors, in the form
attached hereto as Exhibit B;
(n) Buyer shall have received an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C., dated as of the Closing Date, that addresses the matters set
forth in Sections 3.1, 3.2, 3.3, 3.4, 3.14, 3.15, the first sentence in
3.17 and 3.21 hereof, including such exceptions and assumptions as are
customary in such opinions, in form and substance reasonably acceptable to
Buyer.
6.2 CONDITIONS TO OBLIGATION OF SELLER. The obligations of Seller to
consummate the transactions contemplated hereby are 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) Buyer shall have performed and complied with all of the covenants
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; and
(d) Buyer shall have delivered to Seller a certificate to the effect
that each of the conditions specified above in Section 6.2(a)-(c) is
satisfied in all respects.
(e) Seller shall have received an opinion of (i) ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
General Counsel of Buyer, addressing the matters set forth in Section 4.1
and 4.2, and (ii) ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. addressing the matters set forth
in Section 4.4, 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 Seller.
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ARTICLE VII.
REGISTRATION RIGHTS
-------------------
The following provisions govern the registration of Seller's securities:
7.1 DEFINITIONS. As used in this Article VII, the following terms have
the following meanings:
"HOLDERS" means the holders of Registrable Shares (which initially
shall be Buyer and/or its designee) and shall include transferees to
whom Holders are permitted to assign rights hereunder pursuant to
Section 7.9.
"INITIATING HOLDERS" shall mean Holders holding no less than 250,000
Registrable Shares.
"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" means the shares of Common Stock issued by Seller
to Buyer pursuant to this 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 the date hereof by Buyer (or any Affiliate of
Buyer) from Seller or otherwise in a transaction not involving a
public offering within the meaning of the Securities Act.
7.2 PIGGYBACK REGISTRATION. If Seller 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 7.3 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, Seller 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 7.2, if the
managing underwriter advises Seller 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 Seller,
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 7.2 shall
terminate at such time as such Holder hold less than 2% of the outstanding
shares of Common Stock.
7.3 DEMAND REGISTRATION. 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
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under the Securities Act. Within 5 days after receipt of any such request,
Seller 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 Seller with written
requests for inclusion therein within 15 days after the receipt of Seller's
notice. Thereupon, Seller shall effect the registration of all Registrable
Shares as to which it has received requests for registration specified in the
request for registration. Seller shall not be required to effect any such
registration prior to the first anniversary date hereof; provided, however, that
the Initiating Holders may request registration hereunder prior to the first
anniversary hereof and in such event Seller shall undertake to issue the notices
referred to herein prior to such first anniversary so as to permit the filing of
registration statement promptly after such first anniversary. Notwithstanding
any other provision of this Article VII, 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 Seller or by shareholders other than the Holders, and
second, to the extent necessary, and only if all shares to be offered by Seller
and by shareholders other than Holders have been excluded, Registrable Shares.
Seller may not cause any other registration of securities for sale for its own
account (other than a registration effected solely to implement an employee
benefit plan) to be initiated after a registration requested pursuant to this
Section 7.3 and to become effective less than 90 days after the effective date
of any registration requested pursuant to this Section 7.3. Seller shall not be
required to effect more than three registrations pursuant to this Section 7.3.
7.4 DELAY IN REGISTRATION. If Seller shall furnish to the Holders a
certificate signed by the President of Seller stating that in the good faith
judgment of the Board of Directors of Seller it would be seriously detrimental
to Seller for a registration statement to be filed at such time or would
materially adversely affect a pending or proposed public offering of Seller's
securities, Seller shall have the right to defer the filing of a registration
statement requested pursuant to Section 7.3 hereof for a period of not more than
90 days after receipt of the request of the Holders under Section 7.3; provided,
however, that (i) Seller 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 7.3 because of any
pending or proposed public offering of Seller's securities, in the event of any
such pending or proposed public offering of Seller'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.
7.5 DESIGNATION OF UNDERWRITER. In the case of any registration effected
pursuant to Section 7.3, the managing underwriter shall be reasonably acceptable
to the Initiating Holders and Seller.
7.6 EXPENSES. All expenses incurred in connection with any registration
under Sections 7.2 or 7.3 shall be borne by Seller; 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
7.3 shall bear their proportionate part of all SEC and NASD filing fees and one-
half of all other expenses incurred in connection with any such registration.
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7.7 INDEMNITIES. In the event of any registered offering of Common Stock
pursuant to this Article VII:
(a) Seller 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 Seller'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 Seller 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 Seller 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 7.7(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 Seller, which consent shall
not be unreasonably withheld. Such indemnity 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 Seller, any underwriter for Seller, and each
person, if any, who controls Seller 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 Seller 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 Seller,
any underwriter and each such controlling person of Seller or any
underwriter, promptly upon demand, for any reasonable legal or other
expenses incurred by them in connection with investigating,
-24-
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 7.7(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 7.7(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 7.7(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
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 7.7(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 7(a) or 7(b)
hereof, for any reason other than as specified therein, the parties
entitled to indemnification by the terms thereof shall be
-25-
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.
7.8 OBLIGATIONS OF SELLER. Whenever required under this Article VII to
effect the registration of any Registrable Shares, Seller shall, 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;
(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
Seller 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
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(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 Article VII, 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 Seller 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 Seller, 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.
7.9 ASSIGNMENT OF REGISTRATION RIGHTS. Any Holder may assign all of its
rights under this Article VII to any transferee who acquires 100,000 or more
Registrable Shares. The transferor shall, within 20 days after such transfer,
furnish Seller with written notice of the name and address of such transferee
and the securities with respect to which such registration rights are being
assigned.
7.10 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
7.10 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, director and
holder of 10% or more of the outstanding shares of Common Stock.
7.11 SUBSEQUENT GRANTS OF REGISTRATION RIGHTS. After the date hereof,
except with respect to the Grand Gulf Transactions, Seller will not enter into
any agreement granting any holder or prospective holder of any securities of
Seller registration rights (i) unless such registration rights include lockup
provisions which are the same as those provisions set forth in Section 7.10
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.
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ARTICLE VIII.
OTHER PROVISIONS
----------------
8.1 FEES AND COMMISSIONS. Seller agrees to pay, and to indemnify and hold
harmless Buyer from and against liability for, any compensation to any finder,
broker, agent, financial advisor, or other intermediary (collectively, an
"Intermediary") in connection with the transactions contemplated by this
Agreement , and the fees and expenses of defending against such liability or
alleged liability. Seller further agrees to pay to Buyer on demand and whether
or not the transactions contemplated by this Agreement are consummated, all
legal, professional and other bills and costs incurred by Buyer and its
Affiliates in connection with the negotiation and preparation of this Agreement
and the evaluation of, and due diligence investigation with respect to, the
transactions contemplated hereby (including, without limitation, survey, title
due diligence and filing fees and expenses, whether incurred by Buyer, its
Affiliates or counsel or other third party professionals); provided, however,
Seller shall only be liable for the first $75,000 of Buyer's third party legal
fees and 50% of such legal fees that exceed $75,000. Seller shall also pay all
the amounts required to be paid by Seller in accordance with the Fee Letter.
8.2 USE OF PROCEEDS. The entire amount of the cash proceeds from the
issuance of the Shares shall be used by Seller on the Closing Date to pay a
portion of the purchase price under the Pioneer Purchase Agreement and for
general corporate purposes.
8.3 NO RESTRICTIONS ON AFFILIATES. As long as Buyer or any of its
Affiliates hold any shares of Common Stock or Series A Preferred Stock, neither
Seller 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 Buyer or its Affiliates. For purposes of this Section 8.3, the term
"Affiliate" when used to refer to Affiliates of Buyer, shall exclude Seller and
its Affiliates.
8.4 CERTAIN PUBLIC UTILITY MATTERS. Except as contemplated herein, Seller
will not take any action that would be inconsistent with the representations
contained in Sections 3.15 and 3.16 hereof so long as the Buyer or its
Affiliates holds any shares of Common Stock or Series A Preferred Stock. For
purposes of this Section 8.4, the term "Affiliate" when used to refer to
Affiliates of Buyer, shall exclude Seller and its Affiliates.
8.5 STANDSTILL. For two years after the Closing Date, none of Buyer, the
JEDI Entities or their respective Subsidiaries (a) will purchase any additional
shares of Common Stock, or securities convertible into or exchangeable for
shares of Common Stock, other than (i) in transactions approved by the Board of
Directors of Seller, (ii) the purchase of shares of Common Stock in connection
with the Grand Gulf Transaction acquisition, (iii) the purchase of shares of
Common Stock pursuant to the provisions of Section 8.12 hereof, or (iv) an
Inadvertant Purchase, and (b) make or participate in making any solicitation of
proxies to vote Common Stock of Seller or form, join or participate in a "group"
for the purpose of the foregoing without the approval of the Board of Directors
of the Seller. Notwithstanding anything herein to the contrary, the provisions
of this Section 8.5 shall terminate and have no further force or effect if (x)
at any time in which Buyer and its Affiliates hold more than 14% of the issued
and outstanding shares of Common Stock, less than two designees of Buyer are
elected to Seller's Board of Directors within 30 days after Buyer has
-28-
requested the nomination and election of such designees, or (y) at any time in
which Buyer and its Affiliates hold in the range of 7% through 14% of the issued
and outstanding shares of Common Stock, one designee of Buyer is not elected to
Seller's Board of Directors within 30 days after Buyer has requested the
nomination and election of such designee (including as a result of the death or
voluntary resignation of such a designee). Other than as expressly provided
herein, Buyer will be free to exercise its rights as a stockholder, voting or
otherwise, and regardless of whether the exercise of such rights might influence
management, the Board of Directors or the stockholders of Seller. Buyer agrees
that in the event that it transfers more than 10% of the issued and outstanding
shares of Common Stock (determined as of the time of such transfer), then the
transferee of such shares shall be bound by the restrictions set forth in this
Section 8.5 to the extent the same are in full force and effect at the time of
such transfer.
8.6 BUSINESS OPPORTUNITY MATTERS. (a) Seller and Buyer acknowledge and
agree that neither Buyer nor any of its Affiliates shall be expressly or
implicitly restricted or proscribed pursuant to this Agreement, the relationship
that exists between Buyer and Seller 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 Seller or any of its Affiliates. Without limiting the foregoing,
Buyer and Seller acknowledge and agree that (i) neither Seller nor its
Affiliates nor any other Person shall have any rights, by virtue of this
Agreement, the relationship that exists between Buyer and Seller or otherwise,
in any business venture or business opportunity of Buyer or any of its
Affiliates, and neither Buyer nor its Affiliates shall have any obligation to
offer any interest in any such business venture or business opportunity to
Seller, any Affiliate of Seller or any other Person, or otherwise account to any
of such Persons in respect of any such business ventures, (ii) the activities of
Buyer or any of its Affiliates that are in direct or indirect competition with
the activities of Seller or any of its Affiliates are hereby approved by Seller,
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 Buyer or its
Affiliates to the Seller or its Affiliates for Buyer to permit itself or one of
its Affiliates to engage in a business opportunity in preference or to the
exclusion of Seller, its Affiliates or any other Person.
(b) Neither Seller or its Affiliates shall enter into any "area of mutual
interest" agreement of similar agreement that could or would have the effect of
binding Buyer or any of its Affiliates or their respective properties.
(c) For purposes of this Section 8.6, the term "Affiliate" when used to
refer to Affiliates of Buyer, shall exclude Seller and its Affiliates.
8.7 INDEMNIFICATION. Seller agrees to indemnify, defend, and hold
harmless Buyer and each Affiliate of Buyer 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 Buyer
shall incur or suffer, which arise, result from, or relate to (a) any breach of,
or failure by Seller 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 Seller or any of its Subsidiaries in connection with the
transactions contemplated by this
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Agreement, or in the Charter of Seller or any of its Subsidiaries or (b) any
claims of any applicable Governmental Authority or other Person arising under
any Governmental Requirement (including without limitation any Environmental Law
or regulation under ERISA).
8.8 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 Buyer; provided,
however, that any Claim with respect to the breach thereof may be made only if
the party claiming such breach shall have notified the responsible party
hereunder (a) in the case of the representations and warranties of Seller
contained in Article 3 and of Buyer contained in Article 4 and the covenants of
Seller contained in Article V, on or before first anniversary of the Closing
Date, and (b) 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 Article VI
has not been satisfied, Buyer may terminate its obligations under this Agreement
by written notice to Seller; provided, however, that the provisions of Sections
8.1 and 8.7 shall survive any such termination.
8.9 INFORMATION AND MEETINGS. For so long as Buyer and its Affiliates hold
any shares of Common Stock or Series A Preferred Stock, Buyer shall be entitled
to (a) receive notice of each meeting of the Board of Directors of Seller or
each matter to be acted on by consent (in each case as provided for directors in
the bylaws of Seller) and, so long as Buyer and its Affiliates hold 7% or more
of the issued and outstanding shares of Common Stock, to have (i) two observers
present at each such meeting if Buyer and its Affiliates hold more than 14% of
the issued and outstanding shares of Common Stock or (ii) one observer present
at each such meeting if Buyer and its Affiliates hold in the range of 7% through
14% of the issued and outstanding shares of Common Stock (and any such observers
shall enter into a confidentiality agreement with the Seller providing for such
observers to keep confidential any confidential or proprietary information which
such observer obtains from any such meeting of the Seller's Board of Directors,
provided that the information to be kept confidential shall not include
information which (x) is or becomes generally available to the public other than
as a result of acts by the observers, (y) was in the observers' or Buyer's, or
Buyer's Affiliate's, possession prior to the date it was disclosed to the
observers, or (z) is or becomes available to observers or Buyer, or Buyer's
Affiliate, on a nonconfidential basis from a source other than Seller or its
Subsidiaries), (b) to receive, promptly after they are produced, all management
reports and management accounts relating to Seller and its Subsidiaries and (c)
upon reasonable notice, to have reasonable access to the books and records of
Seller and its Subsidiaries, including statutory books, minutes books,
accounting records and customer lists.
8.10 COMMODITY PRICE RISK PROGRAM. Seller shall, and shall cause its
Subsidiaries to, comply with the Commodity Price Risk Program adopted by the
Board of Directors of Seller on or prior to the Closing as contemplated pursuant
to Section 6.1(k) hereof, and neither Seller nor any of its Subsidiary shall
amend or modify such program without the prior written consent of Buyer.
8.11 NUMBER OF BOARD OF DIRECTORS. Seller agrees that it shall not
increase the size of its Board of Directors to a number greater than seven
(inclusive of Buyer's two designees), unless otherwise necessary to permit the
holders of the Series A Preferred Stock to exercise their rights with respect to
the election of directors to serve on the Board of Directors of Seller.
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8.12 OPTION. (a) In the event that the Grand Gulf Transactions are not
consummated on or before January 15, 1998, then Buyer shall have the option (the
"Option") to purchase 165,000 shares of Common Stock of Seller from Seller for
the price equal to the par value of each Option Share (the "Option Price"). To
exercise the Option, Buyer shall deliver a written notice ("Option Notice") to
Seller on or before the second business day following January 15, 1998, stating
its intention to purchase the Option Stock in accordance with the terms hereof.
The closing shall occur at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. on the fifth
business day after the exercise of such Option, unless Seller and Buyer agree in
writing upon a different place or date. At the closing of the sale of the
Option Stock from Seller to Buyer, the following actions shall occur:
(i) Seller shall deliver a certificate or certificates for the
Option Shares, duly executed and registered in the name of Buyer or its
designee; and
(ii) Buyer shall pay the Option Price to Seller in immediately
available funds.
(b) Seller agrees that, when issued to Buyer at the closing of the sale of
the Option Shares upon payment of the Option Price therefor, the Option Shares
will be validly issued, fully paid and non-assessable, and free and clear of any
Liens.
ARTICLE IX.
MISCELLANEOUS
-------------
9.1 AMENDMENTS; WAIVERS. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by Seller therefrom, shall in any event
be effective unless the same shall be in writing and signed by Buyer (and, in
the case of Article VII hereof, Buyer and each permitted transferee of Buyer or
Buyer of the rights thereunto), and then such waiver or consent shall be
effective only in the specific instance or for the specific purpose for which
given.
9.2 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 Seller shall not be assigned without the prior written consent of
Buyer. Buyer may not assign or transfer any or all of its rights and
obligations under this Agreement without the consent of Seller 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), (ii) following the Closing,
to an Affiliate, and (iii) as provided in Section 7.9 hereof.
9.3 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
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of this Agreement unless the consummation of the transaction contemplated hereby
is materially and adversely affected thereby.
9.4 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.
9.5 GOVERNING LAW. Seller 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.
9.6 ENTIRE AGREEMENT. This Agreement, the Fee Letter and the Disclosure
Letter constitutes the entire agreement among Seller and Buyer concerning the
matters referred to herein and therein, and, except only with respect to the
break up fee described in the commitment letter between Seller and Buyer dated
November 14, 1997, supersede all prior agreements and understandings among
Seller and Buyer relating to the subject matter hereof and thereof. There are
no unwritten oral agreements between or among the parties.
9.7 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.
9.8 FURTHER COOPERATION. At any time and from time to time, and at its
own expense, Seller shall promptly execute and deliver all such documents and
instruments, and do all such acts and things, as Buyer may reasonably request in
order to further effect the purposes of this Agreement.
9.9 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.
9.10 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of
Buyer in exercising any right or remedy under this Agreement and no course of
dealing among Seller and Buyer 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. The rights and remedies expressly provided are
cumulative and not exclusive of any rights or remedies that Buyer would
otherwise have. No notice to or demand on Seller not otherwise required by this
Agreement or shall entitle Seller to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Buyer to
any other or further action in any circumstances without notice or demand.
9.11 EXHIBITS; SCHEDULES; AMENDMENT OF DISCLOSURE LETTER. The exhibits and
the Disclosure Letter attached to this Agreement 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
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between any of the provisions of such exhibits or schedules and the provisions
of this Agreement, the provisions of this Agreement shall prevail. Seller may,
from time to time, prior to the Closing, by written notice to Buyer, supplement
or amend the Disclosure Letter to correct any matter that would constitute a
breach of any representation or warranty of such Seller 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 Buyer's rights and obligations
under Section 6.1(a) hereof) until after the Closing Date. Notwithstanding any
other provision hereof, if the Closing occurs, any such supplement or amendment
of the 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 Seller
not having made such supplement or amendment.
9.12 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
Seller or Buyer 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 Seller, Buyer and the Mediator, and each of Seller and Buyer
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 9.12, 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 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 9.12 shall limit or delay the right of Buyer
to exercise the remedies available to it under the Certificate of Designation.
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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/ ▇. ▇. ▇▇▇▇▇▇▇▇
_______________________________
▇. ▇. ▇▇▇▇▇▇▇▇, President
Address for Notice:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇
Telecopy:_________________________
ENRON CAPITAL TRADE &
RESOURCES CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
_______________________________
Address for Notice:
Enron Capital and Trade Resources
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ or (▇▇▇) ▇▇▇-▇▇▇▇
-34-
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A PREFERRED STOCK
Pursuant to Section 151(g) of the Delaware General Corporation Law
___________________
SHERIDAN ENERGY, INC., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the
following resolutions were duly adopted by the Board of Directors of the
Corporation by unanimous written consent of the Board of Directors pursuant to
Section 228 of the Delaware General Corporation Law:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article Four of the Certificate of Incorporation, a series
of Preferred Stock be, and it hereby is, created out of the authorized but
unissued shares of Preferred Stock of the Corporation, such series to be
designated "Series A Preferred Stock" (the "Series A Preferred Stock") to
consist of 1,900,000 shares, par value $0.01 per share, of which the powers,
designations, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
and restrictions thereof shall be as follows:
1. Amount. The number of shares constituting the Series A Preferred Stock
shall be 1,900,000.
2. Payment of Dividends. Holders of the Series A Preferred Stock are
entitled to receive when, as and if declared by the Board of Directors, out of
the funds of the Corporation legally available therefore cash dividends in an
amount equal to $0.60 per share, payable semi-annually, on June 15 and December
15 in each year commencing on June 15, 1998, except that if any such day is not
a business day in Houston, Texas, then such dividends shall be payable on the
next succeeding business day (each such date on which a dividend is payable is
referred to herein as a "Dividend Payment Date"). At the option of the
Corporation, upon declaration of the Board of Directors, dividends may be paid,
in whole or in part, by issuing additional fully paid and non-assessable shares
of the Series A Preferred Stock (the "Preferred Dividend Stock") in an amount
equal to .0675 additional shares of Series A Preferred Stock for each Series A
Preferred Stock then issued and outstanding, payable semi-annually on each
Dividend Payment Date. Dividends on the Series A Preferred Stock are cumulative
from the date of original issuance of shares of Series A Preferred Stock, and
will be payable, when, as and if declared, to holders of record on the
applicable record date as shall be fixed by the Board of Directors. Dividends
in arrears may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date not exceeding
60 days preceding the payment date thereof, as may be fixed by the Board of
Directors. The amount of Preferred Dividend Stock issuable to a holder by way
of a dividend shall be computed on the basis of the aggregate number of shares
of Series A Preferred Stock registered in such holder's name on the record date
fixed for the payment of such dividend plus the amount of accrued but not
declared dividends of Preferred Dividend Stock. Dividends payable for any
period less than a full semi-annual period shall be
computed on the basis of a 360-day year of twelve 30-day months. Dividends
shall accrue whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. Accrued but unpaid
dividends will not bear interest.
3. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights with respect thereto:
(A) Each share of Series A Preferred Stock shall entitle the holder
thereof to the voting rights required by applicable law.
(B) The consent of the holders of at least 66 2/3% of the outstanding
shares of the Series A Preferred Stock, voting separately as a single
class, in person or by proxy, either in writing without a meeting or at an
annual or a special meeting of shareholders called for the purpose, shall
be necessary to (i) increase or decrease the aggregate number of authorized
shares of the Series A Preferred Stock, provided that such decrease shall
never be below the number of then outstanding shares of Series A Preferred
Stock, (ii) effect an exchange, reclassification, or cancellation of all or
part of the Series A Preferred Stock, (iii) change the designations,
powers, preferences, relative and other special rights, or the
qualifications, limitations or restrictions thereof, of the Series A
Preferred Stock (which change shall apply equally to the then outstanding
shares of Series A Preferred Stock), (iv) issue any additional shares of or
securities convertible into or exchangeable for, or reclassify any other
shares of other classes or series into, shares of the Series A Preferred
Stock, (v) create any equity security ranking senior to or on a parity with
(with respect to voting or dividends or upon liquidation, dissolution or
winding up) the Series A Preferred Stock, (vi) approve any material change
in the principal business of the Corporation or (vii) pay a dividend or
distribution of cash or property in respect of, or redeem, repurchase
otherwise acquire, any Junior Security (as hereinafter defined), provided,
however, that no change in the dividend rate can be effected without the
consent of all holders of the Series A Preferred Stock. In all cases where
the holders of shares of the Series A Preferred Stock have the right to
vote separately as a class, all such holders shall be entitled to one vote
for each share held by them. The term "Junior Securities" as used herein
shall mean any of the Corporation's capital stock other than the Series A
Preferred Stock.
(C) If at any time (i) dividends on the Series A Preferred Stock
shall be in arrears for more than thirty days after the applicable Dividend
Payment Date or (ii) the Corporation shall be obligated to and shall have
failed to redeem any shares of the Series A Preferred Stock pursuant to
Section 6, and for so long thereafter as shares of the Series A Preferred
Stock remain outstanding, at the election of the holders of the Series A
Preferred Stock (exercisable by notice to the Corporation from a majority
of the holders of the then outstanding shares of Series A Preferred Stock),
the holders of the Series A Preferred Stock shall have the voting power,
voting separately as a single class, to elect such number of directors as
constitutes a majority of the Board of Directors of the Corporation. Under
such circumstances, the holders of the Series A Preferred Stock shall be
authorized to exercise such voting powers by increasing the size of the
Board of Directors and filling
-2-
the resulting vacancies. The directors elected by the holders of the Series
A Preferred Stock may be removed from the Board of Directors only by a vote
of the holders of a majority of the then outstanding shares of the Series A
Preferred Stock. If the office of a director elected by the holders of the
Series A Preferred Stock becomes vacant by reason of resignation, death or
removal, the vacancy shall be filled by the vote of the holders of a
majority of the outstanding shares of the Series A Preferred Stock, voting
separately as a single class. Holders of the Series A Preferred Stock shall
not be entitled to cumulate their shares for the election of directors. The
holders of the Series A Preferred Stock may assign their rights under this
Section 3(C) to appoint a majority of the Board of Directors of the
Corporation.
4. Liquidation Preference. In the event of any liquidation, dissolution,
or winding up of the affairs of the Corporation, whether voluntary or otherwise
("Liquidation"), after payment or provision for payment by the Corporation of
the debts and other liabilities of the Corporation, each holder of the Series A
Preferred Stock shall be entitled to receive an amount in cash for each share of
the then outstanding Series A Preferred Stock held by such holder equal to
$10.00 per share (such amount being referred to herein as the "Liquidation
Preference"), plus accrued and unpaid dividends on each such share (whether or
not declared), and shall not be entitled to any further payment, before any
distribution shall be made to the holders of any Junior Securities upon the
Liquidation of the Corporation. Written notice of any Liquidation of the
Corporation, stating a payment date and the place where the distributable
amounts shall be payable, shall be given by mail, postage prepaid, not less than
30 days prior to the payment date stated therein, to the holders of record of
the Series A Preferred Stock, if any, at their respective addresses as the same
shall appear on the books of the Corporation. For the purposes of this Section
4, the merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or the sale, lease
or conveyance of all or substantially all the assets, property or business of
the Corporation, shall not be deemed to be a Liquidation of the Corporation,
unless such merger, consolidation, sale, lease or conveyance shall be in
connection with a dissolution or winding up of the business of the Corporation.
5. Redemption at the Option of the Corporation. (A) The Corporation, at
its option, may redeem the shares of Series A Preferred Stock, in whole or in
part, out of funds legally available therefor, at any time or from time to time,
subject to the notice provisions, provisions for partial redemption and
provisions limiting the Corporation's optional redemption rights described
below, at the redemption price ("Redemption Price") as follows:
(i) 50% of the number of shares of Series A Preferred Stock issued
and outstanding on the date of the first redemption of the Series A
Preferred Stock may be redeemed at the price of $10.00 per share plus an
amount equal to accrued and unpaid dividends on such shares (whether or not
declared), if any, to (and including) the date fixed for redemption,
whether or not earned or declared; and
(ii) the remaining number of shares of Series A Preferred Stock issued
and outstanding on the date of the first redemption and all shares of
Series A Preferred Stock issued after the date of the first redemption may
be redeemed at the price described below
-3-
that is set opposite each year following the Anniversary Date (as
hereinafter defined) in which such shares may be redeemed, plus an amount
equal to accrued and unpaid dividends, if any, on such shares (whether or
not declared), to (and including) the date fixed for redemption, whether or
not earned or declared:
Year Following
--------------
Anniversary Date Redemption Price
---------------- ----------------
1 $10.50
2 $10.30
3 $10.20
4 and thereafter $10.00
The term "Anniversary Date" as used herein shall mean [December 15, 1997].
(B) In the event the Corporation shall redeem shares of Series A Preferred
Stock under this Section 5, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior
to the redemption date, to each holder of record of the shares to be redeemed,
at such holder's address as the same appears on the stock records of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares of Series A Preferred Stock to be redeemed and, if less than
all the shares held by such holder are to be redeemed, the number of such shares
to be redeemed from such holder; (iii) the Redemption Price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the Redemption Price; (v) that dividends on the shares to be redeemed shall
cease to accrue on such redemption date.
(C) Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Redemption Price
aforesaid. If fewer than all the outstanding shares of Series A Preferred Stock
are to be redeemed, shares to be redeemed shall be selected by the Corporation
from outstanding shares of Series A Preferred Stock not previously called for
redemption by lot or pro rata (as near as may be) or by any other method
determined by the Board of Directors of the Corporation in its sole discretion
to be equitable. If fewer than all the shares represented by any certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(D) Upon the occurrence of any Default (as defined in Section 6(C)) or
Change in Control (as defined in Section 6(C)), the Corporation may not exercise
its redemption rights pursuant to this Section 5.
(E) On or before the expiration of the third year following the
Anniversary Date, the Corporation shall only have the right to redeem
outstanding shares of Series A Preferred Stock pursuant to this Section 5 with
proceeds received from the sale by the Corporation of (i) equity securities of
the Corporation or (ii) assets of the Corporation (excluding the sale of oil,
gas, natural gas liquid or condensate in the ordinary course of business).
-4-
6. Mandatory Redemption. (A) On [December 15], 2002, the Corporation shall
redeem, for cash, all of the outstanding shares of the Series A Preferred Stock
at the Mandatory Redemption Price (as hereinafter defined).
(B) Upon the occurrence of a Change of Control (as hereinafter defined)
with respect to the Corporation, any holder of Series A Preferred Stock may
require, at the holder's option, for a period of 90 days after receipt of a
notice by the Corporation to the holders of the Series A that a Change of
Control has occurred, the Corporation to redeem the shares of Series A Preferred
Stock held by such holder, in whole or in part, at the Mandatory Redemption
Price. A "Change in Control" shall be deemed to have occurred (i) upon a
merger, consolidation or reorganization or similar transaction that requires
approval of holders of Common Stock, or any person or "group" (as defined in
Rule 13d-5 under the Securities Exchange Act of 1934, as amended) (other than
Enron Capital Trade & Resources Corp. or its Affiliates or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and his Affiliates) becoming the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange of 1934, as amended) of a 50% or more of the
outstanding voting securities of the Corporation, (ii) upon the sale of all or
substantially all of the Corporation's assets, or (iii) upon the execution of an
agreement by the Corporation to do any of the foregoing. The term "Affiliate"
shall mean any person, corporation or other entity controlling, controlled by or
under common control with the party in question and, as used in this definition,
the term "control," including the correlative terms "controlling," "controlled
by" and "under common control with" shall mean possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies (whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a person, corporation or other
entity.
(C) Upon the occurrence of a Default (as hereinafter defined) with respect
to the Corporation, any holder of Series A Preferred Stock may require, at the
holder's option, the Corporation to redeem the shares of Series A Preferred
Stock held by such holder, in whole or in part, at the Mandatory Redemption
Price. A "Default" shall mean shall be deemed to have occurred if at any time
(i) dividends payable on the shares of Series A Preferred Stock at the time
outstanding have not been fully paid on the Dividend Payment Date; provided,
however, if such dividends are paid on or before the 30th day following such
Dividend Payment Date, the Corporation shall not be considered in Default, (ii)
directors elected by the holders of the Series A Preferred Stock pursuant to
Section 3 are not permitted to serve on the Board of Directors of the
Corporation, (iii) the consent of the holders of Series A Preferred Stock in not
obtained pursuant to the terms of Section 3(B), or (iv) the Corporation breaches
any covenant made with respect to the Series A Preferred Stock.
(D) A holder of Series A Preferred Stock may exercise the mandatory
redemption rights pursuant to Sections 6 (A), (B), and (C) by delivering notice
of such exercise to the Corporation, together with the certificate or
certificates representing such shares. Upon receipt of such redemption notice,
the Corporation shall, within 30 days, calculate the Mandatory Redemption Price
as of the end of the month preceding the month in which the Corporation receives
such notice; provided that with respect to the exercise of the mandatory
redemption right set forth in Section 6(C), the Corporation shall calculate the
Mandatory Redemption Price within 5 days after the receipt of such redemption
notice. The Corporation shall pay to the holder exercising such
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redemption right the Mandatory Redemption Price times the number of shares
redeemed on or before the 45th day of the receipt by the Corporation of the
redemption notice; provided that with respect to the exercise of the mandatory
redemption right set forth in Section 6(C), the Corporation shall pay to the
holder exercising such redemption right the Mandatory Redemption Price within 10
days after the receipt of such redemption notice.
(E) The term "Mandatory Redemption Price" shall mean with respect to (i)
the exercise of a mandatory redemption right pursuant to Section 6(A), $10.00
per share of Series A Preferred Stock, plus all accrued and unpaid dividends
(whether or not declared), (ii) the exercise of a mandatory redemption right
pursuant to Section 6(B), $10.10 per share of Series A Preferred Stock, plus all
accrued and unpaid dividends (whether or not declared), or (iii) the exercise of
a mandatory redemption right pursuant to Section 6(C), $10.50 per share of
Series A Preferred Stock, plus all accrued and unpaid dividends (whether or not
declared), if exercised prior to the third anniversary of the Anniversary Date
or $10.00 per share of Series A Preferred Stock, plus all accrued and unpaid
dividends (whether or not declared), if exercised on or after the third
anniversary of the Anniversary Date.
7. Reacquired Shares. Any shares of the Series A Preferred Stock
redeemed or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Series A Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
8. Covenant. (a) For so long as any shares of the Series A Preferred
Stock are outstanding, neither the Corporation nor its Consolidated Subsidiaries
shall incur, create or assume any Indebtedness (as hereinafter defined), if,
taking into account such Indebtedness, the Corporation's aggregate Indebtedness
would exceed 70% of the estimated value of future gross revenues (estimated in
accordance with the requirements of the Securities and Exchange Commission) to
be generated from the production of proved reserves, net of estimated production
and future development costs, using prices and costs in effect as of the date
indicated, without giving effect to non-property related expenses such as
general and administrative expenses and future income tax expenses or to
depreciation, depletion and amortization, discounted using an annual discount
rate of 10% as reported in the Corporation's most recent Annual Report on Form
10-K, or if no Form 10-K is available as of the most recent fiscal year end
(adjusted for any material asset sales or acquisitions since the date of the
last determination).
(b) The following definitions shall apply to terms used in this Section 8:
(i) "Indebtedness" means for any Person the sum of the following
(without duplication): (a) all obligations of such Person for borrowed
money or evidenced by bonds, debentures, notes or other similar
instruments; (b) all obligations of such Person (whether contingent or
otherwise) in respect of bankers' acceptances, surety or other bonds and
similar instruments; (c) all obligations of such Person to pay the deferred
purchase price of property or services (other than for borrowed money)
arising in the ordinary course of business of such Person to the extent
that such obligations have remained outstanding in
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excess of sixty days; (d) all obligations under leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital
leases in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss; (e) all
Indebtedness and other obligations of others secured by a lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
(f) all Indebtedness and other obligations of others guaranteed by such
Person; (g) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of other
Persons; (h) payments received in consideration of oil, gas, or other
minerals yet to be acquired or produced at the time of payment (including
without limitation obligations under "take-or-pay" contracts to deliver gas
in return for payments already received) or obligations to deliver goods or
services in consideration of advance payments therefor; (i) obligations
arising under futures contracts, swap contracts, or similar agreements,
except for those entered into by the Corporation in accordance with its
Commodity Price Risk Program adopted in December 1997; (j) obligations
arising with respect to letters of credit or applications or reimbursement
agreements therefor; (k) mandatory redemption or mandatory dividend rights
on capital stock (including Series A Preferred Stock); and (l) all unfunded
postretirement and postemployment benefits including, without limitation,
unfunded pension liabilities;
(ii) "Consolidated" refers to the consolidation of financial
statements in accordance with GAAP;
(iii) "GAAP" means generally accepted accounting principles
(including principles of consolidation), in effect from time to time,
consistently applied;
(iv) "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; and
(v) "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.
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III. The Resolution was adopted by the Board of Directors of the
Corporation on ______, 1997.
IV. The Resolution was duly adopted by all necessary action on the part
of the Corporation.
DATED: ____________, 1997.
SHERIDAN ENERGY, INC.
By:__________________________________
President
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EXHIBIT B
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement") dated as of the __th day of
December, 1997, is by and among SHERIDAN ENERGY, INC. (the "Company"), ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively, "Susskinds") and ENRON CAPITAL &
TRADE RESOURCES CORP., a Delaware corporation ("ECT").
W I T N E S S E T H:
WHEREAS, the Susskinds are the current owners of a substantial number of
shares of Common Stock (as hereinafter defined);
WHEREAS, contemporaneously herewith, ECT is to acquire a substantial
number of shares of Common Stock (as hereinafter defined);
WHEREAS, the Company, the Susskinds and ECT desire to enter into this
Agreement to evidence their agreement regarding certain matters related to the
Common Stock;
NOW, THEREFORE, in consideration of the mutual agreements and promises
herein contained and on this date made and other consideration, the sufficiency
of which is hereby acknowledged, the Susskinds, ECT and the Company, each with
the other, do hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1. Certain Defined Terms. As used in this Agreement, the following
terms shall have the meanings indicated:
Affiliate: As applied to any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct 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 50% or more of the voting power (or in the case of a Person which
is not a corporation, 50% 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.
Agreement: This Shareholders' Agreement, as the same may be supplemented
or amended from time to time.
Board: The Board of Directors of the Company.
Common Stock: The common stock, par value $.01 per share, of the Company
or any successor class of the Company's common stock.
ECT Group: ECT, the JEDI Entities, and any direct or indirect transferee
of the ECT Shares provided such transferee is an Affiliate of ECT or the JEDI
Entities.
ECT Shares: All of the shares of Common Stock beneficially owned by ECT and
the JEDI Entities as of the effective date of this Agreement, or as to which
beneficial ownership is hereafter acquired by such parties, and any shares of
Common Stock issued in exchange for, as a dividend on, or in replacement or upon
conversion of, or otherwise issued in respect of any such shares of Common Stock
(including Common Stock issued in one or more stock dividends, splits or
recombinations or pursuant to one or more exercises of preemptive rights, if
any).
Family Member: means, with respect to a Person who is an individual, (a)
the spouse of such Persons, (b) the Personal Representatives of such Person
(whether appointed by will or order of a court having jurisdiction) (c) such
Person's descendants or their spouses, (d) any trust having as its beneficiaries
such Person or such Person's descendants, and (e) any trust established for the
benefit of such Person's spouse or the spouse of such Person's descendants.
JEDI Entities: means Joint Energy Development Investments Limited
Partnership and JEDI Hydrocarbons Investments I Limited Partnership.
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.
Personal Representative: means the personal representative of a Person
that is an individual, whether appointed by will or by a court having
jurisdiction over such Person or the estate of such Person.
Susskind Group: The Susskinds and any direct or indirect transferee of the
Susskind Shares provided such transferee is an Affiliate or Family Member of the
Susskinds.
Susskind Shares: All of the shares of Common Stock beneficially owned by
the Susskinds as of the effective date of this Agreement, or as to which
beneficial ownership is hereafter acquired, and any shares of Common Stock
issued in exchange for, as a dividend on, or in replacement or upon conversion
of, or otherwise issued in respect of any such shares of Common Stock (including
Common Stock issued in one or more stock dividends, splits or recombinations or
pursuant to one or more exercises of preemptive rights, if any).
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1.2 For purposes of this Agreement, shares of Common Stock shall be deemed
to be beneficially owned by a Person if such Person would be deemed to be the
beneficial owner of such shares under Rule 13d-3 of the Securities Exchange Act
of 1934, as amended.
ARTICLE II
LOCKUP PROVISION
----------------
2.1 Lockup. For one year after the date hereof, the Susskinds agree that
they shall not sell or otherwise dispose of more than ten percent of the shares
of Common Stock beneficially owned as of the date hereof by the Susskinds.
ARTICLE III
VOTING AGREEMENT
----------------
3.1. ECT Designees. Notwithstanding the general right to vote on matters
as provided under the General Corporation Law of the State of Delaware, the
Susskinds agree, at any meeting of stockholders (whether regular or special) of
the Company or in any action by written consent by such stockholders, if the ECT
Group holds, in the aggregate, 7% or more of the issued and outstanding shares
of Common Stock, to cause all of the Susskind Shares held by the Susskind Group
to be voted (i) for two nominees designated by the ECT Group, if the ECT Group
holds, in the aggregate, in excess of 14% of the issued and outstanding shares
of Common Stock, or for one nominee designated by the ECT Group, if the ECT
Group holds, in the aggregate, in the range of 7% through 14% of the issued and
outstanding shares of Common Stock, (ii) in order to fill any vacancy or
vacancies caused by the removal, death or resignation of any member of the Board
who was the nominee designated by the ECT Group, for a person or persons who
shall be designated for nomination by the ECT Group, and (iii) upon the request
of the ECT Group, for the removal (with or without cause) of any member of the
Board who was the nominee designated by the ECT Group (provided that any such
removal is permitted by the Company's Certificate of Incorporation and/or
bylaws). A member of the ECT Group shall notify the Susskinds of its designated
nominee or nominees and the Susskinds agree to cause the Susskind Shares held by
the Susskind Group to be voted in accordance with the preceding sentence.
3.2. Susskind Group. Notwithstanding the general right to vote on
matters as provided under the General Corporation Law of the State of Delaware,
if the ECT Group, holds, in the aggregate, 7% or more of the issued and
outstanding shares of Common Stock, ECT shall and shall cause any member of the
ECT Group, at any meeting of stockholders (whether regular or special) of the
Company, or by any action by written consent of such stockholders, to cause all
of the ECT Shares to be voted for each member of the Board as of the date hereof
(currently ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) who may be designated by the Susskind Group.
The Susskind Group shall notify ECT of its designated nominee or nominees and
the ECT agrees to cause the ECT Shares to be voted in accordance with the
preceding sentence.
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3.3. Stockholder Groups. Any transferee of ECT or the ECT Group which is
an Affiliate of ECT or any Person in such group and, in the case of the Susskind
Group, any transferee of the Susskinds or the Susskind Group that is an
Affiliate or a Family Member of the Susskinds or the Susskind Group, shall
execute and deliver a counterpart of this Agreement to the Company with copies
to the other parties hereto as evidence that the shares of Common Stock held by
such transferee are held subject to the terms, conditions and restrictions set
forth in this Agreement.
3.4. Legends. A legend will be added to the ECT Shares and to the
Susskind Shares to the effect that such shares are subject to this Voting
Agreement.
ARTICLE IV
MISCELLANEOUS
-------------
4.1. Remedies. Each party hereto acknowledges that a remedy at law for
any breach or attempted breach of this Agreement will be inadequate, agrees that
each other party hereto shall be entitled to specific performance and injunctive
and other equitable relief in case of any such breach or attempted breach, and
further agrees to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or any other equitable
relief.
4.2. Termination. The provisions of this Agreement shall terminate upon
the earlier of (i) December 15, 1999, or (ii) the date upon which the ECT Group
holds less than 7% issued and outstanding Common Stock.
4.3. Amendment. This Agreement may only be amended by an instrument in
writing signed by the parties hereto.
4.4. Notices. Any notice, request, reply, instruction or other
communication (herein severally and collectively called notice ) in this
Agreement provided or permitted to be given to the Company or to any Stockholder
must be given in writing and may be given or served by depositing the same in
the United States mail, in certified or registered form, postage fully prepaid,
addressed to the party or parties to be notified, with return receipt requested,
or by delivering the same in person to such party or parties. Notice deposited
in the United States mail, mailed in the manner hereinabove described, shall be
effective upon deposit. Notice given in any other manner shall be effective only
if and when received by the party to be notified. For purposes of notice
hereunder:
the address for ECT shall be:
Enron Capital & Trade Resources Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ or (▇▇▇) ▇▇▇-▇▇▇▇
the address for the Company shall be:
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▇▇▇▇▇▇▇▇ Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇
the address for the Susskinds shall be:
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
4.5. GOVERNING LAW. THIS AGREEMENT SHALL BE SUBJECT TO AND GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE.
4.6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
heirs, executors, distributees, successors and assigns; provided, however, that
such transferee of any party hereto shall have complied with the requirements of
Section 3.3 hereof.
4.7 Representations. The Susskinds hereby jointly and severally represent
and warrant that as of the date of the execution of this Agreement they own in
the aggregate 1,000,037 shares of Common Stock.
4.8. Invalid Provisions. Should any portion of this Agreement be adjudged
or held to be invalid, unenforceable or void, such holding shall not have the
effect of invalidating or voiding the remainder of this Agreement, and the
portion so held invalid, unenforceable or void shall, if possible, be deemed
amended or reduced in scope, or to otherwise be stricken from this Agreement to
the extent required for the purposes of validity and enforcement thereof.
4.9. Section Headings. The section and paragraph headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
4.10. 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 only one
instrument.
4.11. Entire Agreement. This Agreement and the Stock Purchase Agreement
constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no agreements between the parties in connection with the subject matter
hereof except as set forth specifically herein and therein.
4.12. Arbitration (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 parties hereto
on the following terms. Upon the request of either a
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member of the ECT Group (an "ECT Member") or a member of the Susskind Group (a
"Susskind Member"), a neutral mediator acceptable to all 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 the ECT Group, the Susskind
Group and the Mediator, and each of the ECT Group and the Susskind Group shall
pay their 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 9.12, 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 of the ECT Group and the Susskind Group 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. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by themselves or by their respective representatives thereunto duly
authorized as of the date first above set forth.
SHERIDAN ENERGY, INC.
By:________________________
Name:______________________
Title:_____________________
___________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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ENRON CAPITAL & TRADE
RESOURCES CORP.
By:________________________
Name:______________________
Title:_____________________
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