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EXHIBIT 11
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of December 31, 1997, is made by and
between SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan") and JEDI HYDROCARBON INVESTMENTS I LIMITED PARTNERSHIP, a limited
partnership organized under the laws of Delaware ("JEDI I"). JEDI I, together
with any transferee of Warrants or Warrant Shares, are referred to herein as
the "Warrant Holder."
WHEREAS, Sheridan and JEDI I have entered into that certain Purchase
Agreement (the "Purchase Agreement") dated December 31, 1997; and
WHEREAS, Sheridan proposes to issue to JEDI I as partial consideration
for JEDI I entering into the Purchase Agreement, 67,500 common stock purchase
warrants (the "Warrants") to purchase shares (the "Warrant Shares") of
Sheridan's common stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the holder thereof to purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Purchase Agreement set forth and for other good
and valuable consideration, the parties hereto agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. Sheridan will issue
and deliver the Warrants to JEDI I, or to an affiliate thereof designated by
JEDI I, on the date of Closing referred to in the Purchase Agreement. The
aggregate number of Warrants to be issued and delivered shall be 67,500. The
Warrants shall be exercisable on or after the date of Closing referred to in
the Purchase Agreement. The text of the Warrant, the purchase form and
assignment form to be printed on the reverse thereof shall be substantially as
set forth in the Warrant Certificate attached as Exhibit A hereto. The
Warrants shall be executed on behalf of Sheridan by the manual or facsimile
signature of the President or a Vice President of Sheridan, attested by the
manual or facsimile signature of the Secretary or an Assistant Secretary of
Sheridan. A Warrant bearing the manual or facsimile signature of individuals
who were at any time the proper officers of Sheridan shall bind Sheridan
notwithstanding that such individuals or any of them shall have ceased to hold
such offices prior to the delivery of such Warrant or did not hold such offices
on the date of this Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by
Sheridan either upon initial issuance or upon division, exchange, substitution
or transfer.
2. REPRESENTATIONS AND WARRANTIES OF SHERIDAN. Sheridan hereby
represents and warrants as follows:
(a) POWER AND AUTHORITY. Sheridan has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue and deliver the Warrants and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price, to
issue and deliver the
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shares of Common Stock or other securities issuable upon exercise of
the Warrants. This Warrant Agreement has been duly executed and
delivered by Sheridan.
(b) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK.
There have been reserved for issuance, and Sheridan shall at all times
keep reserved, out of the authorized and unissued shares of Common
Stock, a number of shares sufficient to provide for the exercise of
the rights of purchase represented by the Warrants, and such shares,
when issued upon receipt of payment therefor or upon a net exercise in
accordance with the terms of the Warrants and of this Warrant
Agreement, will be legally and validly issued, fully paid and
nonassessable and will be free of any preemptive rights of
stockholders or any restrictions.
3. CONDITIONS TO PURCHASE. JEDI I's obligations hereunder shall
be subject to satisfaction of the following conditions upon the Closing, in
addition to such other conditions as are set forth in the Purchase Agreement:
(a) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Warrant
Agreement and the Warrants and all other legal matters relating to
this Warrant Agreement, the Warrants and the transactions contemplated
hereby shall be satisfactory in all respects to JEDI I.
(b) There shall have been duly tendered to JEDI I or upon
the order of JEDI I a certificate or certificates representing the
Warrants.
4. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of Sheridan (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as JEDI I has specified to Sheridan.
5. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to Sheridan or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to Sheridan, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, Sheridan shall execute and deliver to the person entitled thereto a
new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of Sheridan, evidencing the same generic rights
and entitled to the same generic benefits under this Warrant Agreement as the
Warrants surrendered for such exchange, transfer or exercise.
6. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to Sheridan of the Warrant certificate or certificates duly endorsed
by the Warrant Holder or by his duly authorized attorney-in-fact or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney-in-fact, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with Sheridan. In case
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of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with Sheridan in its discretion.
Upon any registration of transfer, Sheridan shall deliver a new Warrant or
Warrants to the person entitled thereto.
7. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to purchase
one share of Common Stock during the time period and subject to the conditions
set forth in the Warrant Certificate at an exercise price of $5.50 per share,
subject to adjustment in accordance with Section 12 hereof (the "Exercise
Price"). Each Warrant terminates at 5:00 p.m. Houston time on the fifth
anniversary of the Closing Date as defined in the Purchase Agreement (the
"Expiration Date").
(b) The Exercise Price and the number of shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 12 of this Warrant Agreement.
Subject to the provisions of this Warrant Agreement, each Warrant Holder shall
have the right, which may be exercised as expressed in such Warrants, to
purchase from Sheridan (and Sheridan shall issue and sell to such Warrant
Holder) the number of fully paid and nonassessable shares of Common Stock
specified in such Warrants, upon surrender to Sheridan, or its duly authorized
agent, of such Warrants, and upon payment to Sheridan of the Exercise Price, as
adjusted in accordance with the provisions of Section 12 of this Warrant
Agreement or upon a net exercise pursuant to this subsection of this Warrant
Agreement, for the number of shares in respect of which such Warrants are then
exercised. The Warrant Holder may (i) pay the Exercise Price in cash, by
certified or official bank check payable to the order of Sheridan, or by the
surrender to Sheridan of securities of Sheridan having a Market Price equal to
the Exercise Price or (ii) make an exercise of Warrants for "Net Warrant
Shares." The number of Net Warrant Shares will be determined as described by
the following formula: Net Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the
number of Warrant Shares issuable upon exercise of the Warrants or portion of
Warrants in question. "MP" is the Market Price of the Common Stock on the last
trading day preceding the date of the request to exercise the Warrants.
"Market Price" shall mean the then current market price per share of Common
Stock, as determined in paragraph 12.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise Price,
with cash or securities, or upon a net exercise as aforesaid, Sheridan at its
expense shall issue and cause to be delivered with all reasonable dispatch to
or upon the written order of the Warrant Holder and in such name or names as
the Warrant Holder may designate, a certificate or certificates for the number
of full shares of Common Stock so purchased upon the exercise of such Warrants,
together with cash, as provided in Section 12 of this Warrant Agreement, in
respect of any fraction of a share of such stock otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such shares, as of the date of the surrender
of such Warrants and payment of the Exercise Price or receipt of shares by net
exercise as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the Warrant Holders thereof, either in
full or from time to time in part and, in the event that any Warrant is
exercised in respect of less than all of the shares
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purchasable on such exercise at any time prior to the Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants will be issued.
8. COMPLIANCE WITH GOVERNMENT REGULATIONS. Sheridan covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any U.S. federal or state or
other law or applicable governing rule or regulation of any securities
exchange, registration with or approval of any governmental authority, or
listing on any such securities exchange, before such shares may be issued upon
exercise, Sheridan will use its best efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.
9. PAYMENT OF TAXES. Sheridan will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 12 hereof;
provided, however, that Sheridan shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issue or
delivery of any Warrants or certificates for Warrant Shares and any securities
issued pursuant to Section 12 hereof in a name other than that of the Warrant
Holder of such Warrants.
10. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, Sheridan shall issue and deliver
in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest.
11. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. Sheridan shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the Common Stock ("Transfer Agent") and every subsequent
transfer agent for any shares of Sheridan's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. Sheridan will keep a copy of this Warrant Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of
Sheridan's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. Sheridan will supply the Transfer Agent and any
such subsequent transfer agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be issuable as provided by Section 13 of this Warrant Agreement. Sheridan will
furnish to the Transfer Agent and any such subsequent transfer agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Warrant Holder pursuant to Section 12.3 hereof. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be canceled, and such
canceled Warrants shall constitute sufficient evidence of the number of shares
of stock which have been issued upon the exercise of such Warrants (subject to
adjustment as herein provided). No shares of stock shall be subject to
reservation in respect of the Warrants subsequent to the Expiration Date except
to the extent necessary to comply with the terms of this Warrant Agreement.
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12. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as hereafter defined.
12.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case Sheridan shall (i) pay a dividend to
holders of Common Stock in shares of Common Stock or make a
distribution to holders of Common Stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of Sheridan
(including any such reclassification in connection with a
consolidation or merger in which Sheridan is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other
securities of Sheridan which he would have owned or have been
entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with
respect thereto regardless of whether the Warrants are
exercisable at the time of the happening of such event or at
the time of any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case Sheridan shall issue rights, options
or warrants to holders of its outstanding Common Stock,
without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price
per share which is lower at the record date mentioned below
than the greater of (a) the Exercise Price or (b) the then
current market price per share of Common Stock (as determined
in accordance with paragraph (e) below) (the "Greater Price"),
then in each such case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares which
the aggregate offering price of the total number of shares of
common stock so offered would purchase at the Greater Price.
Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
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(c) In case Sheridan shall distribute to holders
of its shares of Common Stock evidences of its indebtedness or
assets (including cash dividends or other cash distributions)
or rights, options or warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of
each Warrant by a fraction, of which the numerator shall be
the then current market price per share of Common Stock (as
determined in accordance with paragraph (e) below) on the date
of such distribution, and of which the denominator shall be
the then current market price per share of Common Stock, less
the then fair value (as determined in good faith by the Board
of Directors of Sheridan) of the portion of the assets or
evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
In the event of distribution by Sheridan to holders
of its shares of Common Stock of stock of a subsidiary or
securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from Sheridan, such
subsidiary or both, as Sheridan shall determine, the stock or
other securities to which such Warrant Holder would have been
entitled if such Warrant Holder had exercised such Warrant
immediately prior thereto regardless of whether the Warrants
are exercisable at such time, all subject to further
adjustment as provided in this subsection 12.1; provided,
however, that no adjustment in respect of dividends or
interest on such stock or other securities shall be made
during the term of a Warrant or upon the exercise of a
Warrant.
(d) [intentionally left blank]
(e) For the purpose of any computation under
paragraphs (b) or (c) of this Section, the current market
price per share of Common Stock at any date shall be the
average of the daily closing prices of Sheridan's Common
Stock, for 10 consecutive trading days commencing 30 trading
days before the date of such computation. The closing price
for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices
regular way for such day, in each case on the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or
admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over- the-counter market as
reported by NASDAQ or any comparable system. In the absence
of one or more such quotations,
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the Board of Directors of Sheridan shall determine the current
market price, in good faith, on the basis of such quotations
as it considers appropriate.
(f) In any case in which this Section 12.1 shall
require that any adjustment in the number of Warrant Shares be
made effective as of or immediately after a record date for a
specified event, Sheridan may elect to defer until the
occurrence of the event the issuing to the holder of any
Warrant exercised after that record date the shares of Common
Stock and other securities of Sheridan, if any, issuable upon
the exercise of any Warrant over and above the shares of
Common Stock and other securities of Sheridan, if any,
issuable upon the exercise of any Warrant prior to such
adjustment; provided, however, that Sheridan shall deliver to
such Warrant Holder a due ▇▇▇▇ or other appropriate instrument
evidencing the holder's right to receive such additional
shares or securities upon the occurrence of the event
requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share.
(h) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon the exercise
of each Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately after
such adjustment.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made
under paragraphs (b) and (c) if Sheridan issues or distributes
to each Warrant Holder the rights, options, warrants, or
convertible or exchangeable securities, or evidences of
indebtedness or assets referred to in those paragraphs which
each Warrant Holder would have been entitled to receive had
the Warrants been exercised prior to the happening of such
event or the record date with respect thereto regardless of
whether the Warrants are exercisable at the time of the
happening of such event or at the time of any record date with
respect thereto.
(j) For the purpose of this Section 12.1, the
terms "shares of Common Stock" shall mean (i) the class of
stock designated as the Common Stock of Sheridan at the date
of this Agreement, or (ii) any other class of stock resulting
from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In
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the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Warrant Holders shall
become entitled to purchase any securities of Sheridan other
than shares of Common Stock, thereafter the number of such
other securities so purchasable upon exercise of each Warrant
and the Exercise Price of such securities shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in paragraphs (a)
through (i), inclusive, above, and the provisions of Section 7
and Section 12.2 through 12.5, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(k) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof
shall not have been exercised, the Warrant Price and the
number of shares of Common Stock purchasable upon the exercise
of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (A) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange rights and (B)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by Sheridan upon such
exercise plus the aggregate consideration, if any, actually
received by Sheridan for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
rights whether or not exercised; provided, however, that no
such readjustment shall have the effect of increasing the
Warrant Price or decreasing the number of Warrant Shares by an
amount in excess of the amount of the adjustment initially
made with respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
12.2. VOLUNTARY ADJUSTMENT BY SHERIDAN. Sheridan may, at
its option, at any time during the term of the Warrants, reduce the
then current Exercise Price to any amount determined appropriate by
the Board of Directors of Sheridan.
12.3. NOTICE OF ADJUSTMENT. When the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, Sheridan
shall promptly mail by first class, postage prepaid, to each Warrant
Holder notice of such adjustment or adjustments and a certificate of a
firm of independent public accountants selected by the Board of
Directors of Sheridan (who may be the regular accountants employed by
Sheridan) setting forth the number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price of such Warrant
Shares after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation
by which such adjustment was made. Such certificate, absent manifest
error, shall be conclusive evidence of the correctness of such
adjustment.
12.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of Sheridan with or
merger of Sheridan into another person or in case of any sale,
transfer or lease to another person of all of or substantially all the
assets of
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ or such successor or purchaser, as the case may be,
shall execute with each Warrant Holder an agreement that each Warrant
Holder shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other
securities and property which the Warrant Holder would have owned or
have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such Warrant been
exercised immediately prior to such action regardless of whether the
Warrants are exercisable at the time of such action. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 12.
The provisions of this Section 12.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
12.5. STATEMENT ON WARRANTS. Even though Warrants
heretofore or hereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement; the parties understand
and agree that such Warrants will represent rights consistent with any
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.
13. FRACTIONAL INTERESTS. Sheridan shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares which shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
13, be issuable on the exercise of any Warrant (or specified portion, thereof),
Sheridan shall pay an amount in cash equal to the closing price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
14. REGISTRATION UNDER THE SECURITIES ACT OF 1933. JEDI I
represents and warrants to Sheridan that it will not dispose of the Warrant or
Warrant Shares except pursuant to (i) an effective registration statement, or
(ii) an applicable exemption from registration under the Securities Act of
1933, as amended (the "Act"). In connection with any sale by JEDI I pursuant
to clause (ii) of the preceding sentence, JEDI I shall furnish to Sheridan an
opinion of counsel reasonably satisfactory to Sheridan to the effect that such
exemption from registration is available in connection with such sale.
15. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE
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SECURITIES ACT OF 1933, AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii)
OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT SUCH EXEMPTION
FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY SALE
PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED
BY AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH EXEMPTION FROM
REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
16. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of Sheridan or any other matter, or any rights whatsoever as
stockholders of Sheridan. If, however, at any time prior to the expiration of
the Warrants and prior to their exercise, any of the following events shall
occur:
(a) Sheridan shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock, or
(b) Sheridan shall offer to the holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe to or purchase any thereof, or
(c) a dissolution, liquidation or winding up of Sheridan
(other than in connection with a consolidation, merger, sale, transfer
or lease or all or substantially all of its property, assets, and
business as an entirety) shall be proposed,
then in any one or more of said events Sheridan shall give notice in writing of
such event to the Warrant Holders as provided in Section 20 hereof, with such
notice to be completed at least 15 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding
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up. Such notice shall specify such record date or the date of closing the
transfer books, as the case may be. Failure to provide or receive such notice
or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such dividend, distribution or
subscription rights, or such proposed dissolution, liquidation or winding up.
17. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on Sheridan
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows:
Sheridan Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by registered mail, return receipt requested, postage prepaid, addressed to
such Warrant Holder at the address of such Warrant Holder as shown on the
Warrant Register or the Stock Register, as the case may be.
18. GOVERNING LAW; DISPUTES. This Warrant Agreement, the Warrants
and all related documents shall be deemed to be contracts made under and shall
be construed in accordance with and governed by the laws of the State of Texas
without giving effect to principles of conflicts of law; provided, however,
that any matter involving the internal corporate affairs of Sheridan shall be
governed by the provisions of Delaware law.
19. SUPPLEMENTS AND AMENDMENTS. Sheridan and the Warrant Holders
may from time to time supplement or amend this Warrant Agreement in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which Sheridan and the Warrant Holder may deem necessary or desirable and which
shall not be inconsistent with the provisions of the Warrants and which shall
not adversely affect the interests of the Warrant Holders. Any amendment to
this Warrant Agreement may be effected with the consent of Warrant Holders of
at least a majority of the total then outstanding Warrants (for this purpose
Warrant Shares shall be deemed to be Warrants in the proportion that Warrant
Shares are then issuable upon the exercise of Warrants); provided that, any
amendment which shall have the effect of materially adversely affecting the
interests of any Warrant Holder shall not be effective with respect to such
Warrant Holder if such Warrant Holder shall not have consented thereto.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sheridan and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration Date
of all Warrants.
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21. SUCCESSORS. All representations and warranties of Sheridan
and all covenants and agreements of this Warrant Agreement by or for the
benefit of Sheridan or the Warrant Holders shall bind and inure to the benefit
of their respective successors and assigns hereunder.
22. MERGER OR CONSOLIDATION OF SHERIDAN. So long as this Warrant
Agreement remains in effect, Sheridan will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not Sheridan), shall expressly assume, by supplemental
agreement executed and delivered to the Warrant Holders, the due and punctual
performance and observance of each and every covenant and condition of this
Warrant Agreement to be performed and observed by Sheridan.
23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
Sheridan and the Warrant Holders, any legal or equitable right, remedy or claim
under this Warrant Agreement, but this Warrant Agreement shall be for the sole
and exclusive benefit of Sheridan and the holders of the Warrants and Warrant
Shares.
24. CAPTIONS. The captions of the sections and subsections of
this Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
25. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
SHERIDAN ENERGY, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇.▇. ▇▇▇▇▇▇▇▇, President
[Warrant Agreement -- Signature Page 1]
14
JEDI HYDROCARBON
INVESTMENTS I
LIMITED PARTNERSHIP
BY: JEDI CAPITAL L.L.C., ITS
GENERAL PARTNER
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Agent and Attorney-in-Fact
------------------------------
Address for Notice:
JEDI Hydrocarbon Investments I
Limited Partnership
c/o JEDI Capital L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy:
[Warrant Agreement -- Signature Page 2]
15
EXHIBIT A
TO
WARRANT AGREEMENT
(FORM OF WARRANT CERTIFICATE)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE Common Stock OR OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY
SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SHERIDAN TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS AND THE COMMON STOCK UNDERLYING SUCH
WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
Warrant No. _____ 67,500 Warrants
VOID AFTER 5:00 P.M. HOUSTON TIME
ON DECEMBER 31, 2002
SHERIDAN ENERGY, INC.
WARRANT CERTIFICATE
THIS CERTIFIES THAT for value received JEDI HYDROCARBON INVESTMENTS I
LIMITED PARTNERSHIP ("JEDI I"), the registered holders hereof or registered
assigns (the "Warrant Holders") are the owners of the number of Warrants set
forth above, each of which entitles the owners thereof to purchase at any time
from 9:00 A.M., Houston time, on December 31, 1997, until 5:00 P.M., Houston
time on December 31, 2002, one fully paid and nonassessable share of common
stock (subject to adjustment), par value $0.01 per share (the "Common Stock"),
of SHERIDAN ENERGY, INC., a company organized under the laws of Delaware
("Sheridan"), at the exercise price of $5.50 per share, subject to adjustment
as described in the Warrant Agreement referred to below (the "Exercise Price").
The Warrant Holders may pay the Exercise Price in cash, or by certified or
official bank check or make a net exercise for Net Warrant Shares as described
in the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated December
31, 1997 (the "Warrant Agreement"), by and among Sheridan and JEDI I, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of Sheridan and the Warrant Holders of the Warrant
Certificates. Copies of the Warrant Agreement are on file at the principal
office of Sheridan.
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The Warrant Holders hereof may be treated by Sheridan and all other
persons dealing with this Warrant Certificate as the absolute owners hereof for
any purpose and as the persons entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of Sheridan, any notice to the
contrary notwithstanding, and until such transfer on such books, Sheridan may
treat the Warrant Holders hereof as the owners for all purposes.
The Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of Sheridan, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the Warrant Holders to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled the Warrant Holders to
purchase. If this Warrant Certificate shall be exercised in part, the Warrant
Holders shall be entitled to receive upon surrender hereof, another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
Neither the Warrants nor the Warrant Certificate entitles any Warrant
Holders hereof to any of the rights of a shareholder of Sheridan.
THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER,
THAT ANY MATTER INVOLVING THE INTERNAL CORPORATE AFFAIRS OF SHERIDAN SHALL BE
GOVERNED BY THE PROVISIONS OF THE DELAWARE LAW.
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IN WITNESS WHEREOF, SHERIDAN ENERGY, INC. has caused the signature of
its President and Secretary to be printed hereon.
SHERIDAN ENERGY, INC.
By:
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▇.▇. ▇▇▇▇▇▇▇▇, President
ATTEST:
----------------------------------
Name:
Secretary/Assistant Secretary
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