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EXHIBIT 9
STOCK TRANSFER AND TERMINATION AGREEMENT
THIS STOCK TRANSFER AND TERMINATION AGREEMENT (this "Agreement") is
made and entered into as of December 31, 1997 among JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership ("JEDI"), and
GRAND GULF PRODUCTION, L.L.C., a Texas limited liability company ("GGP").
RECITALS
A. JEDI and GGP entered into that certain Loan Agreement dated as
of May 3, 1995 (as amended, supplemented or otherwise modified, the "Loan
Agreement"), pursuant to which JEDI agreed, upon certain terms and conditions
stated therein, to make loans to GGP from time to time.
B. Pursuant to the terms and conditions of the Loan Agreement,
GGP and Xxxxxx X. Xxxxx ("Xxxxx") executed various Loan Documents, including,
without limitation, Security Instruments, Conveyances of Overriding Royalty and
Production Agreements (as all of such terms are hereinafter defined).
C. Pursuant to that certain Purchase Agreement dated December 31,
1997 (the "GGP/Sheridan Purchase Agreement"), GGP has agreed with Sheridan
Energy, Inc. ("Sheridan") to sell substantially all of its oil and gas
properties and all personal property, equipment, fixtures and data relating
thereto to Sheridan in exchange for Sheridan issuing 467,500 shares (the
"Shares") of Sheridan common stock, par value $.01 per share (the "Common
Stock") and warrants to purchase up to an aggregate of 82,500 shares of Common
Stock (the "Warrants") to GGP (the "Sheridan Transactions").
D. In exchange for the transfer by GGP to JEDI of the Shares,
Warrants and certain other rights, (i) JEDI has agreed to forgive the entire
balance of the Indebtedness (as hereinafter defined) remaining due after
application of the value of the Shares and the Warrants to the outstanding
balance of principal and interest owing on the Note (as hereinafter defined)
issued pursuant to the Loan Agreement, and (ii) to reassign the interests
acquired by JEDI under the Conveyances of Overriding Royalty (as hereinafter
defined).
E. In connection with the foregoing, GGP and Xxxxx have requested
that JEDI terminate the Loan Agreement, cancel the Note, release, cancel or
otherwise terminate the Security Instruments, and reconvey to GGP or its
designee, the interests held by JEDI under the Conveyances of Overriding
Royalty and Production Agreements, and JEDI has agreed to do so, subject to the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises, the transfer of the
Shares, Warrants and certain other rights and other good and valuable
consideration paid to JEDI, the receipt and sufficiency of which are hereby
acknowledged, JEDI and GGP hereby agree as follows:
1. Terms Defined in the Loan Agreement. Capitalized terms used
in this Agreement, but not defined herein, shall have the meanings assigned to
such terms in the Loan Agreement.
2. Transfer of Shares, Warrants and Purchase Rights.
Contemporaneously with closing of the Sheridan Transactions, GGP agrees to
deliver to JEDI (a) stock certificates representing all of the Shares(such
Shares being issued in JEDI's name as GGP's designee as directed by GGP to
Sheridan at the closing of the Sheridan Transactions) (b) warrant certificates
representing all of the Warrants endorsed
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in blank or accompanied by duly executed assignment documents, (c) an
assignment of all of GGP's rights under the GGP/Sheridan Purchase Agreement,
and (d) an assignment of all of GGP's rights under the Warrant Agreement (the
"Warrant Agreement") and the Registration Rights Agreement (the "Registration
Rights Agreement"), each of which agreements were entered into by Sheridan and
GGP in connection with the GGP/Sheridan Purchase Agreement. The rights to be
assigned pursuant to Section 2(c) and 2(d) above are collectively referred to
as the "Purchase Rights."
3. Representations, Warranties and Certain Covenants of GGP. (a)
GGP represents and warrants to JEDI that:
(i) Upon the consummation of the Sheridan Transactions
and when transferred to JEDI pursuant to the terms of this Agreement,
the Shares, the Warrants and the Purchase Rights will be free and
clear of any Liens created by GGP.
(ii) GGP has full right, power and authority to (i) enter
into this Agreement and the documents to be executed and delivered in
connection herewith and perform its obligations hereunder and
thereunder and (ii) transfer the Shares, the Warrants, and the
Purchase Rights to JEDI.
(iii) This Agreement and the other documents executed and
delivered in connection herewith, when executed and delivered, shall
each constitute a legal, valid and binding obligation of GGP
enforceable in accordance with its terms.
(b) GGP covenants with JEDI that, without the prior written
consent of JEDI:
(i) GGP shall not waive any conditions to the closing of
the Sheridan Transaction set forth in the GGP/Sheridan Purchase
Agreement; and.
(ii) GGP shall not amend, or waive any of its rights,
under the GGP/Sheridan Purchase Agreement.
4. Representations and Warranties of JEDI. JEDI represents and
warrants to GGP that:
(a) JEDI has full right, power and authority to enter
into this Agreement and the documents to be executed and delivered in
connection herewith and perform its obligations hereunder and
thereunder.
(b) This Agreement and the other documents executed and
delivered in connection herewith, when executed and delivered, shall
each constitute a legal, valid and binding obligation of JEDI
enforceable in accordance with its terms.
(c) JEDI is acquiring the Shares and the Warrants for its
own accounts and not with a view to the public resale of all or any
part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). JEDI acknowledges that the Shares and
Warrants have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available. JEDI if
familiar with investments of the nature of the Shares and Warrants,
understands that this investment involves substantial risks, has
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adequately investigated Sheridan Energy, Inc. and has substantial
knowledge and experience in financial and business matters such that
it is capable of evaluating, and has evaluated, the merits and risks
inherent in acquiring the Shares and Warrants and is able to bear the
economic risks of such investment.
5. Termination of Loan Agreement. Effective only upon JEDI's
receipt of the Shares, Warrant and Purchase Rights, JEDI hereby terminates the
Loan Agreement and releases GGP from all obligations thereunder and GGP hereby
releases JEDI from all of its obligations and commitments under the Loan
Agreement and the other Loan Documents.
6. Termination of Guaranty Agreement. Contemporaneously with the
closing of the Sheridan Transactions, JEDI shall execute and deliver to Xxxxx
the Termination of the Guaranty Agreement in the form attached hereto as
Exhibit A, releasing Xxxxx from all obligations of the Guaranty Agreement dated
January 23, 1997 executed by Xxxxx in favor of JEDI in connection with the Loan
Documents.
7. Release of Security Instruments, Etc. Contemporaneously with
the closing of the Sheridan Transactions, JEDI shall execute and deliver to GGP
instruments, in recordable form if appropriate, to (i) release, cancel or
otherwise terminate the Security Instruments and (ii) reconvey to GGP any
interests held by JEDI as granted by the Conveyances of Overriding Royalty and
Production Agreements.
8. Receipt of Canceled Note and Releases. Contemporaneously with
the delivery of the Shares, Warrants and Purchase Rights, GGP shall acknowledge
receipt from JEDI of the original executed Note marked "CANCELED" and each of
the release and reconveyance documents described in paragraph 7 hereof.
9. Mutual Release. Contemporaneously with the closing of the
Sheridan Transactions, JEDI and GGP shall each execute a Mutual Release in the
form attached hereto as Exhibit B releasing each party from liabilities to the
other party in connection with the Loan Documents or any transactions
contemplated thereby.
10. Survival of Certain Provisions. (a) Notwithstanding anything
to the contrary in this Agreement or the documents executed and delivered
pursuant hereto, the parties hereto agree that:
(i) nothing herein or in the documents to be executed and
delivered pursuant hereto shall be deemed to release GGP from
liability resulting from the breach of the representations and
warranties made by GGP to JEDI herein or the indemnities by GGP
herein; and
(ii) the indemnities and provisions of Section 8.04 of the
Loan Agreement shall survive the consummation of the transaction
hereby pursuant to the terms of such Section 8.04 as if the Note had
been paid in full.
(b) The terms and provisions of this Agreement shall survive the
closing of the Sheridan Transactions.
11. Indemnification. GGP agrees to indemnify, release, defend,
and hold harmless JEDI, its partners, and affiliates, and their respective
officers, directors, employees and agents from, against, and
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in respect of any and all claims, demands, losses, reasonable costs and
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties and reasonable attorneys' fees (collectively,
"Claims"), that JEDI shall incur or suffer, which arise, result from, or relate
to any breach of, or failure by GGP to perform, any of its representations,
warranties, covenants, or agreements in the GGP/Sheridan Purchase Agreement or
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by GGP to Sheridan in connection with the transactions contemplated by
the GGP/Sheridan Agreement, REGARDLESS, IN EACH CASE, OF WHETHER THE LOSS OR
CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW
OF OR BY SUCH INDEMNIFIED OR RELEASED PARTY.
12. Opinion. Contemporaneously with the transfer of the Shares,
Warrants and Purchase Rights, GGP shall cause to be delivered to JEDI an
opinion of Schully, Roberts, Xxxxxxxx & Xxxxxxx, dated as of the date of the
transfer of the Shares, Warrants and Purchase Rights, that addresses the
matters set forth in Sections 3(a)(ii) and (iii), including such exceptions and
assumptions as are customary in such opinions, in form and substance reasonably
acceptable to JEDI.
13. Termination. Notwithstanding anything herein to the contrary,
in the event the closing of the Sheridan Transactions has not occurred on or
before January 15, 1998, JEDI may terminate this Agreement by written notice to
GGP and neither party shall have any rights or obligations under this
Agreement.
14. Amendments; Waivers. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by GGP or JEDI therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance or for the specific purpose for which given.
15. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and permitted assigns of the parties hereto. This
Agreement and the rights and obligations of GGP shall not be assigned without
the prior written consent of JEDI. JEDI may not assign or transfer any or all
of its rights and obligations under this Agreement without the consent of GGP
except to an Affiliate.
16. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement unless the consummation of the transaction
contemplated hereby is materially and adversely affected thereby.
17. Governing Law. Each of the parties hereto hereby consents and
agrees that this Agreement shall be deemed a contract and instrument made under
the laws of the State of Louisiana and shall be construed and enforced in
accordance with and governed by the laws of the State of Louisiana, without
regard to principles of conflicts of law.
18. Notices. All notices, requests, and other communications to
any party hereunder shall be in writing (including telecopy) and shall be given
to such party at its address or telecopy number set
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forth on the signature pages hereof or such other address or telecopy number as
such party may hereafter specify by notice to the other parties.
19. Dispute Resolution. (a) Any controversy, dispute or claim
arising out of or relating to this Agreement or the transactions contemplated
hereby (a "Dispute") shall be submitted to non-binding mediation upon the
request of GGP or JEDI on the following terms. Upon the request of either
party, a neutral mediator acceptable to both parties (the "Mediator") shall be
appointed within fifteen (15) days. The Mediator shall attempt, through
negotiations in any manner deemed reasonably appropriate by the Mediator, in
which the parties shall participate, to resolve the Dispute. The Mediator
shall be compensated at a rate agreeable to GGP, JEDI and the Mediator, and
each of GGP and JEDI shall pay its pro rata share of such compensation and
other expenses of the mediation.
(b) In the event that the Dispute has not been resolved within 30
days after the appointment of the Mediator, the Dispute shall be resolved by
arbitration administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Section 19, the Commercial Arbitration Rules
of the AAA, and, to the maximum extent applicable, the United States
Arbitration Act. Judgment on any matter rendered by arbitrators may be entered
in any court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable in the
subject matter of the Dispute. Each party shall select one arbitrator and the
two arbitrators so selected shall select the third arbitrator. If the third
arbitrator is not selected within thirty (30) days after the request for an
arbitration, then any party may request the AAA to select the third arbitrator.
The arbitrators may engage engineers, accountants or other consultants they
deem necessary to render a conclusion in the arbitration proceeding. To the
maximum extent practicable, an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in Houston, Texas. Arbitrators
shall be empowered to impose sanctions and to take such other actions as the
arbitrators deem necessary to the same extent a judge could impose sanctions or
take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and conclusions of
law. The arbitrators shall have the power to award recovery of all costs and
fees to the prevailing party. IN DECIDING THE SUBSTANCE OF ANY SUCH CLAIM,
DISPUTE OR DISAGREEMENT, THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD
CONSEQUENTIAL, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES (INCLUDING, WITHOUT
LIMITATION, ANY SPECIAL, EXEMPLARY DAMAGES, TREBLE DAMAGES, PUNITIVE DAMAGES,
PENALTIES, OR LOSS OF USE OR LOSS OF PROFITS OR INCOME), WHETHER BASED ON
STATUTE, IN TORT, CONTRACT OR OTHERWISE, UNDER ANY CIRCUMSTANCES, REGARDLESS OF
WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER LOUISIANA LAW, THE PARTIES HEREBY
WAIVING THEIR RIGHT, IF ANY, TO RECOVER SUCH DAMAGES IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(c) All fees of the arbitrators and any engineer, accountant or
other consultant engaged by the arbitrators, shall be shared equally unless
otherwise awarded by the arbitrators.
20. Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
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WITNESS THE EXECUTION HEREOF as of the date first set forth above.
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By:/s/ XXXXX X. XxXXXXX
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Name: Xxxxx X. XxXxxxx
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Title: Agent and Attorney-in-Fact
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Address: 0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
GRAND GULF PRODUCTION, L.L.C.
By:/s/ XXXXXX X. XXXXX
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Name: Xxxxxx X. Xxxxx
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Title: C.E.O.
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Address: 0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxx
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