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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
Under The Securities Exchange Act of 1934
(Amendment No. )(1)
Ponder Industries, Inc.
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(Name of issuer)
Common Stock, par value $0.01 per share
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(Title of class of securities)
732378 10 4
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(CUSIP Number)
c/o William R. Ziegler
Parson & Brown LLP
666 Third Avenue, 9th Floor
New York, New York 10017; (212) 551-9860
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(Name, address and telephone number of person
authorized to receive notices and communications)
October 16, 1997
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note. Six copies of this statement including all exhibits, should be
filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies
are to be sent.
(Continued on following pages)
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(1) The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 80 Pages
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13D
CUSIP NO. 732378 10 4 PAGE 2 OF 80 PAGES
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<TABLE>
<C> <S> <C>
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
White Owl Capital Partners
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
2
(b) [ ]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4 OO (See Item 3)
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEM 2(d) OR 2(e) [ ]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 Texas
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7 SOLE VOTING POWER
6,080,000 shares (assuming the exercise of Warrants and conversion of
Convertible Note (See Item 5(b))
NUMBER OF SHARES -------------------------------------------------------------------------------------
BENEFICIALLY OWNED
BY SHARED VOTING POWER
EACH REPORTING 8 0 (See Item 5(b))
PERSON WITH
-------------------------------------------------------------------------------------
SOLE DISPOSITIVE POWER
9 6,080,000 shares (assuming the exercise of Warrants and
conversion of Convertible Note (See Item 5(b))
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SHARED DISPOSITIVE POWER
10 0 (See Item 5(b))
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 6,080,000 shares of Common Stock issuable upon exercise of Warrants and conversion
of Convertible Note (See Item 5 (a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
See Item 5
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 17.7% (assuming the exercise of Warrants and conversion of Convertible Note (See Item 5(a))
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TYPE OF REPORTING PERSON*
14 PN
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</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $0.01 per
share (the "Common Stock") of Ponder Industries, Inc., a Delaware corporation
(the "Company"). The address of the principal executive offices of the Company
is 5005 Riverway, Suite 550, Houston, Texas 77056.
ITEM 2. IDENTITY AND BACKGROUND.
White Owl Capital Partners (the "Reporting Person") is a Texas
general partnership that was formed recently to acquire, own and hold securities
of the Company. The address of the principal business and the principal office
of the Reporting Person is 20 Pine Brook Road, Bedford, New York 10506. The only
partners of the Reporting Person are Steven A. Webster ("Webster") and William
R. Ziegler ("Ziegler").
Webster is a natural person and has a business address of 1900
West Loop South, Suite 1800, Houston, Texas 77027. The present principal
occupation or employment of Webster is as the Chairman, Chief Executive Officer
and Treasurer of Falcon Drilling Company, Inc., a marine oil and gas drilling
contractor with its principal place of business located at 1900 West Loop South,
Suite 1800, Houston, Texas 77027. Webster is a United States citizen.
Ziegler is a natural person and has a business address of 666
Third Avenue, 9th Floor, New York, New York 10017. The present principal
occupation or employment of Ziegler is as a partner of Parson & Brown LLP, a law
firm with its principal place of business located at 666 Third Avenue, 9th
Floor, New York, New York 10017. Ziegler is a United States citizen.
During the last five years, neither the Reporting Person nor
either partner of the Reporting Person has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, neither the Reporting Person nor either partner of the
Reporting Person was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the terms and conditions of the Securities Purchase
Agreement dated October 15, 1997 (the "Securities Purchase Agreement") among the
Company, the Reporting Person and the other purchasers named on Schedule 1.2
thereof (collectively, the "Purchasers"), the Reporting Person purchased 76
Units of the Company for an aggregate purchase price of $1,900,000. Each Unit
consisted of $25,000 principal amount of Senior Convertible Promissory Notes of
the Company (individually, a "Senior Note" and collectively, the "Senior Notes")
and a
Page 3 of 80 Pages
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detachable Warrant (individually, a "Warrant" and collectively, the
"Warrants") to acquire 40,000 shares of Common Stock (1.6 shares of Common Stock
for each $1 principal amount of Senior Note). On October 16, 1997, the Reporting
Person tendered its subscription price of $1,900,000 for 76 Units of the Company
and received in exchange therefor a Senior Note in the principal amount of
$1,900,000 and a Warrant to purchase an aggregate of 3,040,000 shares (subject
to adjustment) of Common Stock of the Company.
The source of funds for the $1,900,000 aggregate subscription
price for the 76 Units acquired by the Reporting Person was capital
contributions, in the amount of $950,000 from each of its two partners, Webster
and Ziegler. The source of funds for the capital contributions made by each of
Webster and Ziegler to the Reporting Person was personal funds of Webster and
Ziegler, respectively.
ITEM 4. PURPOSE OF TRANSACTION.
As disclosed in Item 3 above, the Reporting Person acquired 76
Units of the Company, consisting of (i) Senior Notes, in the aggregate principal
amount of $1,900,000, that are convertible at the option of the holder into
shares of Common Stock, and (ii) Warrants that are exercisable at the option of
the holder for shares of Company Common Stock, pursuant to the terms and
conditions of the Securities Purchase Agreement. An aggregate of 100 Units of
the Company, consisting of Senior Notes in the aggregate principal amount of
$2,500,000, and Warrants to acquire Common Stock, were issued and sold to the
Purchasers pursuant to the Securities Purchase Agreement.
The Senior Notes issued by the Company (i) are due and payable on
January 1, 1999 (the "Maturity Date"), (ii) bear interest at a rate equal to the
Prime Rate of interest of Citibank, N.A. plus 200 basis points, from and after
July 1, 1998, which interest is payable monthly on the last day of each month
that the Senior Note is outstanding, commencing on July 31, 1998, and at the
Maturity Date, (iii) are subject to a default rate of interest equal to the
lower of (A) 5% per annum in excess of the current applicable interest rate and
(B) the highest permissible legal rate, during any period of default under the
Senior Notes, (iv) are not subject to prepayment and (iv) are convertible at the
option of the holder thereof at any time into such number of shares of Common
Stock of the Company, obtained by dividing the aggregate face amount of the
Senior Note by the exercise price per share of the Warrant (the "Conversion
Price Per Share"). The Senior Notes issued to the Reporting Person presently are
convertible into an aggregate of 3,040,000 shares of Common Stock at a current
Conversion Price Per Share of $0.625.
The Warrants issued to the Reporting Person are presently
exercisable, in whole or in part at any time prior to 5:30 p.m., New York time,
on January 1, 2001 (the "Expiration Date"), for an aggregate of 3,040,000 shares
of Common Stock (the "Warrant Stock") at a purchase price per share of $0.625
(the "Warrant Price"). The number of shares of Warrant Stock and the Warrant
Price are subject adjustment upon the occurrence of specified events, as
provided in Section 4 of the Warrants.
Page 4 of 80 Pages
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The Senior Notes and Warrants issued to the Reporting Person, and
presently representing the right to acquire an aggregate of 6,080,000 shares
(subject to adjustment as provided therein) of Company Common Stock, were
acquired by the Reporting Person primarily for investment purposes, but also
with a view towards influencing management.
The Securities Purchase Agreement also provides that until such
time as the entire principal and interest on the Senior Notes shall have been
paid in full, a Majority-in-Interest of the holders of Senior Notes (presently
the Reporting Person) may, but need not, designate up to two persons to serve as
directors of the Company. To date, the Reporting Person has not exercised its
rights under this provision. The Securities Purchase Agreement further provides
that the holders of the Senior Notes, acting through the Majority-in-Interest
(currently the Reporting Person) shall have a preferred right to participate in
any future debt or equity financing of the Company effected prior to January 1,
1999.
Although there is no present intention to do so, any of the
Reporting Person, Webster or Ziegler may decide to make additional purchases of
Common Stock (or common stock equivalents, as the case may be) in the future
either in the open market or in private transactions, subject to their
evaluation of the Company's business, prospects and financial condition, the
market for the Common Stock (or common stock equivalents, as the case may be),
other opportunities available to the Reporting Person, Webster or Ziegler,
prospects for the respective business' of the Reporting Person, Webster or
Ziegler, general economic conditions, money and stock market conditions and
other future developments.
Depending upon the results of the reviews and the other factors
mentioned above, the Reporting Person, at any time, may decide to change its
intention with respect to the acquisition and/or retention of shares of Common
Stock (or common stock equivalents, as the case may be), including, without
limitation, a determination to increase, decrease or entirely dispose of its
holdings of Common Stock (or common stock equivalents, as the case may be),
although, neither the Reporting Person nor Webster or Ziegler has any current
intention to do so.
Any of the Reporting Person, Webster or Ziegler may also approach
members of the Company's management in connection with the foregoing and/or any
other matter enumerated in clauses (a) through (j) of Item 4 of Schedule 13D
and/or the Reporting Person may exercise its right under the Securities Purchase
Agreement to designate up to two persons to serve as directors of the Company.
The descriptions of the Securities Purchase Agreement, the Senior
Notes and the Warrants (inclusive of the other agreements which are exhibits
thereto) contained in this Item 4 are summaries and are subject to and qualified
in their entirety by reference to the detailed provisions of the Securities
Purchase Agreement, the Senior Note issued to the Reporting Person and the
Warrant issued to the Reporting Person, copies of which are attached hereto as
Exhibits I, II and III, respectively, and incorporated herein by reference.
Except as discussed above in this Item 4 (inclusive of the
provisions of the documents incorporated herein by reference), none of the
Reporting Person, Webster or Ziegler
Page 5 of 80 Pages
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has any current plans or proposals which relate to or would result in the
occurrence of any actions or events specified in clauses (a) through (j) of Item
4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number and percentage of shares of Common Stock
beneficially owned by the Reporting Person and other persons named in Item 2
above are as follows:
The aggregate number and percentage of the Common Stock which are
owned beneficially by the Reporting Person on the date hereof are 6,080,000
shares of Common Stock, or approximately 17.7% of the 34,284,354 shares of
Common Stock that would be issued and outstanding as of October 16, 1997,
assuming the conversion of the Senior Note issued to the Reporting Person and
the exercise of the Warrant issued to the Reporting Person, in each case, into
shares of Common Stock as of such date.
Each of Webster and Ziegler, as the sole general partners of the
Reporting Person, may be deemed to indirectly beneficially own the 6,080,000
shares of Common Stock, or approximately 17.7% of the 34,284,354 shares of
Common Stock that would be issued and outstanding as of October 16, 1997,
assuming the conversion of the Senior Note issued to the Reporting Person and
the exercise of the Warrant issued to the Reporting Person, in each case, into
shares of Common Stock as of such date. In addition, Webster owns beneficially
and of record 250,000 shares of Common Stock. Each of the Reporting Person and
Ziegler disclaims beneficial ownership of the shares of Common Stock owned
by Webster.
(b) With respect to each person named in response to paragraph
(a) of this Item 5 of Schedule 13D, set forth below are the number of shares of
Common Stock as to which there is sole power to vote or to direct the vote,
shared power to vote or direct the vote, and sole or shared power to dispose or
direct the disposition:
The Reporting Person may be deemed to have the sole power to vote
(and to direct the vote of) and to dispose of (and direct the disposition of)
the 6,080,000 shares of Common Stock owned of record by it (assuming the
conversion of the Senior Note issued to the Reporting Person and the exercise of
the Warrant issued to the Reporting Person into shares of Common Stock).
Notwithstanding the foregoing, each of Webster and Ziegler, as the sole general
partners of the Reporting Person, may be deemed to share the power to vote (and
direct the vote of) and to dispose of (and direct the disposition of) the
6,080,000 shares of Common Stock owned of record by the Reporting Person
(assuming the conversion of the Senior Note issued to the Reporting Person and
the exercise of the Warrant issued to the Reporting Person into shares of Common
Stock). In addition, Webster has the sole power to vote (and to direct the
vote of) and to dispose of (and direct the disposition of) the 250,000 shares
of Common Stock owned of record by him.
Page 6 of 80 Pages
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(c) Except for (i) the October 6, 1997 open market purchase
by Webster of an aggregate of 250,000 shares of Common Stock, at a purchase
price per share of $0.61313 (aggregate purchase price of $153,282.50,
exclusive of brokerage commission and transaction fee), effected on the
over-the-counter market, and (ii) the acquisition of the Senior Note (presently
convertible into an aggregate of 3,040,000 shares of Common Stock) and the
Warrant (presently exercisable for an aggregate of 3,040,000 shares of Common
Stock) by the Reporting Person pursuant to the terms of the Securities Purchase
Agreement disclosed in response to Items 3 and 4 above, during the past 60 days,
neither the Reporting Person nor Webster or Ziegler has effected any
transaction in the Common Stock. See Items 3 and 4 above and subsection (a) and
(b) of this Item 5 for further details in connection with the acquisition of
the Senior Note and Warrant pursuant to the Securities Purchase Agreement.
(d) Except for the Reporting Person and its general partners
disclosed in Item 2 above, no other person is known to have the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, the securities of the Company owned by the Reporting Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As previously disclosed in Item 4 above, the Reporting Person is
a (i) party to the Securities Purchase Agreement, which provided for the sale
and issuance of the Units (inclusive of the Senior Notes and Warrants) to the
Purchasers (including the Reporting Person) (ii) a holder of a Senior Note, in
the aggregate principal amount of $1,900,000, which presently is convertible
into an aggregate of 3,040,000 shares of Common Stock and (iii) holder of a
Warrant, which presently is exercisable for an aggregate of 3,040,000 shares of
Common Stock. See Item 4 above for further details with respect to the
provisions of the Securities Purchase Agreement, the Senior Notes and the
Warrants.
Contemporaneously with the execution and delivery of the
Securities Purchase Agreement, the Company and the Purchasers (inclusive of the
Reporting Person) entered into a Registration Rights Agreement (the
"Registration Rights Agreement"), that requires the Company, upon the occurrence
of certain events, to register for resale under the Securities Act of 1933, as
amended (the "Securities Act"), the shares of Common Stock issued from time to
time upon conversion of the Senior Notes (inclusive of the Senior Notes issued
to Purchasers other than the Reporting Person) or upon exercise of the Warrants
(inclusive of the Warrants issued to Purchasers other than the Reporting
Person).
The descriptions of the Securities Purchase Agreement, the Senior
Notes, the Warrants and the Registration Rights Agreement contained in this Item
6 are summaries and are subject to and qualified in their entirety by reference
to the detailed provisions of the Securities Purchase Agreement, the Senior Note
issued to the Reporting Person, the Warrant issued to the Reporting Person and
the Registration Rights Agreement, copies of which are attached hereto as
Exhibits I, II, III and IV, respectively, and incorporated herein by reference.
Page 7 of 80 Pages
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Except as discussed in this Item 6 and in Item 4 above (in each
case, inclusive of the provisions of the documents incorporated herein by
reference), neither the Reporting Person, Webster nor Ziegler is a party to any
contract, arrangement, understanding or relationship (legal or otherwise) among
the Reporting Person and the other persons named in Item 2 above or between any
such persons and any other person with respect to any securities of the Company,
including, without limitation, those relating to the transfer or voting of any
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, the giving or
withholding of proxies, the pledge of securities or any other arrangement
involving a contingency the occurrence of which would give another person voting
power or investment power over such securities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
I. Securities Purchase Agreement referred to in Items 3, 4, 5
and 6.
II. Senior Note referred to in Items 3, 4 and 6.
III. Warrant referred to in Items 3, 4, 5 and 6.
IV. Registration Rights Agreement referred to in Item 6.
Page 8 of 80 Pages
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SIGNATURE
After reasonable inquiry and to the best knowledge and belief of
the undersigned, the undersigned hereby certifies that the information set forth
in this statement is true, complete and correct.
Dated: October 23, 1997
WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
_________________________________
Name: William R. Ziegler
Title: General Partner
Page 9 of 80 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
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<C> <S> <C>
I Securities Purchase Agreement dated as of October 15, 1997, among 11
Ponder Industries, Inc., the Reporting Person and the other
Purchasers signatory thereto
II Senior Note issued by Ponder Industries, Inc. in favor of the 44
Reporting Person
III Warrant issued by Ponder Industries, Inc. in favor of the Reporting 51
Person
IV Registration Rights Agreement dated as of October 15, 1997, among 64
Ponder Industries, Inc., the Reporting Person and the other
Purchasers of Units signatory thereto
</TABLE>
Page 10 of 80 Pages
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EXHIBIT I
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PONDER INDUSTRIES, INC.
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SECURITIES PURCHASE AGREEMENT
DATED AS OF OCTOBER 15, 1997
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UNITS
CONSISTING OF
SENIOR NOTES
AND
WARRANTS
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Page 11 of 80 Pages
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
<S> <C> <C>
1.1 Authorization and Description of the Units............................. 1
1.2 Sale and Purchase of the Units..........................................1
1.3 Closing.................................................................2
1.4 Application of Proceeds.................................................2
1.5 Conditions of Closing...................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.........................................................3
2.2 Subsidiaries............................................................4
2.3 Qualification; Enforceability...........................................4
2.4 Business and Property; Financial Statements.............................5
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc ......................................................5
2.6 Consents and Approvals..................................................6
2.7 Litigation..............................................................6
2.8 Private Offering........................................................6
2.9 No Defaults; Debt, etc; Liens...........................................6
2.10 Full Disclosure.........................................................7
2.11 Environmental Matters...................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation...............................................8
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information......................................11
4.2 Certain Restrictions...................................................12
4.3 Maintenance of Office..................................................13
4.4 Corporate Existence....................................................13
4.5 Compliance with Laws; Government Filings...............................13
</TABLE>
i Page 12 of 80 Pages
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<TABLE>
<S> <C> <C>
4.6 Environmental Matters..................................................13
4.7 Certain Contracts......................................................14
4.8 Participation Rights...................................................14
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default......................................................15
5.2 Appointment of Director................................................16
ARTICLE VI
MISCELLANEOUS
6.1 Expenses...............................................................16
6.2 Reliance on and Survival of Representations............................17
6.3 Amendment and Waiver...................................................17
6.4 Register...............................................................18
6.5 Directly or Indirectly.................................................19
6.6 Successors and Assigns.................................................19
6.7 Notices................................................................19
6.8 LAW GOVERNING..........................................................19
6.9 SUBMISSION TO JURISDICTION;
Service of Process.....................................................19
6.10 Headings, etc .........................................................20
6.11 Entire Agreement.......................................................21
6.12 WAIVER OF TRIAL BY JURY................................................21
6.13 No Waiver..............................................................21
6.14 Applicable Interest Rate...............................................21
6.15 Indemnification........................................................22
6.16 Interpretive Provision.................................................23
6.17 Severability...........................................................23
6.18 Counterparts...........................................................23
6.19 Finder's Fee...........................................................23
Schedules:
Schedule 1.2 Purchasers
Schedule 1.4 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Required Consents
Schedule 2.7 Litigation
</TABLE>
ii Page 13 of 80 Pages
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<TABLE>
<S> <C>
Schedule 2.9 Debts; Liens
Exhibits:
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Exhibit A Form of Senior Note
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Company Counsel
Exhibit D Form of Registration Rights Agreement
</TABLE>
iii Page 14 of 80 Pages
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October 15, 1997,
between PONDER INDUSTRIES, INC., a Delaware corporation, and each of the
PURCHASERS who have executed this Agreement.
WHEREAS, the capitalized terms used herein have the meaning given
to such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of and wishes to
sell to each Purchaser the number of Units set forth opposite such Purchaser's
name in Schedule 1.2; and
WHEREAS, each Purchaser wishes to purchase the number of Units
set forth opposite such Purchaser's name in Schedule 1.2, subject to the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the Company
and each Purchaser, intending to be mutually bound, agree as follows:
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units.
The Company has authorized the issuance and sale of 100 Units,
consisting of Senior Notes in the aggregate principal amount of $2,500,000 and
Warrants to purchase an aggregate of 4,000,000 shares of Common Stock. Each
Senior Note shall be in the form of Exhibit A attached hereto and each Warrant
in the form of Exhibit B attached hereto, in each case with such appropriate
insertions therein to reflect the number of Units so purchased and the date of
the purchase.
1.2 Sale and Purchase of the Units.
The Company will sell to each of the Purchasers and each
Purchaser severally will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company contained herein and in the Exhibits hereto, such
number of Units as are set forth in Schedule 1.2, at the purchase price set
forth in Schedule 1.2.
Page 15 of 80 Pages
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1.3 Closing.
The initial sale and purchase of Units shall take place on the
date hereof (the "Closing") at the offices of Parson & Brown LLP, 666 Third
Avenue, 9th Floor, New York, New York 10017. At the Closing the Company will
deliver to each Purchaser one or more Senior Notes and one or more Warrants in
the aggregate amount to be purchased by each Purchaser, each dated the date of
the Closing and registered in the name of such Purchaser, against delivery by
each Purchaser of the purchase price therefor by check or wire transfer of such
purchase price to such account as the Company shall designate. The failure of
any Purchaser to deliver such purchase price shall not excuse any other
Purchaser from delivery of his purchase price.
1.4 Application of Proceeds.
The Company shall apply the proceeds from the sale of the Units
as set forth in the Schedule 1.4 attached hereto.
1.5 Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the Units to
be purchased by him is subject to satisfaction, prior to or simultaneously with
the closing, of the following conditions:
(a) The Company shall have delivered a certificate of an officer
of the Company, dated the Closing Date, certifying that the representations and
warranties of the Company contained in this Agreement and any Exhibit to which
the Company is a party are true and correct in all material respects and that
the Company has performed in all material respects all agreements and complied
with all conditions contained in this Agreement and in any Exhibit to which it
is a party that are required to be performed or complied with on or before the
Closing Date.
(b) The Company shall have delivered a certificate of the
Secretary of the Company, dated the Closing Date, certifying as to (A) the
certificate of incorporation of the Company and any amendments thereto, (B) the
by-laws of the Company, and (C) resolutions of the Board of Directors of the
Company authorizing the execution and delivery of the Senior Notes, the
Warrants, this Agreement and all Exhibits to which the Company is a party and
reserving for issuance such number of shares of Common Stock as is required to
deliver shares of Common Stock upon exercise of rights therefor as provided in
the Senior Notes and the Warrants.
(c) The Company shall have executed and delivered to the
Purchasers the Registration Rights Agreement.
(d) Each of the other Exhibits hereto shall have been executed
and delivered to the Purchasers by the parties thereto.
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(e) Fulbright & Jaworski L.L.P., counsel for the Company, shall
have delivered to the Purchasers the Opinion of Company Counsel.
(f) All proceedings taken in connection with the authorization,
issuance and sale of the Units and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing and all documents and
papers relating thereto shall be satisfactory in form, scope and substance to
the Purchasers and their counsel, and each Purchaser and their counsel shall
have received copies (executed or certified as may be appropriate) of such
documents and papers as each may reasonably request in connection therewith.
(g) The Company shall have paid the reasonable legal fees and
other expenses of the Purchasers' counsel and all other expenses for which the
Company is obligated to pay pursuant to Section 6.1 and for which the Company
shall have received invoices on or prior to the closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own or hold under lease the property
it purports to own or hold under lease, to carry on its business as now
conducted, to enter into this Agreement and the other Exhibits to which it is or
is to be a party, to issue and sell the Units (including the Senior Notes and
the Warrants), to perform its obligations under this Agreement, the Units
(including the Senior Notes and the Warrants), and the other Exhibits to which
it is or is to be a party and to consummate the transactions contemplated hereby
and thereby. The Company has, by all necessary corporate action (no action of
stockholders of the Company being required by law, by its charter or by-laws, or
otherwise in connection therewith), duly authorized the execution and delivery
of this Agreement, the Units (including the Senior Notes and the Warrants), and
the other Exhibits to which it is or is to be a party, the performance of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby.
(b) Schedule 2.1(b) sets forth the authorized capital stock of
the Company. All such authorized capital stock has been duly and validly
authorized, and either are, or will be when issued, duly and validly issued and
outstanding and are, or will be, fully paid and nonassessable. Such capital
stock is not subject to any rights (either preemptive or otherwise) or warrants
to subscribe for or to purchase, nor any options for the purchase of, nor any
agreements providing for the issue (contingent or otherwise) of, nor any calls,
commitments or claims of any
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character relating thereto or any stock or securities convertible into or
exchangeable for any capital stock, other than as set forth in Schedule 2.1(b).
All securities of the Company have been issued in compliance with the Securities
Act and applicable state securities laws. The shares of Common Stock that will
be issuable pursuant to the Senior Notes and the Warrants in the manner referred
to in the Senior Notes and the Warrants have been duly authorized and reserved
for issuance, are not subject to any preemptive or similar rights on the part of
the holders of any shares of capital stock or other securities of the Company,
and when issued in the manner referred to in the Senior Notes and the Warrants
will be validly issued, fully paid and nonassessable.
(c) Schedule 2.1(c) sets forth the authorized, issued and
outstanding capital stock of each Subsidiary, including the record ownership
thereof, and the ownership interests of the Company (direct and indirect), in
any other Person. There are no liens on any capital stock of any Subsidiary or
on the Company's ownership interests in any other Person, except as set forth in
Schedule 2.1(c). There are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from the Company or any
Subsidiary of any shares of capital stock of any Subsidiary or any other
securities convertible into or exchangeable for any shares of capital stock of
any Subsidiary, except as set forth in Schedule 2.1(c).
2.2 Subsidiaries.
Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own or hold
under lease the property it purports to own or hold under lease, and to carry on
its business as conducted by it.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect.
(b) This Agreement, the Senior Notes, the Warrants and the other
Exhibits hereto have been (or at the Closing will be, as the case may be) duly
executed and delivered by the Company, and, assuming due execution and delivery
by the Purchasers of this Agreement and the Exhibits that require execution by
the Purchasers, constitute (or upon execution and delivery at the Closing, will
constitute) the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect relating
to or affecting the enforcement of creditors' rights generally or by the
application of equitable principles (whether such application is considered in
equity or in law).
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2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and complete
copy of the Unit Offering Disclosure Documents. The Unit Offering Disclosure
Documents correctly describe in all material respects the business and material
properties of the Company and its Subsidiaries and the nature of their
operations as of the date thereof. The Financial Statements included in the Unit
Offering Disclosure Documents, were prepared in accordance with GAAP, applied on
a consistent basis throughout the periods specified, and present fairly in all
material respects the financial position of the Company and its Subsidiaries for
the respective periods specified. Except as specifically described in the
Financial Statements contained in the Unit Offering Disclosure Documents,
neither the Company nor any Subsidiary has as of the date thereof any material
liabilities, contingent or otherwise, which under GAAP are required to be
disclosed therein.
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc .
(a) Except as set forth in Schedule 2.5, neither the Company nor
any Subsidiary is (i) in violation of any term or provision of its corporate
charter or by-laws or (ii) in violation of or default under (A) any term or
provision of any agreement, indenture, mortgage, instrument, permit or license
to which it is a party or by which it or any of its properties may be bound or
affected or (B) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties (including,
without limitation, any statute, law, rule, regulation, ordinance or order
relating to occupational health and safety standards, or equal employment
practice requirements), the consequences of which violation or default, either
in any one case or taken together with all other such violations or defaults,
(x) could have a Material Adverse Effect or (y) could materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, the Senior Notes, the Warrants or any other Exhibit to which the
Company is a party.
(b) Except as set forth in Schedule 2.5, neither the execution,
delivery or performance by the Company of this Agreement, the Senior Notes or
the Warrants (including, without limitation, the issuance of Common Stock
pursuant to the Senior Notes or the Warrants), or any other Exhibit to which it
is a party, nor compliance by the Company with the respective terms hereof and
thereof will result in (i) any violation of or be in conflict with or constitute
a default under (A) any term or provision of the corporate charter or by-laws of
the Company or any Subsidiary, (B) any term or provision of any agreement,
indenture, mortgage, instrument, permit or license to which it is a party or by
which it or any of its properties may be bound or affected, or (C) to the
Company's knowledge, any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court, arbitrator or Governmental Body applicable
to it or its properties, or (ii) the creation of (or impose any obligation on
the Company or any Subsidiary to create) any lien upon any of the properties or
assets of the Company or any Subsidiary.
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2.6 Consents and Approvals.
Except for the Required Consents set forth in Schedule 2.6, no
consent, approval or authorization of, or filing or registration with, or the
taking of any other action in respect of, any Governmental Body or any other
Person (including any trustee or holder of any indebtedness, securities or other
obligations of the Company or any Subsidiary) is required (i) for or in
connection with the valid execution and delivery by the Company of, or the
performance by the Company of any obligation under, this Agreement or any
Exhibit to which it is a party or the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
offer, issue, sale and delivery of the Senior Notes or the Warrants (including
without limitation, the issuance of stock pursuant to the Senior Notes or the
Warrants) or (ii) as a condition to the legality, validity or enforceability as
against the Company of this Agreement or any Exhibit to which it is a party. The
Company shall use all reasonable efforts to obtain the Required Consents on or
before the Closing. In the event of the failure of the Company to receive the
Required Consents within ten Business Days of the date hereof, this Agreement
shall terminate, except for the obligations of the Company pursuant to Section
6.1.
2.7 Litigation.
Except as set forth on Schedule 2.7, there are no actions, suits
or proceedings pending (or, to the knowledge of the Company, threatened) against
the Company or any Subsidiary or affecting any of their respective properties in
any court or before any arbitrator of any kind or before or by any Governmental
Body, which (i) question the validity or legality of this Agreement, the Senior
Notes or the Warrants or any other Exhibit or any action taken or to be taken
pursuant hereto or thereto or (ii) might result, either in any one case or in
the aggregate, in (A) a material impairment of the ability of the Company to
perform its obligations under this Agreement or any other Exhibit to which it is
a party, or (B) a Material Adverse Effect.
2.8 Private Offering.
Neither the Company nor any other person acting on behalf of the
Company has taken, or will take, any action which would subject the issuance or
sale of the Units, Senior Notes or Warrants to Section 5 of the Securities Act
or to the registration or qualification requirements of any securities law of
the State of New York or the State of Texas.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 correctly lists (i) all secured and unsecured
funded debt of the Company and any Subsidiary and (ii) any liens (other than
Permitted Liens) on any assets of the Company or any Subsidiary, in each case,
as of the date hereof. Upon receipt of any Required Consent, no default or event
of default, after giving effect to the issuance and sale of the Units and the
consummation of the other transactions contemplated by this Agreement and the
Exhibits, will exist (or, but for the waiver thereof, would exist) under any
instrument or agreement evidencing, providing for the issuance or securing of,
or otherwise relating to, any such debt or liens.
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(b) There is no pending foreclosure with respect to any assets or
properties of the Company or any Subsidiary, and as of the Closing there will
not be any pending foreclosure with respect thereto.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Unit Offering Disclosure
Documents or any document, certificate or instrument delivered to the Purchasers
by or on behalf of the Company in connection with the transactions contemplated
by this Agreement as of their respective dates contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which the same were made, not misleading.
2.11 Environmental Matters.
(a) To the Company's knowledge, the Company and the Subsidiaries
hold all Environmental Permits required under all Environmental Laws except to
the extent failure to have any such Environmental Permit has not had and will
not have a Material Adverse Effect.
(b) To the Company's knowledge, the Company and the Subsidiaries
currently are, and at all times heretofore have been, in compliance with all
terms and conditions of all such Environmental Permits and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws except to the extent failure to comply therewith, in any one case or in the
aggregate, has not had and will not have a Material Adverse Effect.
(c) Neither any of the Company nor any Subsidiary has ever
received, and, to the Company's knowledge, no predecessor in interest of any the
Company and the Subsidiaries has ever received in respect of any of the Company
Premises, from any Governmental Body or other Person any written notice of, and
the Company has no knowledge of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that could
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with the Environmental Permits referred to
in Section 2.11(a) or any scheduled renewals thereof or any Environmental Laws,
or that could reasonably be expected to give rise to any liability on the part
of any the Company and the Subsidiaries or otherwise form the basis of any
claim, action, demand, request, notice, suit, proceeding, hearing, study or
investigation (collectively, "Environmental Claims") involving any of the
Company and the Subsidiaries based on or related to (i) a violation of any
Environmental Law or (ii) the manufacture, refining, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance, other than
liabilities or Environmental Claims referred to in this Section 2.11(c) that
have not had and will not have, either in any one case or in the aggregate, a
Material Adverse Effect.
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(d) To the Company's knowledge, there has not been any civil,
criminal or administrative action, suit, demand, summons, citation, claim,
hearing, notice or demand letter, information request, notice of violation,
judgment, order, lien, investigation, study or proceeding pending or threatened
against any of the Company or the Subsidiaries, or against any predecessor in
interest thereof, in its capacity as such, relating to any such Environmental
Permits or any scheduled renewals thereof or any Environmental Laws that has had
or will have, either in any one case or in the aggregate, a Material Adverse
Effect.
(e) To the Company's knowledge, (i) no part of the Company
Premises or, so far as is known to the Company, the area surrounding the Company
Premises is being used, or has been used at any time in the past, to
manufacture, generate, refine, process, distribute, use, sell, treat, receive,
store, dispose of, transport, arrange for transport of, handle, or conduct any
other activity involving any Hazardous Substance except in a manner that has
been in compliance in all material respects with all applicable Environmental
Laws and Environmental Permits and to an extent that has not had and will not
have a Material Adverse Effect; and (ii) neither the Company nor any Subsidiary
is conducting or has ever conducted any such activities anywhere else except in
a manner that has been in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits and to an extent that
has not had and will not have a Material Adverse Effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally as to himself, represents and warrants
as follows:
3.1 Investment Representation . (a) The Purchaser of the Senior
Notes and of the Warrants hereby acknowledges that the Senior Notes and the
Warrants are not being registered (i) under the Securities Act of 1933, as
amended (the "Act") or (ii) under any applicable state securities law; and that
the Company's reliance on the Section 4(2) exemption of the Act and under
applicable state securities laws is predicated in part on the representations
hereby made to the Company in the Agreement.
(b) The Purchaser of the Senior Notes will not sell or transfer
all or any part of the Senior Notes unless and until he shall first have given
notice to the Company describing such sale or transfer and, if requested by the
Company, furnished to the Company either (a) an opinion, reasonably satisfactory
to counsel for the Company, of counsel skilled in securities matters (selected
by the Purchaser and reasonably satisfactory to the Company) to the effect that
the proposed sale or transfer may be made without registration under the Act and
without registration or qualification under applicable state law, or (b) an
interpretive letter from the Securities and Exchange Commission to the effect
that no enforcement action will be recommended if the proposed sale or transfer
is made without registration under the Act. The Purchaser acknowledges that the
Senior Notes and the Warrants (and upon any exercise thereof,
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the certificates representing the Common Stock) subscribed for hereby will bear
a legend restricting transfer thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE
BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE
REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION
ON THE PART OF THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
(c) The Company may refuse to recognize a transfer of the Senior
Notes or the Warrants on its books should a Purchaser attempt to transfer the
Senior Notes or the Warrants otherwise than in compliance with this Section 3.1.
(d) The Purchaser has adequate means of providing for his current
needs and possible personal contingencies, he anticipates no need now or in the
foreseeable future to sell the Senior Notes or the Warrants (or upon any
exercise thereof, the Common Stock) which he is purchasing and he can afford the
loss of his entire investment in the Company.
(e) The Purchaser is an "accredited investor," as defined in Rule
501 of Regulation D, promulgated under the Act.
(f) The Purchaser has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(g) Each Purchaser will be the only owner, beneficial or
otherwise, of the Senior Notes and the Warrants (and upon any exercise thereof,
the Common Stock) being purchased by the Purchaser hereunder.
(h) The Purchaser has received and read and is familiar with the
Unit Offering Disclosure Documents and confirms that all documents, records and
books pertaining to his proposed investment in the Company have been made
available to him. The Purchaser is aware that no federal or state agency has
passed upon the Senior Notes, the Warrants or the Common Stock or made any
finding or determination concerning the fairness of the investment represented
thereby.
(i) The Purchaser had an opportunity to ask questions of and
receive answers from representatives of the Company concerning the terms and
conditions of this investment, and
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all such questions have been answered to the full satisfaction of the Purchaser.
The Purchaser understands that no person other than the Company has been
authorized to make any representation or warranty other than as contained herein
(inclusive of the Exhibits hereto) or in the Unit Offering Disclosure Documents
and, if made, such representation may not be relied on unless it is made in
writing and signed by the Company. The Company has not rendered any investment
or tax advice to the Purchaser with respect to the suitability of an investment
in the Senior Notes and the Warrants (and upon any exercise thereof, the Common
Stock) or the tax consequences thereof. The Company has urged each Purchaser to
consult his own tax adviser concerning any tax matters relating to this
investment.
(j) The Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) which Purchaser is acquiring will be acquired for his
own account for investment. The Purchaser intends to hold the Senior Notes and
the Warrants (and upon any exercise thereof, the Common Stock) indefinitely and
he is not purchasing such securities with a view toward distribution in a manner
which would require registration under the Securities Act, and he does not
presently have any reasons to anticipate any change in his circumstances or
other particular occasion or event which would cause him to sell, the Senior
Notes and the Warrants (or upon any conversion or exercise thereof, the Common
Stock) which he is purchasing hereunder, subject, nevertheless, to any
requirement of law that the disposition of his property shall at all times be
within his control.
(k) The Purchaser acknowledges that it has been called to his
attention both in the Unit Offering Disclosure Documents and by those
individuals with whom he has dealt in connection with his investment in the
Company that his investment in the Company involves a high degree of risk.
(1) The Purchaser has received no representations or warranties
from the Company other than those contained herein (inclusive of the Exhibits
hereto) or in the Unit Offering Disclosure Documents or otherwise furnished in
writing and signed by the Company.
(m) The Purchaser, if a corporation, partnership, trust or other
form of business entity: is authorized and otherwise duly qualified to purchase
and hold the Senior Notes and the Warrants (and upon any exercise thereof, the
Common Stock) and to enter into this Agreement and the Exhibits hereto to which
it is a signatory; represents that the purchase of the Senior Notes and the
Warrants (and upon any conversion or exercise thereof, the Common Stock) will
not result in a breach of or violation of the terms or provisions of, or
constitute a default under, the certificate of incorporation, by-laws, or other
charter document of such entity or any indenture or other agreement or
instrument by which the entity or its property is bound, or violate any
applicable law, administrative regulation, or court decree; and represents that
such entity has its principal place of business as set forth on its signature
page and that such entity has not been formed for the specific purpose of
acquiring the Senior Notes and the Warrants (or upon any exercise thereof, the
Common Stock). If the Purchaser is one of the aforementioned entities, it shall
supply any additional written information that may be required by the Company.
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(n) All of the information that the Purchaser has heretofore
furnished or which is set forth in this Agreement and the Schedules and Exhibits
hereto with respect to his financial position and business status is correct and
complete as of the date of this Agreement and, if there should be any material
change in such information prior to the Closing, the Purchaser will immediately
furnish the revised or corrected information to the Company.
ARTICLE IV
COVENANTS
The Company, so long as any Senior Note shall be outstanding,
agrees to perform and comply with each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Holder of the Senior Notes the
following:
(a) Financial Information. The Company shall send, or cause to be
sent, to each Holder (i) its consolidated audited annual financial statements,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the same have been issued but in any case within ninety days of the end of its
fiscal year, together with the report thereon by independent public auditors,
(ii) its unaudited quarterly consolidated financial statements, of each of the
first three fiscal quarters of its fiscal year, fairly and accurately presenting
in all material respects the financial condition and the results of operations
and cash flows of the Company and its Subsidiaries, prepared in accordance with
GAAP, as soon as is practicable after the end of each fiscal quarter but in any
case within forty-five days of the end of its fiscal quarters, certified by its
duly authorized chief financial officer, together with a certificate signed by
its duly authorized chief executive officer or treasurer to the effect that,
based upon due inquiry and investigation, during such fiscal quarter no Event of
Default, or event which with the passing of time or giving of notice would
constitute an Event of Default, occurred, (iii) a copy of any monthly financial
report or statement of the Company and/or any of its Subsidiaries as may be
prepared by or for the directors of such company or for any other Person, as
soon as same is available, and (iv) such financial or other information relating
to the Company and its Subsidiaries or any of the transactions contemplated by
this Agreement or any Exhibit to which the Company is a party, as may be
reasonably requested by a Majority-in-Interest of the Holders.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any other holder of funded debt of
the Company or Subsidiary, or any notices which are so furnished, in each case
pursuant to the terms of any indenture, loan, credit or similar
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agreement and not otherwise required to be furnished pursuant to any other
clause of this Section 4.1
(c) Commission and Other Reports. Promptly upon their becoming
available (and in any event within five Business Days thereafter), copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by the Company to any class of its
security holders (in their capacity as such) or by any Subsidiary to any class
of its security holders other than the Company or another Subsidiary, (ii) all
regular and periodic reports and all registration statements, forms and
prospectuses filed by the Company or any of its Subsidiaries with any securities
exchange or with the Commission, and (iii) all press releases and other
statements made available generally by the Company or any of its Subsidiaries to
the public concerning material developments in the business of the Company or
any of its Subsidiaries.
(d) Defaults, etc. Promptly upon and in any event within five
Business Days after any officer of the Company obtaining knowledge of any
condition or event which constitutes a Default or an Event of Default or
becoming aware that the Holder of any Senior Note has given any notice or taken
any other action with respect to a claimed Default or Event of Default or that
any person has given any notice to the Company or any of its Subsidiaries or
taken any other action with respect to a claimed default under or in respect of
any debt for borrowed money in excess of $100,000 or with respect to the
occurrence or existence of any event or condition of such type, written notice
in reasonable detail specifying the facts and circumstances of such condition,
event or action.
(e) Litigation, etc. Promptly and in any event within five
Business Days after any officer of the Company obtains knowledge of any
litigation, administrative proceeding or judgment (i) affecting the Company or
any of its Subsidiaries which involves claims against the Company or its
Subsidiaries aggregating, when taken together with all other such litigation,
proceedings and judgments, $100,000 which are not considered by the Company, in
its reasonable judgment, to be covered by insurance, or (ii) relating in any
material way to this Agreement, the Senior Notes, or any other Exhibit, notice
thereof specifying in each case in reasonable detail the facts and circumstances
surrounding such litigation, proceeding or judgment.
4.2 Certain Restrictions.
(a) The Company shall not pay any dividend or distribution in
respect of any class of its capital stock or make any payment on account of the
purchase, redemption or other retirement of any of its shares of capital stock
without the prior written consent of the Majority-in-Interest of the Holders of
the Senior Notes.
(b) Without the prior written consent of the Majority-in-Interest
of the Holders of the Senior Notes, for so long as the Senior Notes are
outstanding, the Company shall not, and shall not permit any Subsidiary to,
mortgage, pledge, create a lien or security interest in or otherwise encumber
any assets or property of the Company or any Subsidiary, except as
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contemplated by any loan or security document specifically referenced in any of
the Schedules to this Agreement and except for Permitted Liens.
(c) Without the prior written consent of the Majority-in-Interest
of the Holders of the Senior Notes, the Company shall not, and shall not permit
any Subsidiary to, voluntarily liquidate or dissolve, or consolidate or merge
with or into any other Person (except where the Company or Subsidiary is the
surviving entity and the net worth of such surviving entity is at least equal to
the net worth of the Company or Subsidiary, as the case may be, immediately
prior thereto), or sell, lease, transfer, contribute or otherwise dispose of all
or substantially all of its assets to any other Person (other than sales of
inventory and worn out and obsolete assets in the ordinary course of business).
4.3 Maintenance of Office.
Until the principal of and interest on the Senior Notes has been
paid in full to the Holders, (i) the Company shall maintain its principal office
at a location in the United States of America where notices, presentations and
demands in respect of this Agreement and the Senior Notes may be made upon it,
and (ii) shall notify each Holder of a Senior Note in writing of any change of
location of such office at least 20 days prior to such change of location. Such
principal office shall first be maintained at 5005 Riverway, Suite 550, Houston,
Texas 77056.
4.4 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to, do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
4.5 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries to,
comply in all material respects with all laws, statutes, rules, regulations and
ordinances and all orders of, and restrictions imposed by, any court, arbitrator
or Governmental Body in respect of the conduct of the business of the Company or
Subsidiary and the ownership of the properties of the Company or Subsidiary
(including, without limitation, applicable laws, statutes, rules, regulations,
ordinances and orders relating to occupational health and safety standards,
consumer protection and equal employment opportunities), except to the extent
that the applicability or validity of any such law, statute, rule, regulation,
ordinance or order is being contested in good faith by appropriate and timely
actions or proceedings diligently pursued, and for which such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made.
4.6 Environmental Matters.
(a) The Company shall, and shall cause each of its Subsidiaries
to, (i) obtain and maintain in full force and affect all Environmental Permits
that may be required from time to time in order for the Company and such
Subsidiary to comply in all material respects with all Environmental Laws
applicable to the Company or such Subsidiaries and (ii) be and remain in
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compliance in all material respects with all terms and conditions of all such
Environmental Permits and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at
any time on, in, under or above the Company Premises or any part thereof or (B)
the Company Premises or any part thereof to be used at any time to manufacture,
generate, refine, process, distribute, use, sell, treat, receive, store, dispose
of, transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the foregoing clause (i) on the Company Premises or anywhere else,
except, in each case referred to in the foregoing clauses (i) and (ii), in a
manner that is in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits or to an extent that will not have
a Material Adverse Effect.
4.7 Certain Contracts.
The Company shall notify the Holders of the Senior Notes promptly
following receipt of notice of any default or assertion of any material breach
under any existing Material Contract, and shall notify the Holders of the Senior
Notes promptly following the entering into of any new Material Contract.
4.8 Participation Rights.
The Holders of the Senior Notes, acting by a
Majority-in-Interest, shall have a preferred right to participate in any future
debt or equity financing of the Company effected prior to January 1, 1999, on
the following basis. The Company agrees to negotiate in good faith with the
Holders of the Senior Notes for the provision of any such debt or equity
financing before negotiating with any other potential provider of any such
financing. If the Company and such Holders cannot agree upon the terms of such
debt or equity financing, the Company may negotiate with third parties for the
provision of such debt or equity financing, and may obtain debt financing
without being required to offer to allow the Holders to provide such debt
financing on the same terms. If the Company and any such third party reach an
agreement upon the terms of any equity financing, the Company shall give notice
to the Holders specifying such terms and the Holders shall have the option,
exercisable within 30 days of receipt of such notice, to provide such equity
financing on the same terms. If the Holders waive such option, or do not
exercise such option within such 30-day period, the Company may, for a period of
60 days from the date of such waiver or the expiration of such period, obtain
such equity financing from such third party on the terms specified in the notice
or on terms no less favorable to the Company.
-14- Page 28 of 80 Pages
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ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. In the event that:
(i) the Company defaults for more than five days after written
notice from any Holder hereof in making any payment required to be made on the
Senior Notes; or
(ii) any other obligation of the Company or any Subsidiary for
the payment of borrowed money in excess of $100,000 becomes or is declared to be
due and payable prior to its expressed maturity, unless the validity of any such
indebtedness or obligation is being contested in good faith by appropriate
proceedings; or
(iii) the Company defaults in the observance or performance in
any material respect of any of the covenants and agreements (other than
covenants and agreements with respect to the payment of principal or interest on
the Senior Notes) contained in this Agreement or in any Exhibit hereto and if
the same is capable of being cured the continuance of the same for 30 days after
written notice of such default from any Holder; or
(iv) any warrant of attachment, execution or other writ is levied
upon any property or assets of the Company or any Subsidiary in excess of
$100,000 and is not discharged or stayed (including stays resulting from the
filing of an appeal) within 30 days; or all or any substantial part of the
assets or properties of the Company or any Subsidiary are condemned, seized or
appropriated by any government or governmental authority; or any order is
entered in any proceeding directing winding up, dissolution or split-up of the
Company or any Subsidiary; or
(v) any representation or warranty of the Company made in this
Agreement or any Exhibit hereto or in connection herewith or therewith shall
prove to have been false or incorrect or breached in any material respect on the
date on which made, and if the same is capable of being cured the continuance of
same for 20 days after receiving notice of such default from any Holder; or
(vi) the Company or any Subsidiary hereafter makes an assignment
for the benefit of creditors, or files a petition in bankruptcy as to itself, is
adjudicated insolvent or bankrupt, petitions a receiver of or any trustee for
the Company or any Subsidiary or any substantial part of the property of the
Company or any Subsidiary under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or if there is hereafter
commenced against the Company or any Subsidiary any such proceeding and an order
approving the petition is entered or such proceeding remains undismissed for a
period of 60 days, or the Company or any Subsidiary by any act or omission to
act indicates its consent to or approval of or acquiescence in any such
proceeding or the appointment of any receiver of, or trustee for, the Company or
any
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Subsidiary or any substantial part of its properties, or suffers any such
receivership or trusteeship to continue undischarged for a period of 60 days;
then, and in any such event, and at any time thereafter, if such event shall
then be continuing, any Holder as to Section 5.1(i) and a Majority-in-Interest
of all Holders as to any other Event of Default may, by written notice to the
Company, declare the Senior Notes due and payable, whereupon the same shall be
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived.
5.2 Appointment of Director.
Until such time as the entire principal and interest on the
Senior Notes shall have been paid in full, the Majority-in-Interest may, but
need not, designate up to two persons to serve as directors of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I hereof
are consummated (unless the failure to consummate such transactions is due to a
breach by the Purchasers of their obligations hereunder), the Company shall: (a)
directly pay the reasonable fees and expenses of special counsel to the
Purchasers incurred in connection with such transactions (up to $35,000), in
connection with compliance by the Purchasers with any obligations imposed by or
under the Securities Exchange Act as a consequence of the issuance of the Senior
Notes and Warrants or the conversion or exercise thereof (including, without
limitation, pursuant to Sections 13(d) and 16 of that Act) (up to $10,000 for
the initial filings under Sections 13(d) and 16 of that Act and up to $2,500 per
year thereafter so long as the Purchasers are subject to such Sections), or in
connection with any actual or proposed amendment, waiver or consent pursuant to
the provisions hereof, and all other expenses in connection with the foregoing
(including, without limitation, document production and reproduction expenses);
(b) reimburse each Purchaser for his reasonable out-of-pocket expenses in
connection with each such actual or proposed amendment, waiver or consent
pursuant to the provisions of this Agreement, and any items of the character
referred to in clause (a) which shall have been paid by any Purchaser; and (d)
pay all documentary, stamp or similar taxes (including interest and penalties)
which may be payable in respect of the execution and delivery or issuance (but
not the transfer) of any of the Senior Notes or of any amendment of, or waiver
or consent under or with respect to, this Agreement, any of the Senior Notes or
any other Exhibit and save each Purchaser of the Senior Notes harmless against
each Purchaser any loss or liability resulting from nonpayment or delay in
payment of any such tax. The obligations of the Company under this Section shall
survive payment and transfer of any Senior Notes.
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6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of the
Company herein or in any Exhibit or of (or on behalf of) the Company in any
certificate or other instrument delivered pursuant hereto or thereto shall: (a)
be deemed to be material and to have been relied upon by each Purchaser,
notwithstanding any investigation heretofore or hereafter made by each Purchaser
or on his behalf, and (b) survive the execution and delivery of this Agreement
and the execution and delivery of the Senior Notes to each Purchaser and any
investigation made at any time by him or on his behalf or any disposition of any
of the Senior Notes, and all representations and warranties contained in Article
II hereof and in any Exhibit hereto and in any Financing Document shall expire
and terminate upon payment in full of the Senior Notes including all accrued
interest thereon.
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of this
Agreement, the Senior Notes or the Warrants or any other Exhibit hereto may,
with the written consent of the Company, be amended or modified, or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), by one or more substantially concurrent written
instruments signed by the Holder or Holders of not less than 66 2/3% in
aggregate unpaid principal amount of all Senior Notes and 66 2/3% in number of
the Warrants at the time outstanding (except that amendments or waivers to the
Senior Notes shall not require the consent of Holders of Warrants and amendments
or waivers to the Warrants shall not require the consent of Holders of Senior
Notes); provided, that
(i) with respect to the Senior Notes no such amendment,
modification or waiver shall (A) change the principal of, or change the
rate of interest or change the time of payment of principal, or premium,
if any, or interest on any of the Senior Notes, (B) change the
percentage of Holders of Senior Notes required to accelerate or rescind
any acceleration of the Senior Notes, or (C) modify any provision of
this Section, without the consent of the Holders of all Senior Notes
then outstanding,
(ii) with respect to the Warrants no such amendment, modification
or waiver shall change the Warrant Price, as provided in the Warrant,
without the consent of the Holders of all Warrants then outstanding, and
(iii) no such amendment, modification or waiver shall extend to
or affect any obligation not expressly waived or impair any right
consequent thereon.
(b) Any amendment, modification or waiver pursuant to this
Section 6.3 shall apply equally to all the Holders of the Senior Notes or the
Warrants, as the case may be, and shall be binding upon them, upon each future
holder of any Senior Note or Warrants, as the case may be, and upon the Company,
in each case, whether or not a notation thereof shall have been placed on any
Senior Note. Promptly after any amendment, modification or waiver pursuant to
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this Section 6.3 has become effective, the Company shall deliver to each Holder
of a Senior Note or Warrant, as the case may be, a true and complete copy of the
written instruments pursuant to which such amendment, modification or waiver was
effected, signed by the Holder or Holders of the requisite percentage and
setting forth any such amendment or modification or the terms of any such
waiver.
(c) Each Holder shall continue to make its own analysis and
decisions in taking or not taking action under this Agreement. In no event shall
the Majority-in-Interest be deemed to be an agent or fiduciary for the
Purchasers, and shall not be required to keep informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Company. No Holder shall have any duty or responsibility to provide any other
Holder with any credit or other information concerning the affairs, financial
condition or business of the Company that may come into the possession of such
Holder.
6.4 Register.
(a) The Senior Notes and the Warrants shall be issued in
registered form only. The Company shall keep a register (the "Senior Note
Register") in which provision shall be made for the registration of the Senior
Notes and the registration of transfers of the Senior Notes and a register (the
"Warrant Register") in which provisions shall be made for the registration of
the Warrants and the registration of transfers thereof. Such Registers shall be
kept at the principal office of the Company and the Company is hereby appointed
"Senior Note Registrar" and the "Warrant Registrar" for the purpose of
registering the Senior Notes and the Warrants, respectively, and transfers of
the Senior Notes. Subject to compliance with the provisions of Article III
hereof by a transferee, upon surrender for registration of transfer of any
Senior Note or Warrant at the principal office of the Company and compliance
with the provisions of Section 3.1, if applicable, the Company shall execute and
deliver, in the name of the designated transferee, a new Senior Note or Warrant,
as the case may be, of a like amount. The Company shall make or cause to be made
a notation on each new Senior Note of the amount of all payments of principal
previously made on the surrendered Senior Note and the date to which interest
accrued on the surrendered Senior Note has been paid. The Company shall treat
the individual or entity in whose name each Senior Note is registered on the
Senior Note Register or Warrant on the Warrant Register, as the case may be, as
the sole and absolute owner thereof, notwithstanding any contrary notice.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Senior Note or
Warrant and of a letter of indemnity reasonably satisfactory to the Company, and
upon reimbursement to the Company of all reasonable expenses incident thereto,
and upon surrender or cancellation of a Senior Note or Warrant, if mutilated,
the Company will make and deliver a new Senior Note or Warrant of like tenor in
lieu of such lost, stolen, destroyed or mutilated Senior Note or Warrant.
-18- Page 32 of 80 Pages
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6.5 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be
taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether the action in question is taken directly
or indirectly by such person.
6.6 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of
the respective parties hereto shall bind and inure to the benefit of their
respective successors and, in the case of any Holder of a Senior Note or
Warrant, registered assigns. The provisions of this Agreement are intended to be
for the benefit of all Holders from time to time of the Senior Notes, and shall
be enforceable by any such Holder, whether or not an express assignment to such
Holder of rights under this Agreement has been made by the Purchaser or his
successors or assigns.
6.7 Notices.
Unless otherwise expressly provided in this Agreement, all
notices, opinions and other communications provided for in this Agreement shall
be in writing and delivered by hand or mailed, first class postage prepaid,
return receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at 5005 Riverway, Suite 550,
Houston, Texas 77056 (with a copy sent by telefax transmission to it at (713)
850-7730), marked to the attention of the President, with a copy to Fulbright &
Joworski L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas 78205,
telecopy number (210) 270-7205, to the attention of Phillip Renfro, Esq., or at
such other address as the Company may hereafter designate by notice to each
Holder of Senior Notes or Warrants at the time outstanding, or (b) if to the
Purchasers, at the address of each Purchaser as set forth in Schedule 1.2 or at
such other address as such Purchaser may hereafter designate by notice to the
Company, or (c) if to any other Holder of any Senior Note or Warrant, at the
address of such Holder as it appears on the Senior Note Register or the Warrant
Register, as the case may be.
6.8 LAW GOVERNING.
THIS AGREEMENT AND THE SENIOR NOTES AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK.
6.9 SUBMISSION TO JURISDICTION;
Service of Process .
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK,
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STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE SENIOR NOTES OR WARRANTS OR ANY OTHER EXHIBIT
MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT
MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF
ANY PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Agreement or any Exhibit, and for the exclusive benefit of the
Holders, the Company irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York, and to the non-exclusive jurisdiction of any court of the
State of New York located in the City and County of New York, for the purposes
of any suit, action or other proceeding arising out of, or relating to, this
Agreement or any Exhibit or any of the transactions contemplated hereby or
thereby, and hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, that it is not personally subject to the jurisdiction of
the above named courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum, or that the venue of such suit,
action or proceeding is improper, or that this Agreement or any Exhibit or the
subject matter hereof may not be enforced in or by such courts. The Company
hereby agrees that process against it may be served by mail or delivery of
service of process in any of the aforementioned action, suits or proceedings to
C T Corporation System, 1633 Broadway, New York, New York 10019 (such agent
being hereinafter called the "Process Agent"), which the Company hereby
irrevocably designates and appoints as its attorney-in-fact to receive service
of process in any action, suit or proceeding with respect to any matter as to
which it submits to jurisdiction as set forth above, it being agreed that
service to such office or upon such agent shall constitute valid service upon
the Company. The Company hereby directs the Process Agent to receive and accept
all process on its behalf. The Company shall promptly notify the Purchasers of
any change in the address of the Process Agent and may, with prior notice given
to Holders, appoint a successor Process Agent; provided, however, that if the
Process Agent shall at any time cease to exist or its agency shall for any
reason cease, the Company shall designate forthwith a successor Process Agent in
the County and State of New York and shall give prompt notice of such
designation to the Holders, together with evidence of the acceptance of any such
appointment. The Company agrees irrevocably to the service of process of any of
the aforementioned courts in any suit, action or proceeding described above by
mailing of copies of such process to the Company at its address specified in
Section 6.7 hereof. Nothing herein shall preclude service of process in any
other manner permitted by applicable law or prohibit any Holder from commencing
legal proceedings against the Company or any of its properties in any other
jurisdiction.
6.10 Headings, etc.
The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning or construction of any
of the terms hereof. Unless otherwise specified, any reference in this Agreement
to a particular section, clause or other subdivision, or a particular schedule
or exhibit, shall be considered a reference to that section, clause or other
subdivision of, or to that schedule or exhibit to, this Agreement.
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6.11 Entire Agreement.
This Agreement (inclusive of the Exhibits hereto) embodies the
entire agreement and understanding among the Company and the Purchasers and
supersedes all prior agreements and understandings among such parties relating
to the subject matter hereof.
6.12 WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE PURCHASERS
IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.13 No Waiver.
No failure on the part of any Holders of the Senior Notes to
exercise any right or remedy hereunder with respect to the Company, whether
before or after the happening of an Event of Default, shall constitute waiver of
any such subsequent Event of Default or of any other Event of Default. No
failure to accelerate the debt of the Company evidenced hereby by reason of an
Event of Default or indulgence granted from time to time shall be construed to
be a waiver of the right to insist upon prompt payment thereafter; or shall be
deemed to be a novation of the Senior Notes or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any Holders of the
Senior Notes may have, whether by the laws of the state governing the Senior
Notes, by agreement or otherwise; and the Company hereby expressly waives the
benefit of any statute or rule of law or equity that would produce a result
contrary to or in conflict with the foregoing.
6.14 Applicable Interest Rate.
The Holders of the Senior Notes, on the one hand, and the
Company, on the other hand, intend that the obligations evidenced by the Senior
Notes conform strictly to the applicable usury laws from time to time in force.
All agreements between the Company and any Holder of the Senior Notes, whether
now existing or hereafter arising and whether oral or written, hereby are
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to such Holder, or collected by such Holder, by or on behalf of the
Company for the use, forbearance or detention of the money to be loaned to the
Company hereunder or otherwise, or for the payment or performance of any
covenant or obligation contained herein of the Company to such Holder, or in any
other document evidencing, securing or pertaining to such indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury law. If
under any circumstances whatsoever fulfillment of any provision thereof or any
other document, at the time
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performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances any Holder of Senior Notes ever shall receive from or on behalf of
the Company an amount deemed interest, by applicable law, which would exceed the
highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder and under the Senior Notes and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and such
other indebtedness, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to the Company or to any other person making such
payment on the Company's behalf.
6.15 Indemnification.
In consideration of the execution and delivery of this Agreement
by each Purchaser, the Company hereby agrees to indemnify, defend and hold each
Purchaser and each Holder from time to time of any Senior Notes, and such
Purchaser's and their respective officers and directors, general and limited
partners (and directors and officers thereof), employees and agents (herein
called the "Indemnitees") free and harmless from and against any and all claims,
actions, causes of action, suits or other proceedings (whether or not any such
Indemnitee is a party thereto), losses, liabilities and damages, and expenses in
connection therewith, including, without limitation, reasonable fees and
disbursements of counsel, consultants and experts and claims relating to
personal injury or property damage (herein called the "Indemnified Liabilities",
which term shall not include, however, in respect of any particular Indemnitee,
liabilities incurred by reason of the gross negligence or willful misconduct of
such Indemnitee) incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds from the sale of any
Senior Note, or (b) any failure of any representation or warranty set forth in
Section 2.11 to be true and correct when made or any failure by the Company to
comply with any of its covenants or agreements set forth in Section 4.6. If and
to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment of each of the Indemnified Liabilities which is permissible under
applicable law. The provisions of, and obligations of the Company under, this
Section 6.15 shall survive the execution and delivery of this Agreement, the
delivery, payment or transfer of any Senior Note, the enforcement of any
provision hereof or thereof, the consummation of the transactions to occur on
the Closing Date, and any amendments or waivers, and shall be enforceable by
each Indemnitee separately or together without necessity of accelerating the
maturity of any Senior Notes; and any such Indemnitee seeking to enforce the
indemnification provided for hereunder may initially proceed directly against
the Company without first resorting to any other rights of indemnification or
otherwise that it may have.
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6.16 Interpretive Provision.
Wherever any representation, warranty or other statement made by
the Company in this Agreement is limited to the Company's knowledge, such
limitation shall mean the actual knowledge or awareness of any person who, on
the date hereof, is an executive officer or director of the Company after due
inquiry of the circumstances thereof.
6.17 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.18 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
6.19 Finder's Fee.
(a) The Company represents and warrants that it has not incurred
any obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Units and agrees to indemnify and hold
the Purchasers harmless against any claims or liabilities asserted against them
by any person acting or claiming to act as a broker or finder on behalf of the
Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not
incurred any obligation or liability to any broker or finder for any fee or
payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Company harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of such Purchaser.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first before written.
COMPANY:
PONDER INDUSTRIES, INC.
By: /s/ EUGENE L. BUTLER
------------------------------
Name: Eugene L. Butler
Title: President
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PURCHASERS:
WHITE OWL CAPITAL PARTNERS
By:/s/ WILLIAM R. ZIEGLER
----------------------------------------
William R. Ziegler, General Partner
/s/ ARVIND SANGER
----------------------------------------
Arvind Sanger
/s/ ANTONY T. F. LUNDY
----------------------------------------
Antony T. F. Lundy
/s/ KARL BANDTEL
----------------------------------------
Karl Bandtel
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APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the
meanings ascribed thereto:
"Agreement" means this agreement, as it may be amended from time
to time, including all schedules and exhibits thereto.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"Closing" has the meaning set forth in Section 1.3.
"Commission" means the Securities and Exchange Commission or any
other United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company having a par
value of $.01 per share.
"Company" means Ponder Industries, Inc., a Delaware corporation.
"Company Premises" means real property in which (a) the Company,
(b) any Subsidiary of any person referred to in clause (a) of this definition or
(c) any person which has at any time been a Subsidiary of any person referred to
in clause (a) of this definition at any time has or ever had any direct or
indirect interest, including, without limitation, ownership thereof, or any
arrangement for the lease, rental or other use thereof, or the retention or
claim of any mortgage or security interest therein or thereon.
"Environmental Claims" has the meaning set forth in Section
2.11(c).
"Environmental Law" any past, present or future Federal, state,
local or foreign statutory or common law, or any regulation, ordinance, code,
plan, Order, permit, grant, franchise, concession, restriction or agreement
issued, entered, promulgated or approved thereunder, relating to (a) the
environment, human health or safety, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Substances,
"Environmental Permit" means any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to or in order to comply with any Environmental Law.
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"Event of Default" has the meaning set forth in Section 5.1.
"Exhibit" means any of the exhibits to this Agreement, including
such exhibits as executed and delivered pursuant to the terms of this Agreement.
"Financial Statements" means (i) the consolidated balance sheet
of the Company and the Subsidiaries as of August 31, 1996, and the consolidated
statement of operations and cash flows for the year ended August 31, 1996, and
(ii) the consolidated balance sheets of the Company and the Subsidiaries as of,
and the consolidated statements of operations and cash flows for the fiscal
quarters ended November 30, 1996, February 28, 1997, and May 31, 1997, in each
case, together with the notes thereto.
"GAAP" means generally accepted accounting principles as from
time to time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any Federal, state, municipal, local or
other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority of any country.
"Hazardous Substances" collectively, contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; polychlorinated biphenyls; medical wastes; infectious
wastes; asbestos; paint containing lead; and urea formaldehyde.
"Holder" means initially a Purchaser and thereafter such person
who from time to time is the registered Holder of a Senior Note or a Warrant, as
the case may be, or a Holder of either.
"Indemnified Liabilities" has the meaning set forth in Section
6.15.
"Indemnitees" has the meaning set forth in Section 6.15.
"Majority-in-Interest" means the Holders of at least two-thirds
of the outstanding principal amount of the Senior Notes and two-thirds of the
outstanding Warrants, provided, however, that if fewer than one-half of the
principal amount of Senior Notes or Warrants originally issued pursuant to this
Agreement are outstanding then Majority-in-Interest means 50.1% of such
outstanding principal amount of Senior Notes and Warrants.
"Material Adverse Effect" means any circumstance or event which
is material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole, or which may
reasonably be expected to result in or cause an Event of Default.
-26- Page 40 of 80 Pages
<PAGE>
<PAGE>
"Material Contract" means any contract of the Company or any
Subsidiary with any Person that is presently in effect and (i) that either (A)
accounted for 10 percent or more of the annual revenues of the Company or any
Subsidiary during any of the past three fiscal years or (B) is expected to
account for 10 percent or more of the annual revenues of the Company or any
Subsidiary during the present fiscal year or (ii) the expiration or termination
of which would have a Material Adverse Effect.
"Opinion of Company Counsel" means the legal opinion of Fulbright
& Jaworski L.L.P., counsel for the Company, in favor of the Purchasers, in the
form of Exhibit C hereto
"Permitted Liens" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business securing
sums not overdue; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
government insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of the Company in
conformity with GAAP, (iii) liens for taxes (a) not yet due or (b) being
diligently contested in good faith, provided that adequate reserves with respect
thereto are maintained on the books of the Company in conformity with GAAP.
"Person" means a corporation, a partnership, an organization or
business, an individual, a government or political subdivision thereof or
governmental agency.
"Purchaser" means a person set forth on Schedule 1.2 with respect
to that number of Units set forth opposite his name, and Purchasers means two or
more Purchasers.
"Registration Rights Agreement" means that certain registration
rights agreement to be entered into between the Company and the Purchasers in
the form of Exhibit D hereto.
"Required Consents" means the approvals, consents and
agreements set forth on Schedule 2.6.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Note" means a Senior Convertible Promissory Note of the
Company in the form of Exhibit A.
"Senior Note Register" has the meaning set forth in Section 6.4.
"Subsidiary" means any corporation or other legal entity 50% or
more of the voting stock of which is owned by the Company or another Subsidiary
of the Company. For these purposes voting stock means the capital stock or other
form of ownership which ordinarily,
-27- Page 41 of 80 Pages
<PAGE>
<PAGE>
in the absence of contingencies, entitles the holder to elect corporate
directors or persons performing similar functions.
"Unit" means a unit of securities consisting of a $25,000
principal amount Senior Note and a detachable Warrant, issued by the Company.
"Unit Offering Disclosure Documents" means the Annual Report on
Form 10-K of the Company for the fiscal year ended August 31, 1996, and the
Forms 10-Q of the Company for the fiscal quarters ended November 30, 1996,
February 28, 1997, and May 31, 1997, as filed with the Commission, together with
the Financial Statements.
"Warrant" means a warrant of the Company to purchase 1.6 shares
of Common Stock for each $1 principal amount of Senior Note, in the form of
Exhibit B.
"Warrant Register" has the meaning set forth in Section 6.4.
-28- Page 42 of 80 Pages
<PAGE>
<PAGE>
SCHEDULE 1.2
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No.
and Tax Identification No. No. Units
of Purchaser Subscribed For Subscription Price
- -------------------------------------- -------------- ------------------
<S> <C> <C>
White Owl Capital Partners 76 $1,900,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Arvind Sanger 10 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-2913
SSN:
Antony T. F. Lundy 10 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-7976
SSN:
Karl Bandtel 4 $100,000
c/o Wellington Management Co., LLP
75 State Street, 18th Floor
Boston, MA 02109
Fax: (617) 428-3649
SSN:
Total: 100 $2,500,000
</TABLE>
Page 43 of 80 Pages
<PAGE>
<PAGE>
EXHIBIT II
No. 1 $1,900,000
PONDER INDUSTRIES, INC.
Senior Convertible Promissory Note
due January 1, 1999
THIS SENIOR CONVERTIBLE PROMISSORY NOTE (THE "SENIOR NOTE") IS ISSUED PURSUANT
TO THE TERMS OF, IS ENTITLED TO THE BENEFITS OF, AND TRANSFER THEREOF IS
RESTRICTED BY, A SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT") OF
EVEN DATE HEREWITH BETWEEN PONDER INDUSTRIES, INC. AND THE HOLDERS OF SENIOR
NOTES. A COPY OF THE PURCHASE AGREEMENT IS ON FILE AND MAY BE EXAMINED AT THE
PRINCIPAL OFFICE OF THE COMPANY. TERMS USED HEREIN WHICH ARE NOT DEFINED HEREIN
HAVE THE SAME MEANINGS USED IN THE PURCHASE AGREEMENT UNLESS THE CONTEXT
OTHERWISE REQUIRES.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
FOR VALUE RECEIVED, the undersigned Ponder Industries, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to WHITE OWL
CAPITAL PARTNERS, the registered holder or registered assigns hereof (the
"Holder"), the principal amount of One Million Nine Hundred Thousand
($1,900,000) Dollars payable on the 1st day of January, 1999 (the "Maturity
Date"), together with interest on the outstanding principal amount of this
Senior Note at a rate equal to the Prime Rate of interest of Citibank, N.A. plus
200 basis points, calculated on the basis of a 360-day year or the actual number
of days elapsed. Such interest shall begin to accrue on July 1, 1998, and shall
be payable monthly on the last day of each month that this Senior Note is
outstanding, commencing on July 31, 1998, and at the Maturity Date. This Senior
Note shall, in addition, bear interest payable at the Default Rate (as
hereinafter defined) in certain circumstances as hereinafter provided ("Default
Interest").
Page 44 of 80 Pages
Page 1 of 7 INITIALED FOR
IDENTIFICATION______
<PAGE>
<PAGE>
1. Payments and Prepayments.
1.1. Payments of principal and interest on this Senior Note shall
be made to the Holder at the address set forth in the Purchase Agreement or on
the Senior Convertible Promissory Note Register or such other place or places
within the United States as may be specified by the Holder of this Senior Note
in a written notice to the Company at least 10 Business Days before a given
payment date.
1.2. Payments of principal and interest on this Senior Note shall
be made in lawful money of the United States of America by mailing the Company's
good check in the proper amount to the Holder at least three days prior to the
due date of each payment or otherwise transferring funds so as to be received by
the Holder on the due date of each such payment.
1.3. If any payment on this Senior Note becomes due and payable
on a Saturday, Sunday or other day on which commercial banks in the City of New
York, New York are authorized or required by law to close, the due date of such
payment shall be extended to the next succeeding business day, and, with respect
to payments of principal, interest thereon shall be payable during such
extension at the then applicable rate.
1.4. The Company shall not be entitled to prepay this Senior Note
either in whole or in part.
2. Obligation Absolute. The obligations under this Senior Note
are absolute and unconditional obligations of the Company, subject to Sections
3, 4 and 5 below, and no modification, release, consent, waiver, removal,
rearrangement or amendment shall impair the obligations of the Company
hereunder.
3. Purchase Agreement.
This Senior Note is issued simultaneously with other Senior Notes
of like tenor in an aggregate principal amount of up to $2,500,000, pursuant to
the Purchase Agreement of even date herewith among the Company and the holders
of the Senior Notes, which Purchase Agreement contains provisions as to Events
of Default (inclusive of acceleration provisions with respect thereto) and other
terms of the Senior Notes. The foregoing provisions of the Purchase Agreement
and the representations and warranties of the Company set forth in the Purchase
Agreement are hereby incorporated herein as if set forth at length herein, which
provisions and representations shall survive the execution and delivery hereof
so long as any amount is owed under this Senior Note. Any notice herein required
shall be given in accordance with the notice provisions of the Purchase
Agreement.
Page 45 of 80 Pages
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IDENTIFICATION______
<PAGE>
<PAGE>
4. Detachable Warrants.
Contemporaneously with the execution and delivery hereof pursuant
to the Purchase Agreement, The Company has issued to the Holder a detachable
warrant to purchase 1.6 shares of the Common Stock, for each $1 principal amount
of this Senior Note at an initial warrant exercise price of $0.625 per share of
Common Stock.
5. Conversion Right.
(a) The Holder of this Senior Note shall have the right,
exercisable at any time while this Senior Note is outstanding, by notice to the
Company at its principal office, to cause the conversion of this Senior Note at
the principal amount hereof into that number of shares of the Common Stock of
the Company, obtained by dividing the aggregate face amount of this Senior Note
by the exercise price per share of the detachable warrants of the Company (the
"Conversion Price Per Share"). The Conversion Price Per Share and the securities
or other property to be issued upon conversion of this Senior Note shall be
subject to adjustment in the same manner as the exercise price per share of the
detachable warrants of the Company and the securities or other property to be
issued upon exercise of such warrants.
(b) Subject to the right of the person in whose name this Senior
Note is registered on the record date to receive all interest (including Default
Interest) on such Senior Note accrued through the date of conversion, no
adjustment for interest (including Default Interest) or dividends will be made
upon the conversion of this Senior Note. No fractional shares will be issued
upon conversion, but if the conversion results in a fraction, an appropriate
amount will be paid by the Company in cash. This right of conversion shall cease
upon payment in full of all principal and accrued interest and Default Interest
and other amounts due in respect of this Senior Note, provided that the right of
conversion shall not cease upon a prepayment of this Senior Note without the
consent of the Holder.
(c) The Company hereby agrees that at all times there shall be
reserved for issuance upon the exercise of the conversion right under this
Senior Note such number of shares of its Common Stock as shall be required for
issuance upon exercise of conversion rights under this Senior Note and that the
par value of such shares will at all times be less than or equal to the lesser
of $0.625 per share or the applicable Conversion Price Per Share. The Company
further agrees that all shares which may be issued upon the exercise of any
rights represented by this Senior Note will, upon issuance, be validly issued,
fully paid and non-assessable, free from all taxes, liens and charges with
respect to the issuance thereof other than income or gross receipt taxes and
taxes, if any, in respect of any transfer occurring contemporaneously with such
issuance and other than transfer restrictions imposed by federal and state
securities laws.
Page 46 of 80 Pages
Page 3 of 7 INITIALED FOR
IDENTIFICATION______
<PAGE>
<PAGE>
(d) Notices to Holders.
(i)
Notice of Record Date. In case, at any time while
this Senior Note is outstanding:
(A) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at
the time receivable upon the exercise of any
conversion rights under this Senior Note) for the
purpose of entitling them to receive any dividend
(other than a cash dividend payable out of earned
surplus of the Company) or other distribution, or
any right to subscribe for or purchase any shares
of stock of any class or any other securities, or
to receive any other right; or
(B) of any capital reorganization of the Company, any
reclassification of the capital stock of the
Company, any consolidation with or merger of the
Company into another corporation, or any conveyance
of all or substantially all of the assets of the
Company to another corporation; or
(C) of any voluntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be
mailed to the Holder hereof at the time outstanding a notice
specifying, as the case may be, (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend,
distribution or right, or (y) the date on which such
reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up is to take
place, and the time, if any, is to be fixed, as of which the
holders of record of Common Stock (or such stock or securities at
the time receivable upon the exercise of the conversion rights
under this Senior Note) shall be entitled to exchange their
shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 30 days prior to the record date therein
specified, or if no record date shall have been specified
therein, at least 30 days prior to such other specified date.
(ii) Notice of Adjustments. Whenever any Conversion Price
Per Share shall be adjusted, pursuant to Section 5(a) hereof, the
Company shall promptly make a certificate signed by its Chairman,
its CEO, its President or a Vice President and by its Treasurer
or Assistant Treasurer or its Secretary or Assistant
Page 47 of 80 Pages
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IDENTIFICATION______
<PAGE>
<PAGE>
Secretary, setting forth in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Conversion
Price Per Share after giving effect to such adjustment, and shall
promptly cause copies of such certificates to be mailed (by first
class mail postage prepaid) to the Holder of this Senior Note.
6. Default Interest.
Upon any default in the payment of any interest, principal or
other payment required hereunder, such payment and the unpaid principal balance
hereof shall bear interest thereafter at the rate of five percent (5%) per annum
in excess of the then current applicable rate of interest being charged
hereunder, or at the highest permissible legal rate, which ever is lower (the
"Default Rate"), until the default shall have been cured.
7. Senior Note Holder Not a Stockholder.
The Holder of this Senior Note, as such, shall not be entitled by
reason of this Senior Note to any rights whatsoever as a stockholder of the
Company.
8. Applicable Interest Rate.
The Holder of this Senior Note, on the one hand, and the Company,
on the other hand, intend that the obligations evidenced by the Senior Notes
conform strictly to the applicable usury laws from time to time in force. All
agreements between the Company and the Holder of this Senior Note, whether now
existing or hereafter arising and whether oral or written, hereby are expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid to
such Holder, or collected by such Holder, by or on behalf of the Company for the
use, forbearance or detention of the money to be loaned to the Company hereunder
or otherwise, or for the payment or performance of any covenant or obligation
contained herein of the Company to the Holder, or in any other document
evidencing, securing or pertaining to such indebtedness evidenced hereby, exceed
the maximum amount permissible under applicable usury law. If under any
circumstances whatsoever fulfillment of any provision thereof or any other
document, at the time performance of such provisions shall be due, shall involve
transcending the limit of validity prescribed by law, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if under any circumstances the Holder of this Senior Note ever shall receive
from or on behalf of the Company an amount deemed interest, by applicable law,
which would exceed the highest lawful rate, such amount that would be excessive
interest under applicable usury laws shall be applied to the reduction of the
principal amount owing hereunder and under this Senior Note and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal and such other indebtedness, the excess shall be deemed to have been a
payment made by mistake and shall be refunded to the Company or to any other
person making such payment on the Company's behalf.
Page 48 of 80 Pages
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IDENTIFICATION______
<PAGE>
<PAGE>
9. LAW GOVERNING.
THIS SENIOR NOTE AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS,
WAIVERS AND CONSENTS RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
10. SUBMISSION TO JURISDICTION;
Service of Process .
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SENIOR NOTE,
THE PURCHASE AGREEMENT OR ANY OTHER EXHIBIT TO THE PURCHASE AGREEMENT MAY BE
LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING
IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Senior Note, the Purchase Agreement or any other Exhibit thereto, and
for the exclusive benefit of the Holder, the Company irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York, and to the non-exclusive
jurisdiction of any court of the State of New York located in the City and
County of New York, for the purposes of any suit, action or other proceeding
arising out of, or relating to, this Senior Note, the Purchase Agreement or any
other Exhibit thereto or any of the transactions contemplated hereby or thereby,
and hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, that it is not personally subject to the jurisdiction of the above
named courts for any reason whatsoever, that such suit, action or proceeding is
brought in an inconvenient forum, or that the venue of such suit, action or
proceeding is improper, or that this Senior Note, the Purchase Agreement or any
other Exhibit thereto or the subject matter hereof or thereof may not be
enforced in or by such courts. The Company hereby agrees that process against it
may be served by mail or delivery of service of process in any of the
aforementioned action, suits or proceedings to C T Coporation System, 1633
Broadway, New York, New York 10019 (such agent being hereinafter called the
"Process Agent"), which the Company hereby irrevocably designates and appoints
as its attorney-in-fact to receive service of process in any action, suit or
proceeding with respect to any matter as to which it submits to jurisdiction as
set forth above, it being agreed that service to such office or upon such agent
shall constitute valid service upon the Company. The Company hereby directs the
Process Agent to receive and accept all process on its behalf. The Company shall
promptly notify the Holder of any change in the address of the Process Agent and
may, with prior notice given to Holder, appoint a successor
Page 49 of 80 Pages
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IDENTIFICATION______
<PAGE>
<PAGE>
Process Agent; provided, however, that if the Process Agent shall at any time
cease to exist or its agency shall for any reason cease, the Company shall
designate forthwith a successor Process Agent in the County and State of New
York and shall give prompt notice of such designation to the Holder, together
with evidence of the acceptance of any such appointment. The Company agrees
irrevocably to the service of process of any of the aforementioned courts in any
suit, action or proceeding described above by mailing of copies of such process
to the Company at its address specified in Section 6.7 of the Purchase
Agreement. Nothing herein shall preclude service of process in any other manner
permitted by applicable law or prohibit the Holder from commencing legal
proceedings against the Company or any of its properties in any other
jurisdiction.
11. WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS SENIOR NOTE OR THE PURCHASE
AGREEMENT OR ANY OTHER EXHIBIT THERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY OR THE ACTIONS OF THE HOLDERS IN THE NEGOTIATION OR ENFORCEMENT
HEREOF OR THEREOF.
IN WITNESS WHEREOF, the Company has signed this Senior Note as
of the 15th day of October, 1997.
PONDER INDUSTRIES, INC.
By: /s/ EUGENE L. BUTLER
---------------------------------
Name: Eugene L. Butler
Title: President
Page 50 of 80 Pages
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IDENTIFICATION______
<PAGE>
<PAGE>
EXHIBIT III
WARRANT TO PURCHASE COMMON STOCK OF
PONDER INDUSTRIES, INC.
VOID AFTER 5:30 P.M. NEW YORK CITY
TIME ON THE EXPIRATION DATE
3,040,000 Shares of
Warrant No. 1 Warrant Stock
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
PONDER INDUSTRIES, INC. (the "Company"), a Delaware corporation,
for value received, hereby agrees to sell upon the terms and on the conditions
hereinafter set forth, but no later than 5:30 p.m., New York City Time, on the
Expiration Date (as hereinafter defined) to WHITE OWL CAPITAL PARTNERS, the
registered holder hereof (the "Holder"), having an address set forth in the
Warrant Register maintained by the Company, under the terms as hereinafter set
forth, Three Million and Forty Thousand (3,040,000) fully paid and
non-assessable shares of the Company's Common Stock, par value $.01 per share
(the "Warrant Stock"), at a purchase price per share of sixty-five and one half
Cents ($0.625) (as adjusted as provided herein, the "Warrant Price") pursuant to
this Warrant (the "Warrant"). In accordance with the terms of that certain
Securities Purchase Agreement of even date herewith (the "Securities Purchase
Agreement") between the Company and the Holders of those certain Senior
Convertible Promissory Notes of the Company in favor of the Holders of even date
herewith, the initial number of shares as comprise the Warrant Stock was
calculated on the basis of 1.6 shares of Warrant Stock for each $1 principal
amount of Senior Convertible Promissory Notes subscribed for by the Holder. The
number of shares of Warrant Stock to be so issued and the Warrant Price are
subject to adjustment as hereinafter set forth. The term "Common Stock" shall
mean, when used herein, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant.
Page 51 of 80 Pages
<PAGE>
<PAGE>
1. Exercise of Warrant.
(a) The Holder may exercise this Warrant according to its terms by
surrendering this Warrant to the Company at the address set forth in Section 10,
the subscription form attached hereto having then been duly executed by the
Holder, accompanied by cash, certified check or bank draft in payment of the
purchase price for the number of shares of the Warrant Stock specified in the
subscription form, or as otherwise provided in this Warrant prior to 5:30 p.m.,
local New York City time, on the Expiration Date. The Expiration Date shall be
January 1, 2001. The purchase price of the shares of Warrant Stock as to which
this Warrant shall be exercised shall be paid to the Company at the time of
exercise either in cash, in Common Stock of the Company already owned by the
Holder, by the relinquishment of a portion of this Warrant having a total fair
market value equal to the purchase price, or any combination of the foregoing.
For purposes of this Section, the fair market value of the portion of this
Warrant that is relinquished shall be the excess of
(x) the fair market value at the time of exercise of the number
of shares of Warrant Stock subject to the portion of this
Warrant that is relinquished over
(y) the aggregate exercise price specified in this Warrant with
respect to such shares.
The fair market value of the Warrant Stock shall be equal to the average of the
closing sales prices of the Company's Common Stock on any stock exchange or
market on which the Company's Common Stock is then traded on the ten trading
days immediately preceding the date of exercise. If the exchange or market does
not report sales prices, the fair market value of the Warrant Stock shall be
equal to the average of the average of the closing bid and ask prices of the
Company's Common Stock on the ten trading days immediately preceding the date of
exercise. If the Company's Common Stock is then traded on more than one exchange
or market, the fair market value shall be the highest of fair market values
determined as provided above. If the Company's Common Stock is not then traded
on any exchange or market, the fair market value shall be determined in good
faith by the Board of Directors of the Company.
(b) This Warrant may be exercised in whole or in part so long as any
exercise in part hereof would not involve the issuance of fractional shares of
Warrant Stock. If exercised in part, the Company shall deliver to the Holder a
new Warrant, identical in form, in the name of the Holder, evidencing the right
to purchase the number of shares of Warrant Stock as to which this Warrant has
not been exercised, which new Warrant shall be signed by the Chairman and CEO or
the President and the Secretary or the Assistant Secretary of the Company. The
term Warrant as used herein shall include any subsequent Warrant issued as
provided herein.
-2- Page 52 of 80 Pages
<PAGE>
<PAGE>
(c) No fractional share or scrip representing fractional shares shall be
given upon the exercise of this Warrant. The Company shall pay cash in lieu of
fractions with respect to the Warrants based upon the Warrant Price at the time
of exercise of this Warrant.
(d) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Stock so purchased,
registered in the name of the Holder, shall be delivered to the Holder within a
reasonable time after such rights shall have been so exercised. The person or
entity in whose name any certificate for the Warrant Stock is issued upon
exercise of the rights represented by this Warrant shall for all purposes be
deemed to have become the holder of record of such shares immediately prior to
the close of business on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, irrespective of
the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at
the opening of business on the next succeeding date on which the stock transfer
books are open.
2. Disposition of Warrant Stock and Warrant.
(a) By the acceptance of this Warrant, the Holder hereby acknowledges
and covenants that this Warrant and any Warrant Stock purchased pursuant thereto
are and will be held for investment and not for distribution; provided that:
(i) the Warrant and/or Warrant Stock may not be transferred by the
Holder, (A) unless an exemption is available under the Securities Act of
1933, as amended, and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder (collectively the "Act"),
and to a person who, in the opinion of counsel to the Company, is a
person to whom the Warrant and/or Warrant Stock may be transferred
legally without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against
receipt of (x) an agreement of such person to comply with the provisions
of this Section 2 with respect to any resale or other disposition of
such securities and (y) an agreement by such person that he is acquiring
such securities for investment and not for distribution except in
compliance with the Act; or (B) except to a person upon delivery of a
prospectus relating to the Warrant and/or Warrant Stock then meeting the
requirements of the Act; and
(ii) the Warrant Stock shall be issued upon exercise of this
Warrant only in compliance with the Act.
(b) If, at the time of issuance of the shares issuable upon exercise of
this Warrant, no registration statement is in effect with respect to such shares
under applicable provisions of the Act, the Company may at its election require
that the Holder provide the Company with written reconfirmation of the Holder's
investment intent and that any stock certificate delivered to the Holder of a
surrendered Warrant shall bear legends reading substantially as follows:
-3- Page 53 of 80 Pages
<PAGE>
<PAGE>
"Transfer of the shares represented by this certificate is subject
to certain restrictions set forth in the Warrant pursuant to which these
shares were purchased from the Company. Copies of those restrictions are
on file at the principal offices of the Company, and no transfer of such
shares or of this certificate, or of any shares or other securities (or
certificates therefor) issued in exchange for or in respect of such
shares, shall be effective unless and until the terms and conditions
therein set forth shall have been complied with."
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, and may not be sold,
transferred, pledged or otherwise disposed of in the absence of an
effective registration statement under the Securities Act of 1933 or an
opinion of counsel satisfactory to the issuer of this certificate that
registration is not required under said Act."
In addition, so long as the foregoing legend may remain on any stock certificate
delivered to the Holder, the Company may maintain appropriate "stop transfer"
orders with respect to such certificates and the shares represented thereby on
its books and records and with those to whom it may delegate registrar and
transfer functions.
3. Reservation of Shares.
The Company hereby agrees that at all times there shall be reserved for
issuance upon the exercise of this Warrant such number of shares of its Common
Stock as shall be required for issuance upon exercise of this Warrant and that
the par value of such shares will at all times be less than or equal to the
applicable Warrant Price. The Company further agrees that all shares which may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable, free from all taxes,
liens and charges with respect to the issuance thereof other than taxes, if any,
in respect of any transfer occurring contemporaneously with such issuance and
other than transfer restrictions imposed by federal and state securities laws.
4. Capital Adjustments.
This Warrant is subject to the following further provisions:
(a) Recapitalization, Reclassification and Succession. If any
recapitalization of the Company or reclassification of its Common Stock or any
merger or consolidation of the Company into or with a corporation or other
business entity, or the sale or transfer of all or substantially all of the
Company's assets or of any successor corporation's assets to any other
corporation or business entity (any such corporation or other business entity
being included within the meaning of the term "successor corporation") shall be
effected, at any time while this Warrant remains outstanding and unexpired,
then, as a condition of such recapitalization, reclassification, merger,
consolidation, sale or transfer, lawful and adequate provision shall be
-4- Page 54 of 80 Pages
<PAGE>
<PAGE>
made whereby the Holder of this Warrant thereafter shall have the right to
receive upon the exercise hereof as provided in Section 1 and in lieu of the
shares of Common Stock immediately theretofore issuable upon the exercise of
this Warrant, such shares of capital stock, securities or other property as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore issuable upon the exercise of this Warrant had such
recapitalization, reclassification, merger, consolidation, sale or transfer not
taken place, and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or property receivable
upon the exercise of this Warrant after such consummation.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the number of shares of Warrant Stock purchasable upon
exercise of this Warrant shall be proportionately adjusted.
(c) Certain Dividends and Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of, Common Stock, then the number of
shares of Warrant Stock purchasable upon exercise of this Warrant shall be
adjusted to that number determined by multiplying the number of shares of
Warrant Stock so purchasable immediately prior to such record date by a fraction
(i) the numerator of which shall be the sum of (A) the total number of
outstanding shares of Common Stock immediately prior to such record date and (B)
the total number of shares of Common Stock issuable pursuant to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately prior to such record date.
(d) Corresponding Warrant Price Adjustment. Whenever the number of
shares of Warrant Stock purchasable upon the exercise of the rights granted to
the Holder herein is increased or decreased as provided in Section 4 (b) or (c),
the Warrant Price payable for the exercise of such rights 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 shares of Warrant Stock
purchasable upon the exercise of such rights immediately prior to such
adjustment, and of which the denominator shall be the number of shares of
Warrant Stock purchasable immediately thereafter.
(e) Certain Other Warrant Price Adjustments. (i) If the Company at any
time while this Warrant is outstanding and unexpired issues and sells, or is
deemed to have issued and sold (as provided in Section 4(e)(ii) or (iii)), any
shares of Common Stock, for a consideration per share of less than the Warrant
Price in effect immediately prior to the issuance of such additional Common
Stock, then, immediately following the issue and sale of such additional Common
Stock, the Warrant Price shall be adjusted by multiplying the Warrant Price in
effect immediately before the issuance of such additional Common Stock by the
number determined by dividing:
-5- Page 55 of 80 Pages
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<PAGE>
(A) An amount equal to (1) the total number of shares of Common
Stock outstanding immediately following the last previous adjustment of
the Warrant Price pursuant to this Section 4 (or on the date hereof if
there shall have been no previous adjustment) multiplied by the Warrant
Price in effect immediately prior to such issuance, plus (2) the
consideration, if any, received or deemed to have been received by the
Company upon such issuance and upon the issuance of any Common Stock
issued subsequent to the last previous adjustment of the Warrant Price
pursuant to this Section 4 (or subsequent to the date hereof if there
shall have been no such previous adjustment), by
(B) The total number of shares of Common Stock outstanding
immediately after the issuance of such additional Common Stock (or which
would have been outstanding but for retirement of Common Stock or
acquisitions of Common Stock by or for the account of the Company during
the period covered by the computation) multiplied by the Warrant Price
in effect immediately prior to such issuance.
(ii) If the Company at any time while this Warrant is outstanding
and unexpired grants any rights, warrants or options (other than the
rights granted herein or in any stock option plan of the Company
covering officers, directors, consultants or employees of the Company)
to subscribe for Common Stock or any securities convertible or
exchangeable into Common Stock (such rights, warrants and options being
called the "Options" and such securities convertible into Common Stock
the "Convertible Securities"), then the maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of the Convertible Securities will be deemed to
have been outstanding and to have been issued and sold by the Company,
and the appropriate adjustment to the Warrant Price will be made in
accordance with Section 4(e)(i). For purposes of this paragraph, the
consideration of the shares of Common Stock issuable upon the exercise
of such Options will be equal to the total amount received or receivable
by the Company for the granting of the Options plus the minimum
aggregate amount of additional consideration due the Company upon the
exercise of the Options (plus, in the case of the Options relating to
Convertible Securities, any additional consideration payable upon the
issuance or sale and the conversion and exchange thereof).
(iii) If the Company at any time while this Warrant is outstanding
and unexpired issues or sells any Convertible Securities, then the
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities will be deemed to be
outstanding and to have been issued or sold by the Company, and the
appropriate adjustment to the Warrant Price will be made in accordance
with Section 4(e)(i). For purposes of this paragraph, the consideration
for the shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities will be equal to the total amount
received or receivable by the Company for the issue or sale of such
Convertible Securities plus the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange thereof.
-6- Page 56 of 80 Pages
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<PAGE>
(iv) If at any time while this Warrant is outstanding and unexpired
the purchase price per share for any Option, or any additional
consideration payable to the Company upon the exercise of any Option or
upon conversion of a Convertible Security, or the rate at which any
Convertible Securities are convertible or exchangeable into Common
Stock, is reduced, then the consideration for the shares of Common Stock
issuable upon the exercise or conversion thereof will be recalculated
giving effect to such reduction, and immediately after any such price
reduction or rate reduction becomes effective, the appropriate
adjustment to the Warrant Price will be made in accordance with Section
4(e)(i).
Notwithstanding the foregoing,
(1) no further adjustments in the Warrant Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Company, or decrease or increase in the number
of shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Warrant Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Warrant Price shall affect Common Stock previously issued upon conversion of the
Warrant;
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Warrant Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or Options for Common
Stock the only additional shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Company for the
issue of all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company upon such
conversion or exchange and
-7- Page 57 of 80 Pages
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<PAGE>
(B) in the case of Options for Convertible Securities only the
Convertible Securities, if any, actually issued upon the exercise thereof were
issued at the time of issue of such Options, and the consideration received by
the Company for the additional shares of Common Stock deemed to have been then
issued was the consideration actually received by the Company for the issue of
all such Options, whether or not exercised, plus the consideration deemed to
have been received by the Company (determined as described above) upon the issue
of the Convertible Securities with respect to which such Options were actually
exercised;
(4) in the case of any Options which expire by their terms not more
than 30 days after the date of issue thereof, no adjustment of the Warrant Price
shall be made until the expiration or exercise of all such Options, whereupon
such adjustment shall be made in the same manner provided in clause (3) above;
(5) no adjustments in the Warrant Price shall be made in respect of
grants of stock pursuant to employee benefit plans of the Company;
(6) no adjustments in the Warrant Price shall be made in respect of
the issuance of Warrant Stock upon exercise of the Warrant or in respect of the
issuance of Common Stock upon conversion of the Senior Notes of the Company
dated the date hereof;
(7) no adjustments in the Warrant Price shall be made in respect of
the issuance of securities of the Company on terms that have been unanimously
approved by the entire Board of Directors of the Company, but only so long as a
nominee of the Holders of Senior Notes and Warrants under the Securities
Purchase Agreement dated the date hereof is serving on the Board of Directors of
the Company; and
(8) no further adjustments in the Warrant Price shall be made under
this paragraph (e) in respect of adjustments required pursuant to paragraphs (a)
through (c) of this Section 4.
(f) Certain Shares Excluded. The number of shares of Common Stock
outstanding at any given time for purposes of the adjustments set forth in this
Section 4 shall exclude any shares then directly or indirectly held in the
treasury of the Company.
(g) Deferral and Cumulation of De Minimis Adjustments. The Company shall
not be required to make any adjustment of the Warrant Price pursuant to this
Section 4 if the amount of such adjustment would be less than one percent (1%)
of the Warrant Price in effect immediately before the event that would otherwise
have given rise to such adjustment. In such case, however, any adjustment that
would otherwise have been required to be made shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to not less than one percent
(1%) of the Warrant Price in effect immediately before the event giving rise to
such next subsequent adjustment.
-8- Page 58 of 80 Pages
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(h) Duration of Adjusted Warrant Price. Following each computation or
readjustment of an adjusted Warrant Price as provided in this Section 4, the new
adjusted Warrant Price shall remain in effect until a further computation or
readjustment thereof is required.
5. Notices to Holders.
(a) Notice of Record Date. In case:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
exercisable of this Warrant) for the purpose of entitling them to
receive any dividend (other than a cash dividend payable out of earned
surplus of the Company) or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
with or merger of the Company into another corporation, or any
conveyance of all or substantially all of the assets of the Company to
another corporation; or
(iii) of any voluntary dissolution, liquidation or winding-up of
the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder hereof at the time outstanding a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 30 days prior to the record date therein
specified, or if no record date shall have been specified therein, at least 30
days prior to such other specified date.
(b) Notice of Adjustments. Whenever any Warrant Price shall be adjusted,
pursuant to Section 4 hereof, the Company shall promptly make a certificate
signed by its Chairman, its CEO, its President or a Vice President and by its
Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Warrant Price after giving effect to such adjustment, and shall promptly
cause copies of such certificates to be mailed (by first class mail, postage
prepaid) to the Holder of this Warrant.
-9- Page 59 of 80 Pages
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<PAGE>
6. Loss, Theft, Destruction or Mutilation.
Upon receipt by the Company of evidence satisfactory to it, in the
exercise of its reasonable discretion, of the ownership and the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to the Company and, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
execute and deliver in lieu thereof, without expense to the Holder, a new
Warrant of like tenor dated the date hereof.
7. Warrant Holder Not a Stockholder.
The Holder of this Warrant, as such, shall not be entitled by reason of
this Warrant to any rights whatsoever as a stockholder of the Company.
8. Transfer; Register.
Subject to the provisions of Section 2 above, this Warrant is
transferable in the same manner and with the same effect as in the case of a
negotiable instrument payable to a specified person. Pursuant to Section 6.4 of
the Securities Purchase Agreement, the Warrants shall be issued in registered
form only and the Company shall keep a register (the "Warrant Register") in
which provisions shall be made for the registration of the Warrants and the
registration of transfers thereof. Such Register shall be kept at the principal
office of the Company and the Company is hereby appointed the "Warrant
Registrar" for the purpose of registering the Warrants and transfers of the
Warrants. Subject to compliance with the provisions of Section 2 hereof and
Article III of the Securities Purchase Agreement by a transferee, upon surrender
for registration of transfer of any Warrant at the principal office of the
Company and compliance with the provisions of Section 2 hereof and Section 3.1
of the Securities Purchase Agreement, if applicable, the Company shall execute
and deliver, in the name of the designated transferee, a new Warrant. The
Company shall treat the individual or entity in whose name each Warrant is
registered on the Warrant Register as the sole and absolute owner thereof,
notwithstanding any contrary notice.
9. Registration Rights.
The Holder shall have certain registration rights with respect to the
Warrant Shares, all as set forth in a Registration Rights Agreement of even date
herewith among the Company, the Holder and certain other Holders, a copy of
which is annexed hereto.
10. Notices.
Any notice required or contemplated by this Warrant shall be deemed to
have been duly given if transmitted by registered or certified mail, return
receipt requested, to the Company at
-10- Page 60 of 80 Pages
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<PAGE>
5005 Riverway, Suite 550, Houston, Texas 77056, Attention: President, or to the
Holder at the name and address set forth in the Warrant Register maintained by
the Company.
11. Choice of Law.
This Warrant shall be governed by the local laws of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has duly signed this Warrant as of
this 15 day of October, 1997.
PONDER INDUSTRIES, INC.
By:/s/ EUGENE L. BUTLER
-----------------------
Name: Eugene L. Butler
Title: President
-11- Page 61 of 80 Pages
<PAGE>
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the Undersigned Holder of the attached
Warrant, hereby sells, assigns and transfers unto_______________________________
the right to purchase ______________________________ shares of Common Stock of
PONDER INDUSTRIES, INC.evidenced by the attached Warrant, and does hereby
irrevocably constitute and appoint _________________________________
Attorney to transfer the said Warrant on the books of the Company with full
power of substitution.
HOLDER
------------------------------------
Name:
Dated: _____________________, ______
In the presence of:
- -----------------------------------
Name:
(NOTE: The signature of the Holder on the foregoing Assignment must correspond
exactly to the name as written on the face of the Warrant, without any
alteration, enlargement or change whatsoever.)
-12- Page 62 of 80 Pages
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SUBSCRIPTION FORM
The Undersigned, the Holder of the attached Warrant, hereby
irrevocably elects to exercise purchase rights represented by such Warrant for,
and to purchase thereunder, the following shares of Common Stock of PONDER
INDUSTRIES, INC.:
Number of Shares Purchase Price Per Share
--------------- -------------------------
The undersigned herewith makes payment of $_____________________
therefor, and requests that certificates for such shares (and any warrants or
other property issuable upon such exercise) be issued in the name of and
delivered to ____________________ whose address is _______________________ and,
if such shares shall not include all of the shares issuable under such warrant,
that a new warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
HOLDER:
--------------------------------------
Name:
Dated: _____________________, ______
-13- Page 63 of 80 Pages
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EXHIBIT IV
REGISTRATION RIGHTS AGREEMENT
By and Among
PURCHASERS OF UNITS
and
PONDER INDUSTRIES, INC.
Common Stock, par value $.01 per share
Dated as of October 15, 1997
Page 64 of 80 Pages
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Under Securities Act, etc.............................. 1
1.1 Registration on Request........................................ 1
1.2 Piggy-Back Registration........................................ 3
1.3 Registration Procedures........................................ 4
1.4 Underwritten Offerings......................................... 6
1.5 Preparation: Reasonable Investigation ......................... 7
1.6 Qualification to Obligations under Registration Covenants ..... 8
1.7 Indemnification ............................................... 8
2. Definitions ........................................................ 10
3. Rule 144 and Rule 144A ............................................. 12
4. Amendments and Waivers.............................................. 12
5. Nominees for Beneficial Owners...................................... 13
6. Notices1............................................................ 3
7. Assignment.......................................................... 13
8. Calculation of Percentage Interests in Registrable Securities....... 14
9. No Inconsistent Agreements ......................................... 14
10. Remedies ........................................................... 14
11. Severability ....................................................... 14
12. Entire Agreement.................................................... 14
13. Descriptive Headings ............................................... 14
14. Governing Law ...................................................... 14
15. Counterparts........................................................ 15
Page 65 of 80 Pages
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REGISTRATION RIGHTS AGREEMENT, dated as of October 15, 1997,
among Ponder Industries, Inc., a Delaware corporation (the "Company") and each
of the undersigned Purchasers of Units identified on the signature page hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
This Agreement is being entered into in connection with a
Securities Purchase Agreement, of even date herewith between the Company and the
Purchasers (the "Purchase Agreement") providing for the issuance by the Company
to the Purchasers of Units consisting of Senior Convertible Notes (collectively,
the "Notes") of the Company and Warrants (collectively, the "Warrants")
entitling the holders thereof to purchase, upon conversion of the Notes and
exercise of the Warrants, up to 8,000,000 shares (subject to adjustment) of
Common Stock, par value $.01 per share, of the Company (the "Common Stock"),
upon the terms and subject to the conditions set forth therein. It is a
condition precedent to the obligations of the Company and the Purchasers to
consummate the transactions contemplated by the Purchase Agreement that the
Company and the Purchasers enter into this Agreement. Capitalized terms used
herein but not otherwise defined shall have the meanings given them in the
Purchase Agreement.
1. Registration Under Securities Act, etc.
1.1 Registration on Request.
(a) Request. At any time, or from time to time,
upon the written request of one or more holders (the "Initiating Holders") of
Registrable Securities representing not less than 50% (25% in the case of a
registration on Form S-3) of the Registrable Securities that the Company effect
the registration under the Securities Act of all or part of such Initiating
Holders' Registrable Securities, the Company promptly will give written notice
of such requested registration to all registered holders of Registrable
Securities, and thereupon the Company will use its best efforts to effect, at
the earliest possible date, the registration under the Securities Act of (i) the
Registrable Securities which the Company has been so requested to register by
such Initiating Holders, and (ii) all other Registrable Securities which the
Company has been requested to register by the holders thereof (such holders
together with the Initiating Holders hereinafter are referred to as the "Selling
Holders") by written request given to the Company within 30 days after the
giving of such written notice by the Company, all to the extent requisite to
permit the disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 1.1, no securities
other than Registrable Securities and other securities subject to registration
rights granted by the Company shall be included among the securities covered by
such registration unless Initiating Holders of greater than 51% of the
Registrable Securities to be included in such registration shall have consented
in writing to the inclusion of such other securities, which consent shall not be
unreasonably withheld or delayed.
Page 66 of 80 Pages
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(c) Registration Statement Form. Registrations
under this Section 1.1 shall be on such appropriate registration form of the
Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A
registration requested pursuant to this Section 1.1 shall not be deemed to have
been effected unless a registration statement with respect thereto has become
effective and remained effective in compliance with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of at least 120 days, or
earlier if all Registrable Securities have been sold pursuant to such
registration statement.
(e) Selection of Underwriters. If the Selling
Holders of at least 50% of all Registrable Securities to be covered by a
registration so elect, the offering of such Registrable Securities pursuant to
this Section 1.1 shall be in the form of an underwritten offering. The
underwriter or underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Selling Holders of at
least 50% of the Registrable Securities to be included in such registration and
shall be reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the
managing underwriter of an underwritten offering shall advise the Company in
writing (and the Company shall so advise each Selling Holder of Registrable
Securities requesting registration of such advice) that, in its opinion, the
number of securities requested to be included in such registration is
sufficiently large to materially adversely affect the success of the offering,
the Company, except as provided in the following sentence, will include in such
registration, to the extent of the number and type which the Company is so
advised can be sold in such offering, Registrable Securities requested to be
included in such registration, pro rata among the Selling Holders requesting
such registration on the basis of the estimated gross proceeds from the sale
thereof. To the extent Registrable Securities so requested to be registered are
excluded from the offering, the holders of such Registrable Securities shall be
deemed not to have used a demand registration pursuant to this Section 1.1.
(g) Limitations on Registration on Request.
Notwithstanding anything in this Section 1.1 to the contrary, the Company shall
not be required to take any action to file a registration statement pursuant to
this Section 1.1:
(i) during the period starting with the sixty days prior
to the Company's good faith estimate of the date of filing of,
and ending 120 days following the effective date of, any
subsequent registered offering of the Company's securities to the
general public;
(ii) in any registration of less than 20% of the
Registrable Securities, unless the aggregate sales price (before
deduction of underwriting discounts and expenses of sale) is at
least $2,000,000 (or $1,000,000 in the case of a registration on
Form S-3); or
2 Page 67 of 80 Pages
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(iii) after the Company has effected an aggregate of two
such registrations on Form S-3 and two such registrations on any
other form available to the Company (including additional
registrations on Form S-3).
(h) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
1.1 and each Selling Holder shall pay all underwriting discounts or commissions
with respect to the Registrable Securities sold by such Selling Holder in such
registration.
1.2 Piggy-Back Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to file a registration statement to register any of
its equity securities (or any security convertible into or exchangeable for any
equity security of the Company) under the Securities Act (except for
registration on Form S-4 or S-8 or any successor or similar forms), whether or
not for sale for its own account, it will each such time give prompt written
notice to all registered holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 30
days after the receipt of any such notice (20 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Requesting Holders thereof. No registration effected under this Section 1.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 1.1.
(b) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall deliver a written
opinion to the holders of Registrable Securities that the total amount of
Registrable Securities requested to be included in such registration would have
a material adverse effect on such offering, then the Company will include in
such registration, to the extent of the number which the Company is so advised
can be sold in (or during the time of) such offering, first, all securities
proposed by the Company to be sold for its own account, and second, such
Registrable Securities requested to be included in such registration pursuant to
this Agreement and the securities of all other holders who possess registration
rights (the "Other Holders"), pro rata among Requesting Holders and Other
Holders on the basis of the estimated gross proceeds from the sale thereof;
provided that the number of securities included in such registration by the
Requesting Holders and the Other Holders shall not be less than 20% of the total
number of shares included in such registration and, if securities are being
offered for the account of other persons or entities as well as the Company,
such reduction shall not represent a greater fraction of the number of
securities intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities they intended to offer.
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(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this Section
1.2 and each Selling Holder shall pay all underwriting discounts or commissions
with respect to the Registrable Securities sold by such Selling Holder in such
registration.
1.3 Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 1.1 and 1.2, the Company will, as
expeditiously an possible use its best efforts to:
(i) prepare and (within 90 days after the end of the
period within which requests for registration may be given to the
Company or in any event as soon thereafter as practicable) file
with the Commission the requisite registration statement to
effect such registration and thereafter use its best efforts to
cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration
statement for a period of at least 120 days or until all such
Registrable Securities have been sold, whichever is earlier;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements
of the Securities Act, and such other documents, as such seller
may reasonably request;
(iv) register or qualify all Registrable Securities and
other securities covered by such registration statement under
such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and
as the sellers of Registrable Securities covered by such
registration statement shall reasonably request; keep such
registration or qualification in effect for so long as such
registration statement remains in effect; and take any other
action which may be reasonably necessary or advisable to enable
such sellers to consummate the disposition in such jurisdictions
of the securities to be sold by such sellers, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of
this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
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(v) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and
counsel to the seller or sellers of Registrable Securities to
enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish at the effective date of such registration
statement and, if applicable, the date of the closing under the
underwriting agreement, to each seller of Registrable Securities,
and each such seller's underwriters, if any, a signed counterpart
of (x) an opinion of counsel for the Company, dated the effective
date of such registration statement and (y) a "comfort" letter
signed by the independent public accountants who have certified
the Company's financial statements included or incorporated by
reference in such registration statement, covering substantially
the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' comfort
letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, and, in the case of
the legal opinion, such other legal matters, as the sellers of
the Registrable Securities covered by such registration
statement, or the underwriters, may reasonably request;
(vii) notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon 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 fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they
were made, and at the request of any such seller promptly prepare
and furnish to it a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement
of a material fact or omit 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 under which they
were made;
(viii) otherwise comply with all applicable rules and
regulations of the Commission, and, if required, make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities
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Act and Rule 158 promulgated thereunder, and promptly furnish to
each such seller of Registrable Securities a copy of any
amendment or supplement to such registration statement or
prospectus;
(ix) keep each Selling Holder and each Requesting Holder
advised in writing as to the initiation and progress of any
registration under Section 1.1 or 1.2 hereunder, as the case may
be;
(x) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration; and
(xi) list all Registrable Securities covered by such
registration statement on any national securities exchange on
which Registrable Securities of the same class and, if
applicable, series, covered by such registration statement are
then listed or on the National Association of Securities Dealers
Automated Quotations ("NASDAQ") if the Registrable Securities are
reported on NASDAQ.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities, as is required by law or
the Commission to be included within the registration statement or as the
company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (vii) of this
Section 1.3 , such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 1.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
1.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested
by the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 1.1, the Company
will use all reasonable efforts to enter into an underwriting agreement with
such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to each such holder and the underwriters and
to contain such representations and warranties by the Company and such other
terms as are generally prevailing in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in Section 1.7.
The holders of the Registrable Securities proposed to be sold by such
underwriters will reasonably cooperate with the Company in the
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negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution or any other representations required by applicable law.
(b) Incidental Underwritten Offerings. If the
Company proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such Requesting
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.
1.5 Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company (i) shall give the holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants the
reasonable opportunity to participate (at the expense of such holder or holders)
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto, (ii) shall give each of them such reasonable access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act and (iii) shall promptly notify the registered
holders of Registrable Securities and their counsel of any stop order issued or
threatened by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered.
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1.6 Qualification to Obligations under Registration Covenants.
The Company shall be entitled to postpone for a reasonable period of time (but
not exceeding 90 days) the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to Section 1.1 if the Company
determines, in its reasonable judgment, that such registration and offering
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its affiliates and
promptly gives the holders of Registrable Securities requesting registration
thereof pursuant to Section 1.1 written notice of such determination, containing
a general statement of the reasons for such postponement and an approximation of
the anticipated delay. If the Company shall so postpone the filing of a
registration statement, holders of Registrable Securities requesting
registration thereof pursuant to Section 1.1 and representing not less than 50%
of the Initiating Holders shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 1.1
hereof.
1.7 Indemnification.
(a) Indemnification by the Company. The Company
will, and hereby does, indemnify and hold harmless, in the case of any
registration statement filed pursuant to Section 1.1 or 1.2, each seller of any
Registrable Securities covered by such registration statement and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, and their respective
directors, officers, partners, employees and affiliates against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or any such director, officer, partner, employee, affiliate or
controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse such seller or underwriter and each such
director, officer, partner, employee, affiliate and controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the
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preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, employee, affiliate, partner or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a condition
to including any Registrable Securities in any registration statement, the
Company shall have received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 1.7) the Company, and each director of the Company, each
officer of the Company and each other Person, if any, who participates as an
underwriter in the offering or sale of such securities and each other Person who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the liability of
such indemnifying party under this Section 1.7(b) shall be limited to the amount
of proceeds received by such indemnifying party in the offering giving rise to
such liability. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims, etc. Promptly after receipt
by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of this
Section 1.7, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 1.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation, provided, however, that if the indemnified party reasonably
believes it is advisable for it to be represented by separate counsel because
there exists a conflict of interest between its interests and those of the
indemnifying party with respect to such claim, or there exist defenses available
to such indemnified party which may not be available to the indemnifying party,
or if the indemnifying party shall fail to assume responsibility for such
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defense, the indemnified party may retain counsel satisfactory to it and the
indemnifying party shall pay all reasonable fees and expenses of such counsel.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent. No indemnifying party shall,
without the consent of the indemnified party, 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 or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided
for in this Section 1.7 shall for any reason be held by a court to be
unavailable to an indemnified party under subparagraph (a) or (b) hereof in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under subparagraph (a) or
(b) hereof, the indemnified party and the indemnifying party under subparagraph
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating the same), (i) in such proportion as is appropriate to
reflect the relative fault of the Company and the prospective sellers of
Registrable Securities covered by the registration statement which resulted in
such loss, claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as shall be appropriate
to reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. Such
prospective sellers' obligations to contribute as provided in this subparagraph
(d) are several in proportion to the relative value of their respective
Registrable Securities covered by such registration statement and not joint. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
section 1.7 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification
and contribution required by this Section 1.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:
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"Affiliate" means any person that directly or indirectly controls
or is controlled by or is under common control with any Purchaser. For purposes
of this definition, an Affiliate of any Purchaser shall be deemed to include any
corporation, partnership, limited liability company or other entity in which
such Purchaser (whether directly, or indirectly through any other Person that is
an Affiliate) is an officer or director, general partner, managing member or
otherwise holds a significant equity interest.
"Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" is defined in the
second introductory paragraph on page 1.
"Company" is defined in the first
introductory paragraph on page 1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
Federal statute.
"Initiating Holder" is defined in Section 1.1.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Purchaser" and "Purchasers" are defined in the first
introductory paragraph on page 1.
"Purchase Agreement" is defined in the second introductory
paragraph on page 1.
"Registrable Securities" means (i) any shares of Common Stock
issued from time to time upon conversion of the Notes or exercise of the
Warrants and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (c) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of them
under the Securities Act, or (d) they shall have ceased to be outstanding. All
references to percentages of Registrable Securities shall be calculated pursuant
to Section 8.
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"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the reasonable fees and
disbursements of counsel for the Company (and one special counsel to the Selling
Holders) and of its independent public accountants, including the expenses of
"cold comfort" letters required by or incident to such performance and
compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities) with respect to an
underwritten offering.
"Related Registrable Securities" means any securities of the
Company issued or issuable with respect to the Registrable Securities by way of
a dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
"Securities Act" means the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. References to a particular section
of the Securities Act of 1933 shall include a reference to the comparable
section, if any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
"Warrants" is defined in the second introductory paragraph
on page 1.
3. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, (b) Rule 144A under the Securities Act,
as such Rule may be amended from time to time, or (c) any similar rules or
regulations hereafter adopted by the Commission, including, without limiting the
generality of the foregoing, filing on a timely basis all reports required to be
filed by the Exchange Act. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether the Company has complied with such requirements.
4. Amendments and Waivers. This Agreement may be amended
(including to add as parties hereto future purchasers of securities of the
Company) and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act
of the holder or holders of at least two thirds of the Registrable Securities
affected by such amendment, action or omission to act. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 4, whether or not such Registrable
Securities shall have been marked to indicate such consent.
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5. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities hold by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
6. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
by registered or certified first-class mail, return receipt requested,
telex, telegram, telecopier, reputable courier service or personal delivery:
(a) if to the Purchasers, addressed to them in the manner
set forth in the Purchase Agreement, or at such other address as
it shall have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder
of such Registrable Securities who has furnished an address to
the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as the
Company shall have furnished to each holder of Registrable
Securities at the time outstanding.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being sent by reputable courier service; three business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
7. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and assigns and, with respect to each
Purchaser, any holder who is an affiliate or successor entity to such Purchaser
or a transferee therefrom of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. Notwithstanding the foregoing, a
Purchaser may not assign its rights hereunder to a competitor of the Company or
to a transferee that is acquiring beneficial ownership of fewer than 50,000
shares of Common Stock, with appropriate adjustments for recapitalizations and
the like. The Company must be given notice of any such assignment by a Purchaser
and the transferee must agree to be bound by the terms of this Agreement. The
Purchasers named on the
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signature page of this Agreement (and not any other holder of Registrable
Securities or any other Person) shall be permitted, in connection with a
transfer or disposition of Registrable Securities, to eliminate or impose
conditions or constraints on the ability of the transferee, as a holder of
Registrable Securities, to request a registration pursuant to Sections 1.1 and
1.2 and shall provide the Company with copies of such conditions or constraints
and the identity of such transferees.
8. Calculation of Percentage Interests in Registrable Securities.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the number of shares of
Registrable Securities outstanding at the time such calculation is made.
9. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement. The grant of registration rights to other securities holders of the
Company shall not, by itself, be deemed to be inconsistent with this Agreement.
10. Remedies. Each holder of Registrable Securities, is entitled
to exercise all rights granted by law, including recovery of damages; such
rights not to extend to incidental or consequential damages.
11. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
12. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
13. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York applicable to agreements made and to be performed
entirely within such State.
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15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
PONDER INDUSTRIES, INC.
By: /s/ EUGENE L. BUTLER
-----------------------------------
Name: Eugene L. Butler
Title: President
PURCHASERS:
WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
-----------------------------------
William R. Ziegler, General Partner
/s/ ARVIND SANGER
-----------------------------------
Arvind Sanger
/s/ ANTONY T. F. LUNDY
-----------------------------------
Antony T. F. Lundy
/s/ KARL BANDTEL
------------------------------------
Karl Bandtel
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