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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)
January 13, 1998
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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 86 Pages
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CUSIP NO. 732378 10 4 13D PAGE 2 OF 86 PAGES
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<TABLE>
<C> <S> <C> <C>
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
White Owl Investors, L.L.C.
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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 Delaware
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SOLE VOTING POWER
7 10,000,000 shares (See Item 5(b))
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SHARED VOTING POWER
NUMBER OF 8 0 (See Item 5(b))
SHARES
BENEFICIALLY ----------------------------------------------------------------------
OWNED BY SOLE DISPOSITIVE POWER
EACH 9 10,000,000 shares (See Item 5(b))
REPORTING
PERSON WITH ----------------------------------------------------------------------
SHARED DISPOSITIVE POWER
10 0 (See Item 5(b))
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 10,000,000 shares (See Item 5 (a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 22.5% (See Item 5(a))
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TYPE OF REPORTING PERSON*
14 00 (Limited Liability Company)
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</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 732378 10 4 13D PAGE 3 OF 86 PAGES
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<TABLE>
<C> <S> <C> <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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SOLE VOTING POWER
7 6,080,000 shares (assuming the exercise of Warrant)(See Item 5(b))
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SHARED VOTING POWER
NUMBER OF 8 10,000,000 (See Item 5(b))
SHARES
BENEFICIALLY ----------------------------------------------------------------------------
OWNED BY SOLE DISPOSITIVE POWER
EACH 9 6,080,000 shares (assuming the exercise of Warrant)(See Item 5(b))
REPORTING
PERSON WITH ----------------------------------------------------------------------------
SHARED DISPOSITIVE POWER
10 10,000,000 (See Item 5(b))
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 16,080,000 shares of Common Stock (inclusive of shares issuable upon exercise of
Warrant)(See Item 5(a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 33.9% (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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CUSIP NO. 732378 10 4 13D PAGE 4 OF 86 PAGES
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<TABLE>
<C> <S> <C> <C>
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Somerset 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 New York
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SOLE VOTING POWER
7 1,000,000 shares (See Item 5(b))
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SHARED VOTING POWER
NUMBER OF 8 0 (See Item 5(b))
SHARES
BENEFICIALLY ----------------------------------------------------------------------
OWNED BY SOLE DISPOSITIVE POWER
EACH 9 1,000,000 shares (See Item 5(b))
REPORTING
PERSON WITH ----------------------------------------------------------------------
SHARED DISPOSITIVE POWER
10 0 (See Item 5(b))
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 1,000,000 shares (See Item 5 (a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 2.25% (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
INTRODUCTION.
The reporting persons named in Item 2 below are hereby jointly
filing this Schedule 13D because they may be deemed a "group" within the meaning
of Rule 13d-5(b)(1) promulgated pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), by virtue of the fact that they may be deemed
to have acted in concert in connection with their acquisition of certain
securities of the issuer, pursuant to the terms and conditions of a certain
Securities Purchase and Exchange Agreement dated as of January 12, 1998 (the
"Securities Purchase and Exchange Agreement"), among the Company (as hereinafter
defined), the reporting persons and certain other persons signatory thereto, and
because they may be deemed to share beneficial ownership with respect to some of
the same securities of the issuer. In accordance with Rule 13d-1(f) promulgated
pursuant to the Exchange Act, the persons named in Item 2 below have executed a
written agreement relating to the joint filing of this Schedule 13D (the "Joint
Filing Agreement"), a copy of which is attached hereto as Exhibit I.
White Owl Capital Partners, one of the reporting persons named in
Item 2 below, is also a signatory to (i) a certain Schedule 13D which was filed
with Securities and Exchange Commission (the "Commission") on October 27, 1997
by such reporting person (the "Prior Filing"), in connection with its
acquisition of certain securities of the issuer, inclusive of certain Senior
Convertible Promissory Notes of the Company (collectively, the "Senior Notes")
and Warrants to acquire Common Stock of the Company (collectively, the "Bridge
Loan Warrants"), pursuant to the terms and conditions of a certain Securities
Purchase Agreement dated October 15, 1997 (the "Bridge Loan Securities Purchase
Agreement") and (ii) a certain Amendment No. 1 to the Prior Filing, which is
being filed with the Commission contemporaneously with the filing of this
Initial Statement of Beneficial Ownership, on Schedule 13D, to disclose a
termination of such Prior Filing (the "Termination of Prior Filing") upon the
filing of this Statement.
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 Investors, L.L.C., ("White Owl"), White Owl Capital
Partners ("WOCP") and Somerset Capital Partners ("SCP"), together with certain
other individuals who are not reporting persons hereunder, are purchasers of
shares of Common Stock of the Company, pursuant to the terms and conditions of
the Securities Purchase and Exchange Agreement. White Owl, WOCP and SCP are
sometimes hereinafter individually referred to as a "Reporting Person" and
collectively referred to as the "Reporting Persons").
Page 5 of 86 Pages
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White Owl is a Delaware limited liability company that was formed
recently to acquire, own and hold the securities of the Company (inclusive of
the shares of Common Stock) to be purchased by it pursuant to the Securities
Purchase and Exchange Agreement. The address of the principal business and the
principal office of White Owl is 20 Pine Brook Road, Bedford, New York 10506.
The sole managing member of White Owl is WOCP.
WOCP 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 WOCP is 20 Pine Brook Road, Bedford, New
York 10506. The only partners of WOCP are Steven A. Webster ("Webster") and
William R. Ziegler ("Ziegler").
SCP is a New York general partnership whose principal business is
investment in marketable securities. The address of the principal business and
the principal office of SCP is 254 Franklin Street, Buffalo, New York 14202. The
only partners of SCP are Thomas H. O'Neill, Jr. ("O'Neill"), Webster and
Ziegler.
O'Neill is a natural person and one of the three general partners
of SCP and has a business address of 254 Franklin Street, Buffalo, New York
14202. The present principal occupation or employment of O'Neill is as the
Chairman and Chief Executive Officer of Somerset Exploration Corporation, an oil
and gas exploration and production company with its principal place of business
located at 254 Franklin Street, Buffalo, New York 14202. O'Neill is a United
States citizen.
Webster is a natural person and has a present business address of
1900 West Loop South, Suite 1800, Houston, Texas 77027 (which address will
change to 901 Threadneedle, Suite 200, Houston, Texas 77079 sometime in February
of 1998). The present principal occupation or employment of Webster is as the
Chief Executive Officer of R&B Falcon Corporation, a marine oil and gas drilling
contractor with its principal place of business located at 901 Threadneedle,
Suite 200, Houston, Texas 77079. 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, none of the Reporting Person or any
of the partners of any of the Reporting Persons has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, none of the Reporting Persons or any of the partners of any of
the Reporting Persons 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.
Page 6 of 86 Pages
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the terms and conditions of the Securities Purchase
and Exchange Agreement, on January 13, 1998, (i) White Owl purchased from the
Company 10,000,000 shares of Common Stock, in consideration of an aggregate cash
purchase price of $10,000,000 ($1.00 per share) and (ii) SCP purchased from the
Company 1,000,000 shares of Common Stock, in consideration of an aggregate cash
purchase price of $1,000,000 ($1.00 per share).
The source of funds for the $10,000,000 aggregate cash purchase
price for the Common Stock of the Company purchased by White Owl pursuant to the
Securities Purchase and Exchange Agreement was the offering and sale of limited
liability company interests in White Owl in a private placement transaction. The
source of funds for the $1,000,000 aggregate cash purchase price for the Common
Stock of the Company purchased by SCP pursuant to the Securities Purchase and
Exchange Agreement was working capital of SCP.
Pursuant to the terms and conditions of the Securities Purchase
and Exchange Agreement, on January 13, 1998, WOCP purchased from the Company
3,040,000 shares of Common Stock, in consideration of the surrender and delivery
by WOCP to the Company of the Senior Note of the Company, in the aggregate
principal amount of $1,900,000, registered in the name of WOCP (the "WOCP Senior
Note").
As previously disclosed in the Prior Filing, (i) the source of
funds for the $1,900,000 subscription price for the WOCP Senior Note and Bridge
Loan Warrants acquired by WOCP pursuant to the Bridge Loan Securities Purchase
Agreement was capital contributions, in the amount of $950,000 from each of
WOCP's two partners, Webster and Ziegler, and (ii) the source of funds for the
capital contributions made by each of Webster and Ziegler to WOCP was personal
funds of Webster and Ziegler, respectively.
ITEM 4. PURPOSE OF TRANSACTION.
As disclosed in Item 3 above, on January 13, 1998, pursuant to
the terms and conditions of the Securities Purchase and Exchange Agreement, (i)
White Owl acquired from the Company 10,000,000 shares of Common Stock, (ii) SCP
acquired from the Company 1,000,000 shares of Common Stock, and (iii) WOCP
acquired from the Company 3,040,000 shares of Common Stock.
It was a condition precedent to the obligations of White Owl,
WOCP, SCP and the other purchasers signatory to the Securities Purchase and
Exchange Agreement (collectively, the "Purchasers") to consummate the
transactions contemplated by the Securities Purchase and Exchange Agreement that
Messrs. Webster and Ziegler and one other person designated by WOCP, as the
managing member of White Owl, be elected to the Board of Directors of the
Company, effective and conditioned upon the closing (the "Closing") of the
transactions contemplated by the Securities Purchase and Exchange Agreement.
Messrs. Webster and Ziegler were elected to the Board of Directors of the
Company on January 13, 1998 (the "Closing Date").
Page 7 of 86 Pages
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WOCP and the Company reached an oral understanding giving WOCP the right, at its
option, to designate a third person for election to the Board of Directors of
the Company.
The obligations of the Purchasers to consummate the transactions
contemplated by the Securities Purchase and Exchange Agreement were also subject
to, among other things, the following conditions: (i) the execution and delivery
by the Company of the Registration Rights Joinder Agreement (as defined in Item
6 below), (ii) the payment by the Company of the reasonable legal fees and other
expenses of the Purchasers' counsel, (iii) the consummation by the Company of
the acquisition of Fishing Tools, Inc., on substantially the terms described in
the White Owl PPM (as defined in the Securities Purchase and Exchange
Agreement), (iv) White Owl having raised $10 million pursuant to the White Owl
PPM, and (v) the Company being in compliance with all of its covenants under its
loan agreements with KBK Financial, Inc. The obligations of the Company to
consummate the transactions contemplated by the Securities Purchase and Exchange
Agreement were subject to, among other things, the surrender by each of the
holders of the Senior Notes of the Company, in the aggregate principal amount of
$2,500,000, to the Company for cancellation of the Senior Note registered in his
or its name. In satisfaction of this closing condition, all of the Senior Notes
were surrendered to the Company for cancellation and an aggregate of 4,000,000
shares of Common Stock of the Company were issued to the holders thereof in
exchange therefor, in accordance with the conversion provisions thereof,
including the issuance of an aggregate of 3,040,000 shares of Common Stock to
WOCP in exchange for the Senior Note, in the aggregate principal amount of
$1,900,000 registered in the name of WOCP, as disclosed above.
The Common Stock issued to the Reporting Persons pursuant to the
terms and conditions of the Securities Purchase and Exchange Agreement was
acquired by such Reporting Persons primarily for investment purposes, but also
for the purpose of influencing management.
Although there is no present intention to do so, any of the
Reporting Persons and/or any of the control persons of the Reporting Person
named in Item 2 above (hereinafter sometimes collectively referred to as the
"Item 2 Persons"), may decide to make additional purchases of Common Stock 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, other opportunities available to the Reporting
Persons and/or the Item 2 Persons, prospects for the respective business' of the
Reporting Persons and/or the Item 2 Persons, 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, any of the Reporting Persons and/or any of the Item 2 Persons,
at any time, may decide to change his or its intention with respect to the
acquisition and/or retention of shares of Common Stock, 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, except for the possible acquisition of shares of Common Stock by WOCP
upon the exercise in whole or in part of any of the Bridge Loan Warrants
acquired by WOCP pursuant to the Bridge Loan
Page 8 of 86 Pages
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Securities Purchase Agreement, in accordance with the terms thereof, as
described above, none of the Reporting Persons or Item 2 Persons has any current
intention to do so.
Any of the Reporting Persons or Item 2 Persons 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 Messrs. Webster or Ziegler may seek to influence the management of the
Company in his capacity as a director of the Company.
The descriptions of the terms of the Securities Purchase and
Exchange Agreement, the Bridge Loan Securities Purchase Agreement, the Senior
Notes and the Bridge Loan Warrants 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 and Exchange Agreement, the Bridge Loan
Securities Purchase Agreement, the Senior Note issued to WOCP and the Bridge
Loan Warrant issued to WOCP which are Exhibit II, Exhibit III, Exhibit IV and
Exhibit V hereto, 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 Persons or any Item 2 Person 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 Persons and the Item 2 Persons are as
follows:
The aggregate number and percentage of the Common Stock which are
owned of record and beneficially by White Owl on the date hereof are 10,000,000
shares of Common Stock, or approximately 22.5% of the 44,378,477 shares of
Common Stock issued and outstanding as of the close of business on the Closing
Date.
The aggregate number and percentage of the Common Stock which are
owned beneficially by WOCP on the date hereof are 16,080,000 shares of Common
Stock, or approximately 33.9% of the 47,418,477 shares of Common Stock that
would be issued and outstanding as of the close of business on the Closing Date,
assuming the exercise of the Bridge Loan Warrants owned by WOCP for an aggregate
of 3,040,000 shares of Common Stock as of such date, which shares include the
10,000,000 shares of Common Stock owned of record by White Owl, since WOCP is
the sole managing member of White Owl, as well as the 3,040,000 shares of Common
Stock owned of record by WOCP and the 3,040,000 shares of Common Stock issuable
upon exercise of the Bridge Loan Warrants owned by WOCP.
The aggregate number and percentage of the Common Stock which are
owned of record and beneficially by SCP on the date hereof are 1,000,000 shares
of Common Stock, or
Page 9 of 86 Pages
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approximately 2.25% of the 44,378,477 shares of Common Stock issued and
outstanding as of the close of business on the Closing Date.
O'Neill, as one of the three general partners of SCP, may be
deemed to indirectly beneficially own the 1,000,000 shares of Common Stock owned
of record by SCP, which shares represent approximately 2.25% of the 44,378,477
shares of Common Stock issued and outstanding as of the close of business on the
Closing Date.
Each of Webster and Ziegler, as the sole general partners of WOCP
and as two of the three general partners of SCP, may be deemed to indirectly
beneficially own an aggregate of 17,080,000 shares of Common Stock, or
approximately 36.0% of the 47,418,477 shares of Common Stock that would be
issued and outstanding as of the close of business on the Closing Date, assuming
the exercise of the Bridge Loan Warrants owned by WOCP for an aggregate of
3,040,000 shares of Common Stock as of such date, which shares include (i) the
16,080,000 shares of Common Stock owned beneficially by WOCP, since Messrs.
Webster and Ziegler are the sole partners of WOCP, which shares include (A) the
10,000,000 shares of Common Stock owned of record by White Owl, and beneficially
by WOCP as the sole managing member of White Owl, (B) the 3,040,000 shares of
Common Stock owned of record by WOCP, and (C) the 3,040,000 shares of Common
Stock issuable upon exercise of the Bridge Loan Warrants owned by WOCP and (ii)
the 1,000,000 shares of Common Stock owned of record by SCP, since Messrs.
Webster and Ziegler are two of the three general partners of SCP. In addition,
Webster owns beneficially and of record 250,000 shares of Common Stock.
In addition, notwithstanding the foregoing, if the Reporting
Persons are deemed to constitute a "group" within the meaning of Rule
13d-5(b)(1) promulgated pursuant to the Exchange Act, by virtue of the fact that
they may be deemed to have acted in concert in connection with their acquisition
of certain securities of the Company, then each of the Reporting Persons and
each of the Item 2 Persons may be deemed to beneficially own an aggregate of
17,330,000 shares of Common Stock collectively owned by such persons on the date
hereof, or 36.5% of the 47,418,477 shares of Common Stock that would be issued
and outstanding as of the close of business on the Closing Date, assuming the
exercise of the Bridge Loan Warrants owned by WOCP for an aggregate of 3,040,000
shares of Common Stock as of such date. However, (i) each of White Owl, WOCP,
SCP, O'Neill and Ziegler disclaims beneficial ownership of the 250,000 shares of
Common Stock owned of record by Webster, (ii) each of White Owl and WOCP
disclaims beneficial ownership of the 1,000,000 shares of Common Stock owned of
record by SCP, (iii) each of SCP and O'Neill disclaims beneficial ownership of
the 16,080,000 shares of Common Stock beneficially owned by WOCP (inclusive of
the 10,000,000 shares of Common Stock owned of record by White Owl, the
3,040,000 shares of Common Stock owned of record by WOCP and the 3,040,000
shares of Common Stock issuable to WOCP upon the exercise of the Bridge Loan
Warrants owned by WOCP) and (iv) White Owl disclaims beneficial ownership of the
6,080,000 shares of Common Stock beneficially owned by WOCP (inclusive of the
3,040,000 shares of Common Stock owned of record by WOCP and the 3,040,000
shares of Common Stock issuable to WOCP upon the exercise of the Bridge Loan
Warrants owned by WOCP).
Page 10 of 86 Pages
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(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:
White Owl 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
10,000,000 shares of Common Stock owned of record by it. Notwithstanding the
foregoing, (i) WOCP, as the sole managing member of White Owl, and (ii) each of
Webster and Ziegler, as the sole general partners of WOCP, may be deemed to
share the power to vote (and direct the vote of) and to dispose of (and direct
the disposition of) the 10,000,000 shares of Common Stock owned of record by
White Owl.
WOCP 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 (inclusive of the 3,040,000 shares
of Common Stock issuable upon the exercise of the Bridge Loan Warrants owned by
it) and, as sole managing member of White Owl, to share with White Owl, the
power to vote (and to direct the vote of) and to dispose of (and direct the
disposition of) the 10,000,000 shares of Common Stock owned of record by White
Owl. Notwithstanding the foregoing, each of Webster and Ziegler, as the sole
general partners of WOCP, 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 WOCP (inclusive of the 3,040,000
shares of Common Stock issuable upon the exercise of the Bridge Loan Warrants
owned by WOCP).
SCP 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 1,000,000
shares of Common Stock owned of record by it. Notwithstanding the foregoing,
each of O'Neill, Webster and Ziegler, as the sole general partners of SCP, may
be deemed to share the power to vote (and direct the vote of) and to dispose of
(and direct the disposition of) the 1,000,000 shares of Common Stock owned of
record by SCP.
O'Neill, as one of the three general partners of SCP, may be
deemed to share with SCP and each of Webster and Ziegler, the other two partners
of SCP, the power to vote (and direct the vote of) and to dispose of (and direct
the disposition of) the 1,000,000 shares of Common Stock owned of record by SCP.
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. In addition, Webster (i) as one of the two general
partners of WOCP, may be deemed to share (A) with each of WOCP and Ziegler, the
other general partner of WOCP, the 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 WOCP (inclusive of the 3,040,000 shares of Common Stock
issuable upon the exercise of the Bridge Loan Warrants owned by WOCP) and (B)
with each of White Owl, WOCP and Ziegler, the power to vote (and to direct the
vote of) and to dispose of (and direct the disposition of) the 10,000,000 shares
of Common Stock owned of record by
Page 11 of 86 Pages
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White Owl and (ii) as one of the three general partners of SCP, may be deemed to
share with each of SCP and O'Neill and Ziegler, the other two general partners
of SCP, the power to vote (and to direct the vote of) and to dispose of (and
direct the disposition of) the 1,000,000 shares of Common Stock owned of record
by SCP.
Ziegler (i) as one of the two general partners of WOCP, may be
deemed to share (A) with each of WOCP and Webster, the other general partner of
WOCP, the 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 WOCP (inclusive of the 3,040,000 shares of Common Stock issuable upon the
exercise of the Bridge Loan Warrants owned by WOCP) and (B) with each of White
Owl, WOCP and Webster, the power to vote (and to direct the vote of) and to
dispose of (and direct the disposition of) the 10,000,000 shares of Common Stock
owned of record by White Owl and (ii) as one of the three general partners of
SCP, may be deemed to share with each of SCP and O'Neill and Webster, the other
two general partners of SCP, the power to vote (and to direct the vote of) and
to dispose of (and direct the disposition of) the 1,000,000 shares of Common
Stock owned of record by SCP.
In addition, notwithstanding the foregoing, if the Reporting
Persons are deemed to constitute a "group" within the meaning of Rule
13d-5(b)(1) promulgated pursuant to the Exchange Act, by virtue of the fact that
they may be deemed to have acted in concert in connection with their acquisition
of certain securities of the Company, then (i) each of SCP and O'Neill may be
deemed to share with (A) White Owl, WOCP, Webster and Ziegler, the power to vote
(and to direct the vote of) and to dispose of (and direct the disposition of)
the 10,000,000 shares of Common Stock owned of record by White Owl, and (B)
WOCP, Webster and Ziegler, the 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 WOCP (inclusive of the 3,040,000 shares of Common Stock
issuable upon the exercise of the Bridge Loan Warrants owned by WOCP), (ii)
White Owl may be deemed to share with each of WOCP, Webster and Ziegler, the
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 WOCP
(inclusive of the 3,040,000 shares of Common Stock issuable upon the exercise of
the Bridge Loan Warrants owned by WOCP), (iii) each of White Owl and WOCP may be
deemed to share with each of SCP, O'Neill, Webster and Ziegler, the power to
vote (and to direct the vote of) and to dispose of (and direct the disposition
of) the 1,000,000 shares of Common Stock owned of record by SCP, and (iv) each
of White Owl, WOCP, SCP, O'Neill and Ziegler may be deemed to share with Webster
the 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 Webster.
However, as previously state in response to Item 5(a) above, (i) each of White
Owl, WOCP, SCP, O'Neill and Ziegler disclaims beneficial ownership of the
250,000 shares of Common Stock owned of record by Webster, (ii) each of White
Owl and WOCP disclaims beneficial ownership of the 1,000,000 shares of Common
Stock owned of record by SCP, (iii) each of SCP and O'Neill disclaims beneficial
ownership of the 16,080,000 shares of Common Stock beneficially owned by WOCP
(inclusive of the 10,000,000 shares of Common Stock owned of record by White
Owl, the 3,040,000 shares of Common Stock owned of record by WOCP and the
3,040,000 shares of Common Stock issuable to WOCP upon the exercise of the
Bridge Loan Warrants owned by WOCP) and (iv)
Page 12 of 86 Pages
<PAGE>
<PAGE>
White Owl disclaims beneficial ownership of the 6,080,000 shares of Common Stock
beneficially owned by WOCP (inclusive of the 3,040,000 shares of Common Stock
owned of record by WOCP and the 3,040,000 shares of Common Stock issuable to
WOCP upon the exercise of the Bridge Loan Warrants owned by WOCP).
(c) Except for acquisition of shares of Common Stock by the
Reporting Persons pursuant to the Securities Purchase and Exchange Agreement,
all as more fully disclosed in Items 3 and 4 above, during the past 60 days,
none of the Reporting Persons or the Item 2 Persons 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 Common
Stock pursuant to the Securities Purchase and Exchange Agreement.
(d) As more fully described below in Item 6, (i) WOCP, as the
Managing Member of White Owl, is entitled to receive 25% of any and all
distributions of cash (which may include proceeds from the sale of securities of
the Company) and securities made by White Owl to its members after its members
have received distributions equal to the sum of a specified preferred return on
their investment in White Owl plus 150% of such investment. Except as disclosed
in the foregoing sentence and except for the right of any Item 2 Person, as a
general partner of any Reporting Person that is a general partnership to receive
distributions from such Reporting Person, 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 any Reporting
Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As previously disclosed in Prior Filing and in the above Items,
WOCP (i) was (A) a party to the Bridge Loan Securities Purchase Agreement, which
provided for the sale and issuance of certain units of the Company (inclusive of
the Senior Notes and Bridge Loan Warrants) to the purchasers thereunder
(including WOCP) and (B) a holder of a Senior Note, in the aggregate principal
amount of $1,900,000, which was converted into an aggregate of 3,040,000 shares
of Common Stock pursuant to the terms thereof and the terms of the Securities
Purchase and Exchange Agreement and (ii) is a holder of a Bridge Loan Warrant,
which presently is exercisable for an aggregate of 3,040,000 shares of Common
Stock. See Items 3 and 4 above for further details with respect to the
provisions of the Securities Purchase and Exchange Agreement and the conversion
of the Senior Note issued to WOCP.
The Bridge Loan Warrants issued to WOCP 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 Bridge Loan Warrants.
Page 13 of 86 Pages
<PAGE>
<PAGE>
As previously disclosed in Items 3 and 4 above, each of White
Owl, SCP and WOCP was a party to the Securities Purchase and Exchange Agreement,
which provided, among other things, for (i) the sale and issuance of 10,000,000
shares of Common stock to White Owl and 1,000,000 shares of Common Stock to SCP,
in each case, at a cash purchase price of $1.00 per share, and (ii) the sale and
issuance of 3,040,000 shares of Common Stock to WOCP, in consideration of the
surrender for cancellation by WOCP of the WOCP Senior Note. See Items 3 and 4
above for further details with respect to the provisions of the Securities
Purchase and Exchange Agreement.
Contemporaneously with the execution and delivery of the Bridge
Loan Securities Purchase Agreement, the Company and the purchasers thereunder
(inclusive of WOCP) 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 holders other than WOCP) or upon exercise of the Bridge Loan Warrants
(inclusive of the Warrants issued to holders other than WOCP). Contemporaneously
with closing of the transactions contemplated by the Securities Purchase and
Exchange Agreement, the Company and the Purchasers (inclusive of the Reporting
Persons) entered into the Joinder Agreement (the "Registration Rights Joinder
Agreement"), pursuant to which White Owl and SCP were added as parties to the
Registration Rights Agreement and the definition of Registrable Securities was
amended to include the shares of Common Stock acquired by White Owl and SCP
pursuant to the Securities Purchase and Exchange Agreement.
Pursuant to Article V of that certain Limited Liability Company
Agreement of White Owl dated as of January 13, 1998 (the "White Owl LLC
Agreement"), once the members of White Owl have received distributions of cash
and/or securities equal in value to the sum of a specified priority return on
their investment in White Owl and 150% of such investment ("Payout"), WOCP, as
the managing member of White Owl, is entitled to receive 25% of all subsequent
distributions made by White Owl of (i) available cash flow from White Owl (which
may include proceeds from the sale of Common Stock or other securities of the
Company) and (ii) securities of the Company.
The descriptions of the Securities Purchase and Exchange
Agreement, the Bridge Loan Securities Purchase Agreement, the Senior Notes, and
the Bridge Loan Warrants, the Registration Rights Agreement, as amended and/or
supplemented by the Registration Rights Joinder Agreement, and the White Owl LLC
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 and Exchange Agreement, the Bridge Loan Securities Purchase
Agreement, the Senior Note issued to WOCP, the Bridge Loan Warrant issued to
WOCP, the Registration Rights Agreement, the Registration Rights Joinder
Agreement and the White Owl LLC Agreement, which are Exhibits II, III, IV, V,
VI, VII, and VIII hereto, respectively, and incorporated herein by reference.
Page 14 of 86 Pages
<PAGE>
<PAGE>
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), none of the Reporting Persons is a party to any contract,
arrangement, understanding or relationship (legal or otherwise) among the
Reporting Persons and the Item 2 Persons 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.
<TABLE>
<C> <S>
I. Joint Filing Agreement referred to in the Introduction.
II. Securities Purchase and Exchange Agreement referred to in the Introduction and
in Items 3, 4, 5 and 6.
III. Bridge Loan Securities Purchase Agreement referred to in the Introduction and in
Items 3, 4 and 6.
IV. Senior Note issued to WOCP referred to in Items 3, 4 and 6.
V. Bridge Loan Warrant issued to WOCP referred to in Items 3, 4, 5 and 6.
VI. Registration Rights Agreement referred to in Item 6.
VII. Registration Rights Joinder Agreement referred to in Item 6.
VIII. White Owl LLC Agreement referred to in Item 6.
</TABLE>
Page 15 of 86 Pages
<PAGE>
<PAGE>
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: January 22, 1998
WHITE OWL INVESTORS, L.L.C.
By: White Owl Capital Partners, its
Managing Member
By: /s/ WILLIAM R. ZIEGLER
______________________________________
William R. Ziegler, Partner
WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
______________________________________
Name: William R. Ziegler
Title: General Partner
SOMERSET CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
______________________________________
Name: William R. Ziegler
Title: General Partner
Page 16 of 86 Pages
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ----- ----------- --------
<C> <S> <C>
I Joint Filing Agreement dated as of January 22, 1998 among White Owl 18
Investors, L.L.C., White Owl Capital Partners and Somerset Capital
Partners
II Securities Purchase and Exchange Agreement dated as of January 12, 20
1998, among Ponder Industries, Inc., White Owl Investors, L.L.C.,
White Owl Capital Partners, Somerset Capital Partners and the other
Purchasers signatory thereto
III Securities Purchase Agreement dated as of October 15, 1998, among
Ponder Industries, Inc., White Owl Capital Partners and the other
Purchasers signatory thereto (Incorporated by reference to Exhibit
I to that certain Schedule 13D of White Owl Capital Partners filed
with the Commission on October 27, 1997)
IV Senior Note dated as of October 15, 1997 issued to White Owl
Capital Partners (Incorporated by reference to Exhibit II to that
certain Schedule 13D of White Owl Capital Partners filed with the
Commission on October 27, 1997)
V Bridge Loan Warrant dated as of October 15, 1997 issued to White
Owl Capital Partners (Incorporated by reference to Exhibit III to
that certain Schedule 13D of White Owl Capital Partners filed with
the Commission on October 27, 1997)
VI Registration Rights Agreement dated as of October 15, 1997, among
Ponder Industries, Inc., White Owl Capital Partners and the other
parties signatory thereto (Incorporated by reference to Exhibit
III to that certain Schedule 13D of White Owl Capital Partners
filed with the Commission on October 27, 1997)
VII Joinder Agreement dated as of January 12, 1998, among Ponder 51
Industries, Inc., White Owl Capital Partners, White Owl Investors,
L.L.C., Somerset Capital Partners and the other individuals who were
signatory to the Registration Rights Agreement
VIII Limited Liability Company Agreement of White Owl Investors, L.L.C. 53
dated as of January 13, 1998
</TABLE>
Page 17 of 86 Pages
<PAGE>
<PAGE>
EXHIBIT I
SCHEDULE 13D JOINT FILING AGREEMENT
AGREEMENT by and among White Owl Investors, L.L.C., a Delaware
limited liability company ("White Owl"), White Owl Capital Partners, a Texas
general partnership ("WOCP") and the sole managing member of White Owl, and
Somerset Capital Partners, a New York general partnership ("SCP"), whereby each
of them agrees to jointly file a statement on Schedule 13D with the Securities
and Exchange Commission (the "Commission"), pursuant to Section 13D of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations promulgated by the Commission thereunder, in connection with
their acquisition of certain securities of Ponder Industries, Inc. (the
"Company"), pursuant to the terms and conditions of that certain Securities
Purchase and Exchange Agreement dated as of January 12, 1998 by and among the
Company, White Owl, WOCP, SCP and certain other purchasers signatory thereto,
and any required amendments thereto, and that such Schedule 13D (inclusive of
any amendments thereto) with respect to the beneficial ownership of shares of
common stock of the Company, shall be deemed to be filed on behalf of each of
them.
IN WITNESS WHEREOF, each of the undersigned have executed this
Agreement as of the 22nd day of January, 1998.
WHITE OWL INVESTORS, L.L.C.
By: White Owl Capital Partners, Managing Member
By: /s/ WILLIAM R. ZIEGLER
___________________________________________
Name: William R. Ziegler
Title: Partner
WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
___________________________________________
Name: William R. Ziegler
Title: Partner
Page 18 of 86 Pages
<PAGE>
<PAGE>
SOMERSET CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
___________________________________________
Name: William R. Ziegler
Title: Partner
Page 19 of 86 Pages
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<PAGE>
<PAGE>
EXHIBIT II
- --------------------------------------------------------------------------------
PONDER INDUSTRIES, INC.
------------------------------------------------------------------------
SECURITIES PURCHASE AND EXCHANGE
AGREEMENT
DATED AS OF JANUARY 12, 1998
------------------------------------------------------------------------
COMMON STOCK
- --------------------------------------------------------------------------------
Page 20 of 86 Pages
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<C> <S> <C>
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK
1.1 Authorization of Common Stock..........................................1
1.2 Sale and Purchase of Securities........................................2
1.3 Exchange of Senior Notes for Securities................................2
1.4 Closing................................................................2
1.5 Application of Proceeds................................................2
1.6 Purchaser's Conditions of Closing......................................3
1.7 Company's Conditions of Closing........................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership........................................................4
2.2 Subsidiaries...........................................................5
2.3 Qualification; Enforceability..........................................5
2.4 Business and Property; Financial Statements............................6
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc......................................................6
2.6 Consents and Approvals.................................................7
2.7 Litigation.............................................................7
2.8 Private Offering.......................................................7
2.9 No Defaults; Debt, etc; Liens..........................................8
2.10 Full Disclosure........................................................8
2.11 Environmental Matters..................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation..............................................9
3.2 Organization and Authority of the New Purchasers; No Conflicts; Approvals;
Enforceability.........................................................11
</TABLE>
Page 21 of 86 Pages
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<TABLE>
<C> <S> <C>
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information.....................................12
4.2 Corporate Existence...................................................14
4.3 Compliance with Laws; Government Filings..............................14
4.4 Environmental Matters.................................................14
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Use of Proceeds.......................................................15
ARTICLE VI
MISCELLANEOUS
6.1 Expenses..............................................................15
6.2 Reliance on and Survival of Representations...........................15
6.3 Amendment and Waiver..................................................16
6.4 Directly or Indirectly................................................16
6.5 Successors and Assigns................................................16
6.6 Notices...............................................................16
6.7 LAW GOVERNING.........................................................16
6.8 SUBMISSION TO JURISDICTION;
Service of Process....................................................17
6.9 Headings, etc.........................................................18
6.10 Entire Agreement......................................................18
6.11 WAIVER OF TRIAL BY JURY...............................................18
6.12 Indemnification.......................................................18
6.13 Interpretive Provision................................................19
6.14 Severability..........................................................19
6.15 Counterparts..........................................................19
6.16 Finder's Fee..........................................................19
</TABLE>
Page 22 of 86 Pages
- ii -
<PAGE>
<PAGE>
Schedules:
- ---------
Schedule 1.1 Purchasers
Schedule 1.5 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.2 Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Consent and Approvals
Schedule 2.7 Litigation
Schedule 2.9 Debts; Liens
Exhibits:
- --------
Exhibit A Registration Rights Joinder Agreement
Exhibit B Form of Opinion of Company Counsel
Page 23 of 86 Pages
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<PAGE>
<PAGE>
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT, dated as of
January 12, 1998, among PONDER INDUSTRIES, INC., a Delaware corporation (the
"Company"), WHITE OWL INVESTORS, L.L.C., a Delaware limited liability company
("White Owl"), SOMERSET CAPITAL PARTNERS, a New York general partnership ("SCP"
and, with White Owl, the "New Purchasers"), and each of the undersigned HOLDERS
OF THE SENIOR NOTES (individually, a "Holder" and collectively, the "Holders";
the New Purchasers and the Holders being sometimes hereinafter collectively
referred to as the "Purchasers" and individually as a "Purchaser").
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 an aggregate
of 15,000,000 shares of Common Stock and wishes to sell to the New Purchasers an
aggregate of 11,000,000 shares of Common Stock for the consideration provided
herein, and wishes to issue to the Holders an aggregate of 4,000,000 shares of
Common Stock, in the individual amounts set forth opposite each Holder's name on
Schedule 1.1, in exchange for the surrender of the Senior Notes, in each case,
subject to the terms and conditions of this Agreement; and
WHEREAS, the New Purchasers wish to purchase an aggregate of
11,000,000 shares of Common Stock, in the individual amounts set forth opposite
each New Purchaser's name on Schedule 1.1, subject to the terms and conditions
of this Agreement; and
WHEREAS, the Holders wish to exchange the Senior Notes, in the
aggregate principal amount of $2,500,000, for an aggregate of 4,000,000 shares
of Common Stock, in the individual amounts set forth opposite each Holder's name
on Schedule 1.1, 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 the Purchasers, intending to be mutually bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK
1.1 Authorization of Common Stock.
The Company has authorized (i) the issuance and sale to the New
Purchasers at the Closing of an aggregate of 11,000,000 shares of Common Stock,
in the individual amounts set forth opposite each New Purchaser's name on
Schedule 1.1, and (ii) the issuance to the
Page 24 of 86 Pages
<PAGE>
<PAGE>
Holders of an aggregate of 4,000,000 shares of Common Stock, in the individual
amounts set forth opposite each Holder's name on Schedule 1.1, in exchange for
the surrender of the Senior Notes, in the aggregate principal amount of
$2,500,000.
1.2 Sale and Purchase of Securities.
On the Closing Date, the Company will sell to the New Purchasers
and the New Purchasers 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, 11,000,000 shares of Common
Stock, registered in the name of the New Purchasers in the individual amounts
set forth opposite each New Purchaser's name on Schedule 1.1, in consideration
of an aggregate purchase price of $11,000,000 ($1.00 per share) (the "New
Purchasers Purchase Price"). The New Purchasers Purchase Price shall be payable
in cash by wire transfer of immediately available funds to the Company's bank
account with American Bank of Texas (the "Cash Payment"), in accordance with
wire transfer instructions delivered by the Company to the New Purchasers at
least one business day prior to the Closing.
1.3 Exchange of Senior Notes for Securities.
On the Closing Date, the Company will sell to each of the Holders
and each Holder 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, an aggregate of
4,000,000 shares of Common Stock, registered in the names of the Holders in the
individual amounts set forth opposite each Holder's name on Schedule 1.1, in
consideration of an aggregate purchase price of $2,500,000 ($0.625 per share)
(the "Holders' Purchase Price"). The Holders' Purchase Price shall be payable by
the surrender and delivery by the Holders to the Company of the Senior Notes, in
the aggregate principal amount of $2,500,000.
1.4 Closing.
The sale and purchase or exchange (the "Closing") of the shares
of Common Stock (the "Securities") shall take place on the date hereof (the
"Closing Date") 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 certificates for the shares of Common Stock purchased hereunder, each
dated the Closing Date, and registered in the names and amounts as set forth on
Schedule 1.1 hereto, against delivery by the Purchasers of the Purchase Price in
the form of the Cash Payment and the surrender for cancellation of the Senior
Notes. The failure of any Purchaser to deliver such Purchase Price shall not
excuse any other Purchaser from delivery of his or its Purchase Price.
1.5 Application of Proceeds.
The Company shall apply the proceeds from the sale of the
Securities as set forth in Schedule 1.5 attached hereto.
Page 25 of 86 Pages
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<PAGE>
<PAGE>
1.6 Purchaser's Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the
Securities to be purchased by him or it is subject to satisfaction, prior to or
simultaneously with the closing, of the following conditions:
(a) The Company shall have delivered a certificate of the
President 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 (i) the
certificate of incorporation of the Company and any amendments thereto, (ii) the
by-laws of the Company, and (iii) resolutions of the Board of Directors of the
Company authorizing the issuance of the shares of Common Stock and the execution
and delivery of this Agreement.
(c) The Company shall have executed and delivered to the New
Purchasers the Registration Rights Joinder Agreement, substantially in the form
of Exhibit "A" hereto.
(d) Messrs. Steven A. Webster and William R. Ziegler and one
other person designated by the Managing Member shall have been duly elected to
the Board of Directors of the Company, effective and conditioned upon the
Closing.
(e) Fulbright & Jaworski L.L.P., counsel for the Company, shall
have delivered to the Purchasers the Opinion of Company Counsel, substantially
in the form of Exhibit "B" hereto.
(f) All proceedings taken in connection with the authorization,
issuance and sale of the Securities and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing Date 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.
(h) The Company shall have consummated the acquisition of Fishing
Tools, Inc. on substantially the terms described in the White Owl PPM.
Page 26 of 86 Pages
- 3 -
<PAGE>
<PAGE>
(i) White Owl shall have raised $10 million pursuant to the White
Owl PPM.
(j) The Company shall be in compliance with all covenants under
its loan agreements with KBK Financial, Inc. and not otherwise in default under
any of such agreements.
1.7 Company's Conditions of Closing.
The Company's obligations to issue and sell the Securities are
subject to satisfaction, prior to or simultaneously with the closing, of the
following conditions:
(a) Each of the Purchasers shall have delivered a certificate,
dated the Closing Date, certifying that the representations and warranties of
such Purchaser contained in this Agreement and any Exhibit to which the
Purchaser is a party are true and correct in all material respects and that the
Purchaser 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) Each of the Holders shall have surrendered to the Company for
cancellation the Senior Note registered in his name.
(c) All proceedings taken in connection with the purchase by the
Purchasers of the Securities and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing Date and all documents
and papers relating thereto shall be satisfactory in form, scope and substance
to the Company and its counsel, and the Company and its 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.
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 Securities, to perform its obligations
under this Agreement 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-
Page 27 of 86 Pages
-4-
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laws, or otherwise in connection therewith), duly authorized the execution and
delivery of this Agreement, the Securities, 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 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). The sale of the Securities pursuant to this
Agreement will not trigger any anti-dilution rights of any holder of any
securities of the Company, nor require the Company to issue any securities to
any person other than the Purchasers, or adjust the number or purchase price of
any securities subject to options, warrants or similar rights issued or granted
by the Company (including, without limitation, those described on Schedule
2.1(b). All securities of the Company have been issued in compliance with the
Securities Act and applicable state securities laws.
(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.
(a) Schedule 2.2 sets forth the name and jurisdiction of
incorporation or other organization of each Subsidiary. Except for the
Subsidiaries and as indicated on Schedule 2.2, the Company does not directly or
indirectly own any interest in any other Person.
(b) 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
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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 and the Exhibits hereto to which the Company
is a party 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).
2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and complete
copy of the Offering Disclosure Documents (other than the PPM, which was
prepared by the Purchasers, in large part, with information with respect to the
Company and its industry provided by or on behalf of the Company). The 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 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 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. There has been no material adverse change in the financial
position or condition of the Company and its Subsidiaries since the date of such
Financial Statements.
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
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or (y) could materially and adversely affect the ability of the Company to
perform its obligations under this Agreement or any Exhibit to which it is a
party.
(b) Except as set forth in Schedule 2.5, neither the execution,
delivery or performance by the Company of this Agreement or any other Exhibit to
which it is a party, nor compliance by the Company with the respective terms
hereof and thereof, as the case may be, 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.
2.6 Consents and Approvals.
Except as set forth on 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 Securities 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.
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 or any
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, any Subsidiary, nor any other person acting
on behalf of the Company or any Subsidiary has taken, or will take, any action
which would subject the issuance or sale of the Securities to Section 5 of the
Securities Act or to the registration or qualification requirements of any
securities law of any state.
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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.
(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 Offering Disclosure
Documents or any document, certificate or instrument delivered to the Purchasers
by or on behalf of the Company or any Subsidiary 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
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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.
(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 III
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
Securities hereby acknowledges that the Securities are not being registered (i)
under the Securities 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 Securities will not sell or transfer all
or any part of the Securities unless and until he shall first have given notice
to the Company describing such
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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
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 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 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."
(c) The Company may refuse to recognize a transfer of the
Securities on its books should a Purchaser attempt to transfer the Securities
otherwise than in compliance with this Section 3.1.
(d) The Purchaser has adequate means of providing for his or its
current needs and possible personal contingencies, he or it anticipates no need
now or in the foreseeable future to sell the Securities which he or it is
purchasing and he or it can afford the loss of his or its entire investment in
the Company.
(e) If an individual, the Purchaser either
(i) has a net worth or joint net worth with spouse
which exceeds $1,000,000; or
(ii) has had an individual income in excess of $200,000 in
each of 1995 and 1996 or joint income with spouse in excess of $300,000
in each of those years and has a reasonable expectation of reaching the
same income level in 1997.
(f) The Purchaser has such knowledge and experience in financial
and business matters that he or it is capable of evaluating the merits and risks
of investment in the Company and of making an informed investment decision.
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(g) The Purchaser has received and read and is familiar with the
Offering Disclosure Documents and confirms that all documents, records and books
pertaining to his or its proposed investment in the Company have been made
available to him or it. The Purchaser is aware that no federal or state agency
has passed upon the Securities or made any finding or determination concerning
the fairness of the investment represented thereby.
(h) 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 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 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 Securities or the tax consequences
thereof. The Company has urged each Purchaser to consult his or its own tax
adviser concerning any tax matters relating to this investment.
(i) The Securities which Purchaser is acquiring will be acquired
for his or its own account for investment. The Purchaser intends to hold the
Securities indefinitely and he or it is not purchasing such securities with a
view toward distribution in a manner which would require registration under the
Securities Act, and he or it does not presently have any reasons to anticipate
any change in his or its circumstances or other particular occasion or event
which would cause him or it to sell, the Securities which he or it is purchasing
hereunder, subject, nevertheless, to any requirement of law that the disposition
of his or its property shall at all times be within his or its control.
(j) The Purchaser acknowledges that it has been called to his or
its attention both in the Offering Disclosure Documents and by those individuals
with whom he has dealt in connection with his investment in the Company that his
or its investment in the Company involves a high degree of risk.
(k) The Purchaser has received no representations or warranties
from the Company other than those contained herein (inclusive of the Exhibits
hereto) or in the Offering Disclosure Documents or otherwise furnished in
writing and signed by the Company.
3.2 Organization and Authority of the New Purchasers; No
Conflicts; Approvals; Enforceability.
(a) White Owl is a limited liability company organized, validly
existing and in good standing under the laws of the State of Delaware. SCP is a
general partnership organized and validly existing under the laws of the State
of New York. Each of the New Purchasers has all requisite power and authority to
enter into this Agreement, to perform its obligations under this Agreement and
the other Exhibits to which it is or is to be a party and to consummate the
transactions contemplated hereby and thereby. Each of the New Purchasers has by
all requisite action as required by law and its governing instruments duly
authorized the execution and
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delivery of this Agreement and the other Exhibits to which it is or is to be a
party, the performance of its obligations hereunder or thereunder and the
consummation of the transactions contemplated hereby and thereby.
(b) Neither of the New Purchasers is in violation of or in
default with respect to any term or provision of its organizational documents or
any terms 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 any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court the consequences of such violation or
default would conflict with this Agreement or any Exhibit to which the New
Purchaser is or is to be a party or adversely affect the ability of the New
Purchaser's to perform its obligations hereunder or thereunder.
(c) No approval by, from or with, and not other action, in
respect of, any Governmental Body or any other Person is required in connection
with the execution and delivery of this Agreement or any Exhibit to which the
New Purchasers are or will be parties and the consummation of the transactions
contemplated hereby and thereby.
(d) This Agreement has been duly executed and delivered by the
New Purchasers and is a legal, valid and binding obligation of each of the New
Purchasers, enforceable against the New Purchasers in accordance with its terms
and conditions, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general equity
principles (regardless of whether such enforceability is considered in a
proceeding a law or in equity).
ARTICLE IV
COVENANTS
The Company, so long as at least 10% of the Common Stock is owned
by the Purchasers, agrees to perform and comply with each of the following
covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Purchaser the following:
(a) Financial Information. The Company shall send, or cause to be
sent, to each Purchaser (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 as may be acceptable to the Majority-in-Interest, (ii) its
unaudited quarterly consolidated financial statements, of each
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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, (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
Purchasers.
(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 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 under any
agreement with respect to any debt for borrowed money in excess of $100,000 of
the Company or any Subsidiary or becoming aware 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
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reasonable judgment, to be covered by insurance, or (ii) relating in any
material way to this Agreement or any Exhibit to which the Company is a party,
notice thereof specifying in each case in reasonable detail the facts and
circumstances surrounding such litigation, proceeding or judgment.
4.2 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.
4.3 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.
4.4 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
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.
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ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Use of Proceeds. The Company covenants and agrees to use the
proceeds of the sale of the Securities as provided in Schedule 1.5.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I hereof
are consummated, the Company shall: (a) directly pay the reasonable fees and
expenses of special counsel to the Purchasers rendered in connection with such
transactions (up to $40,000) 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; (c) pay, and save each Purchaser of any
Securities harmless from and against, any and all liability and loss with
respect to or resulting from the nonpayment or delayed payment of any and all
placement fees and other liability to pay any agent or finder in connection with
the sale of the Securities to each Purchaser; (d) pay all fees and other charges
payable in connection with the filings, recordings and registrations
contemplated by this Agreement or any other Exhibit; and (e) 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 Securities or of any amendment of, or waiver or consent
under or with respect to, this Agreement, any of the Securities or any other
Exhibit and save each Purchaser of the Securities harmless against each
Purchaser any loss or liability resulting from nonpayment or delay in payment of
any such tax.
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of the
Company herein or of (or on behalf of) the Company in any Exhibit or 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 or its behalf, and (b) survive the execution and delivery of this
Agreement and the execution and delivery of the Securities to each Purchaser and
any investigation made at any time by him or it or on his or its behalf or any
disposition of any of the Securities, until the expiration of any applicable
statute of limitations.
Page 38 of 86 Pages
- 15 -
<PAGE>
<PAGE>
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of this
Agreement 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 Purchasers.
6.4 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.
6.5 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 assigns.
6.6 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 &
Jaworski 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
Purchaser of Securities, or (b) if to the Purchasers, at the address of each
Purchaser as set forth in Schedule 1.1 or at such other address as such
Purchaser may hereafter designate by notice to the Company.
6.7 LAW GOVERNING.
THIS AGREEMENT 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.
Page 39 of 86 Pages
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<PAGE>
<PAGE>
6.8 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 AGREEMENT OR
ANY 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
Purchasers and any 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
CT 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.
Page 40 of 86 Pages
- 17 -
<PAGE>
<PAGE>
6.9 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.
6.10 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.
6.11 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 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.
6.12 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 the Managing Member and each partner of the Managing Member and
the employees and agents thereof (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, 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 Securities, or (b) the execution,
delivery, performance or enforcement of this Agreement or any Exhibit, or the
consummation of any of the transactions contemplated hereby or thereby or (c)
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 4.4 or any liability of the
Company arising pursuant to Environmental Laws. 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
Page 41 of 86 Pages
- 18 -
<PAGE>
<PAGE>
Indemnified Liabilities which is permissible under applicable law. The
provisions of, and obligations of the Company under, this Section 6.13 shall
survive the execution and delivery of this Agreement, the enforcement of any
provision hereof, 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; 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.
6.13 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.
6.14 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.
6.15 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.
6.16 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 Securities 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 Securities 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.
Page 42 of 86 Pages
- 19 -
<PAGE>
<PAGE>
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
PURCHASERS:
WHITE OWL INVESTORS, L.L.C.
By: White Owl Capital Partners, Managing Member
By: /s/ WILLIAM R. ZIEGLER
____________________________________________
Name: William R. Ziegler
Title: Partner
SOMERSET CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
____________________________________________
Name: William R. Ziegler
Title: Partner
WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
____________________________________________
Name: William R. Ziegler
Title: Partner
Page 43 of 86 Pages
- 20 -
<PAGE>
<PAGE>
/s/ ARVIND SANGER
_______________________________________________
Arvind Sanger, Individually
/s/ ANTONY T.F. LUNDY
_______________________________________________
Antony T. F. Lundy, Individually
/s/ KARL BANDTEL
_______________________________________________
Karl Bandtel, Individually
Page 44 of 86 Pages
- 21 -
<PAGE>
<PAGE>
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.
"Bridge Loan Securities Purchase Agreement" means that certain
Securities Purchase Agreement dated as of October 15, 1997, between the Company
and the Holders.
"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.
"Cash Payment" has the meaning set forth in Section 1.2.
"Closing" has the meaning set forth in Section 1.4.
"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
2.12(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,
Page 45 of 86 Pages
- 22 -
<PAGE>
<PAGE>
"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.
"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 the consolidated balance sheet of
the Company and the Subsidiaries as of August 31, 1997, and the consolidated
statement of operations and cash flows for the year ended August 31, 1997,
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 a holder of Senior Notes.
"Holders' Purchase Price" has the meaning set forth in Section
1.3.
"Indemnified Liabilities" has the meaning set forth in Section
6.12.
"Indemnitees" has the meaning set forth in Section 6.12.
"Majority-in-Interest" means the Holders of more than 50% of the
Common Stock purchased hereunder.
"Managing Member" means White Owl Capital Partners, a Texas
general partnership and the managing member of White Owl.
"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.
"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
Page 46 of 86 Pages
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<PAGE>
<PAGE>
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.
"Offering Disclosure Documents" means (i) the Annual Report on
Form 10-K of the Company for the fiscal year ended August 31, 1997, as filed
with the Commission, (ii) the Financial Statements and (iii) the White Owl PPM,
but only to the extent of the information provided or supplied to White Owl or
its counsel by or on behalf of the Company.
"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 "B" 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 1.1 with respect
to that number of Securities set forth opposite his or its name and a person who
executes and delivers a counterpart signature page to this Agreement, and
Purchasers means two or more Purchasers.
"Registration Rights Joinder Agreement" means that certain
registration rights joinder agreement to be entered into between the Company and
the Purchasers in the form of Exhibit "A" hereto.
"Securities" has the meaning set forth in Section 1.4.
"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 Notes" means those certain Senior Convertible Promissory
Notes of the Company, in the aggregate principal amount of $2,500,000, executed
and delivered pursuant to the Bridge Loan Securities Purchase Agreement.
"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, in the absence of contingencies, entitles
the holder to elect corporate directors or persons performing
Page 47 of 86 Pages
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<PAGE>
<PAGE>
similar functions. For purposes of the covenants contained in Article IV hereof,
Subsidiary generally includes any corporation or other legal entity in which the
Company or any other Subsidiary of the Company hereafter acquires 50% or more of
the voting stock, and specifically includes Signature.
"White Owl PPM" means that certain Confidential Private Placement
Memorandum of White Owl dated December 23, 1997
"The New Purchasers Purchase Price" has the meaning set forth in
Section 1.2.
Page 48 of 86 Pages
- 25 -
<PAGE>
<PAGE>
SCHEDULE 1.1
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No.
and Tax Identification No. No. of Shares
of Purchaser Common Stock Price
- -------------------------- ------------- -----
<S> <C> <C>
White Owl Capital Partners 3,040,000 $1,900,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Arvind Sanger 400,000 $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 400,000 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-7976
SSN:
Karl Bandtel 160,000 $100,000
c/o Wellington Management Co., LLP
75 State Street, 18th Floor
Boston, MA 02109
Fax: (617) 428-3649
SSN:
White Owl Investors, L.L.C. 10,000,000 $10,000,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
</TABLE>
Page 49 of 86 Pages
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Somerset Capital Partners 1,000,000 $1,000,000
254 Franklin Street
Buffalo, NY 14202
Fax: (716) 842-2514
TIN:
TOTAL: 15,000,000 $13,500,000
</TABLE>
Page 50 of 86 Pages
<PAGE>
<PAGE>
EXHIBIT VII
JOINDER AGREEMENT
This Joinder Agreement dated as January 12, 1998, is being entered into
with respect to the Registration Rights Agreement dated as of October 15, 1997
(as modified and supplemented and in effect from time to time, the "Registration
Rights Agreement") among Ponder Industries, Inc., a Delaware corporation (the
"Company"), and each of the Purchasers party thereto (the "Purchasers"). Terms
used but not defined herein have the respective meanings given to such terms in
the Registration Rights Agreement.
This Joinder Agreement is being entered into in connection with a
Securities Purchase and Exchange Agreement (the "Purchase Agreement") dated
January 12, 1998, between the Company, the Purchasers, Somerset Capital
Partners, a New York general partnership, and White Owl Investors, L.L.C., a
Delaware limited liability company (the "Additional Purchasers"), providing for
the issuance by the Company to the Purchasers and the Additional Purchaser of an
aggregate of 15,000,000 shares of Common Stock, par value $.01 per share, of the
Company, upon the terms and subject to the conditions set forth therein. It is a
condition precedent to the obligations of the Purchasers and the Additional
Purchasers to consummate the transactions contemplated by the Purchase Agreement
that the Company, the Purchasers and the Additional Purchasers enter into this
Agreement.
The Additional Purchasers have on the date hereof purchased 11,000,000
shares of Common Stock of the Company. The Additional Purchasers wish to be made
a party to the Registration Rights Agreement, and to be entitled to the benefits
of and be bound by the terms and conditions of the Registration Rights Agreement
as "Purchasers" thereunder, and the Company and the other Purchasers are willing
to admit the Additional Purchasers as parties to the Registration Rights
Agreement. Accordingly, the undersigned hereby agree that, upon the execution
and delivery of this Joinder Agreement:
1. a counterpart of this Joinder Agreement may be attached to any
counterpart of the Registration Rights Agreement;
2. the Additional Purchasers shall become Purchaser (as such term
is used in the Registration Rights Agreement) parties to the
Registration Rights Agreement (with all of the rights and obligations of
Purchasers thereunder) as if such Additional Purchasers were signatories
thereto;
3. for the purposes of Section 6 of the Registration Rights
Agreement, the addresses for notices of the Additional Purchasers are as
set forth in the Purchase Agreement;
4. Clause (i) of the definition of "Registrable Securities" set
forth in the Registration Rights Agreement is hereby amended to include
any shares of Common Stock issued pursuant to the Purchase Agreement;
Page 51 of 86 Pages
<PAGE>
<PAGE>
5. this Joinder Agreement shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the undersigned have caused this Joinder
Agreement to be duly executed as of the day and year 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
SOMERSET CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
_____________________________________
William R. Ziegler, General Partner
WHITE OWL INVESTORS, L.L.C., by White
Owl Capital Partners, its Managing Member
By: /s/ WILLIAM R. ZIEGLER
_____________________________________
William R. Ziegler, General Partner
Page 52 of 86 Pages
-2-
<PAGE>
<PAGE>
EXHIBIT VIII
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
WHITE OWL INVESTORS, L.L.C.
Dated as of January 13, 1998
================================================================================
Page 53 of 86 Pages
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
THE COMPANY AND ITS BUSINESS
2.1 Formation.....................................................................4
2.2 Certificate of Formation......................................................4
2.3 Name..........................................................................4
2.4 Place of Business.............................................................4
2.5 Registered Office and Agent...................................................4
2.6 Purposes......................................................................4
2.7 Title to Property.............................................................5
2.8 Duration......................................................................5
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Member's Capital..............................................................5
3.2 Limitations on Member's Liability and Return of Capital.......................5
3.3 Capital Accounts..............................................................5
3.4 Member Loans..................................................................6
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Allocation of Net Profits and Net Loss of the Company.........................6
4.2 Residual Allocations..........................................................7
4.3 Qualified Income Offset.......................................................7
4.4 Minimum Gain Chargeback.......................................................7
4.5 Special Allocations...........................................................7
4.6 Fees to Members or Affiliates.................................................7
4.7 Section 704(c) Allocation.....................................................8
4.8 Distribution in Kind..........................................................8
</TABLE>
i Page 54 of 86 Pages
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash Flow..........................................8
5.2 Estimated Taxes and Withholding...............................................9
ARTICLE VI
CONTROL AND MANAGEMENT
6.1 Management of the Company.....................................................9
6.2 Authority and Responsibility of the Managers..................................9
6.3 Limitations on Authority of Managers. ......................................11
6.4 Participation by Members. ..................................................11
6.5 Other Activities of Managers or Members......................................12
6.6 Fees and Expenses; Compensation of Managers..................................12
6.7 Liability for Acts and Omissions; Indemnification............................12
6.8 Number, Tenure and Qualifications of Managers................................13
6.9 Resignation of Managers......................................................13
6.10 Removal of a Manager.........................................................13
6.11 Vacancies of Managers........................................................14
6.12 Place of Managers' Meetings..................................................14
6.13 Special Meetings of Managers.................................................14
6.14 Notice of Adjournment........................................................14
6.15 Waiver of Notice.............................................................14
6.16 Action by Managers; Quorum; Voting; Action Without a Meeting.................15
6.17 Meetings by Telephone........................................................15
6.18 Adjournment..................................................................15
6.19 Committees of the Managers...................................................15
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings.....................................................................15
7.2 Place of Meetings............................................................16
7.3 Notice of Meetings...........................................................16
7.4 Record Date..................................................................16
7.5 Quorum.......................................................................16
7.6 Manner of Acting.............................................................16
7.7 Proxies......................................................................16
7.8 Action by Members Without a Meeting..........................................17
7.9 Waiver of Notice.............................................................18
7.10 Voting Agreements............................................................18
</TABLE>
ii Page 55 of 86 Pages
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE VIII
TRANSFERS OF COMPANY INTERESTS
8.1 Investment Representation....................................................18
8.2 Assignment by Members........................................................18
8.3 Void Transfers; Effective Date...............................................19
ARTICLE IX
ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS
9.1 Books and Records............................................................19
9.2 Reports......................................................................20
9.3 Tax Returns..................................................................20
9.4 Section 754 Election.........................................................20
9.5 Tax Matters Partner..........................................................20
9.6 Withholding..................................................................20
9.7 Bank Accounts................................................................21
ARTICLE X
DISSOLUTION AND TERMINATION
10.1 Withdrawal...................................................................21
10.2 Dissolution..................................................................21
10.3 Distribution Upon Liquidation of the Company.................................22
10.4 Capital Account Deficits.....................................................22
10.5 Certificate of Cancellation..................................................23
ARTICLE XI
AMENDMENTS
11.1 Amendments Adopted Solely by the Managers. .................................23
11.2 Amendments to be Adopted by Managers and Members.............................23
ARTICLE XII
VALUATION OF SECURITIES OF PONDER
12.1 Normal Valuation.............................................................24
12.2 Legal Restrictions on Transfer...............................................24
12.3 Objection to Valuation.......................................................24
ARTICLE XIII
MISCELLANEOUS
13.1 Notices......................................................................24
13.2 Successors and Assigns.......................................................25
</TABLE>
iii Page 56 of 86 Pages
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
13.3 No Oral Modifications; Amendments............................................25
13.4 Captions.....................................................................25
13.5 Terms........................................................................25
13.6 Invalidity...................................................................25
13.7 Further Assurances...........................................................25
13.8 Complete Agreement...........................................................25
13.9 Attorneys' Fees..............................................................25
13.10 Governing Law................................................................26
13.11 No Third Party Beneficiary...................................................26
13.12 Exhibits and Schedules.......................................................26
13.13 References to this Agreement.................................................26
13.14 Power of Attorney............................................................26
13.15 Reliance on Authority of Person Signing Agreement............................27
13.16 Consents and Approvals.......................................................27
13.17 Ponder Common Stock..........................................................28
</TABLE>
Schedule A Members
iv Page 57 of 86 Pages
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LIMITED LIABILITY COMPANY AGREEMENT
OF
WHITE OWL INVESTORS, L.L.C.
------------------------------------
This Limited Liability Company Agreement of White Owl Investors,
L.L.C. (the "Company"), dated as of January 13, 1998, is made and entered into
by and among White Owl Capital Partners, a general partnership, as a Member and
the sole initial Manager (the "Managing Member"), and the other Persons listed
on Schedule A hereto, as Members (the "Investor Members"),
W I T N E S S E T H :
In consideration of the mutual agreements made herein, the
Members hereby agree to constitute a limited liability company pursuant to the
Act as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall have the
respective meanings specified in this Article I:
"Accountants" means any firm of independent certified public
accountants as shall be engaged by the Company.
"Act" means the Delaware Limited Liability Company Act, as
amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to contribute to the
Company pursuant to Treasury Regulations Sections 1.704-2(g) (1) and 1.704-2(i)
(5); and
(ii) reduce such Capital Account by the amount of the items
described in Treasury Regulation Section 1.704-1(b) (2) (ii) (d) (4), (5) and
(6).
"Adjusted Invested Capital" (with respect to each Member) means,
at any time, the sum of all Capital Contributions made by such Member pursuant
to Article III less distributions previously made to that Member pursuant to
Section 5.1 (ii).
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"Affiliate" means, when used with reference to a specified
Person, (i) any Person directly or indirectly controlling, controlled by or
under common control with such Person, (ii) any Person owning or controlling 10%
or more of the outstanding voting interests of such Person, and (iii) any
relative or spouse of such Person.
"Agreement" means this Limited Liability Company Agreement, as
originally executed and as amended from time to time, as the context requires.
"Available Cash Flow" means, with respect to any Fiscal Year or
other period, the sum of all cash receipts of the Company from any and all
sources, less all cash disbursements (including loan repayments, capital
improvements and replacements) and a reasonable allowance for reserves,
contingencies and anticipated obligations as determined by the Managers.
"Bankruptcy" means, with respect to a Person, the occurrence of
any of the following events: (a) the filing by that Person of a petition
commencing a voluntary case in bankruptcy under applicable bankruptcy laws; (b)
entry against that Person of an order for relief under applicable bankruptcy
laws; (c) written admission by that Person of its inability to pay its debts as
they mature, or an assignment by that Person for the benefit of creditors; or
(d) appointment of a receiver for the property or affairs of that Person.
"Capital Account" means, with respect to each Member, an account
determined in accordance with the provisions of Section 3.4 of this Agreement.
"Capital Contribution" means, with respect to each Member, the
total amount of money and fair market value of any property contributed to the
Company by such Member.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Company" means the limited liability company formed under this
Agreement.
"Company Minimum Gain" means the amount determined by computing
with respect to each nonrecourse liability of the Company, the amount of gain
(of whatever character), if any, that would be realized by the Company if it
disposed (in a taxable transaction) of the Company's property subject to such
liability in full satisfaction thereof, and by then aggregating the amounts so
computed as set forth in Treasury Regulation Section 1.704-2(d).
"Fiscal Year" means the fiscal year of the Company as determined
the Managers. As used in this Agreement, a Fiscal Year shall include any partial
Fiscal Year at the beginning and end of the Company term.
"Interest" means a Member's percentage interest in the Company.
"Investor Member" means a Person who or which is listed in
Schedule A hereto and executes a counterpart of this Agreement as an Investor
Member and each Person who or which may hereafter become a party to this
Agreement as a substitute Investor Member.
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"Majority-in-Interest of the Members" means such of the Members
whose Interests equal (at the time of determination) more than 50% of the total
Interests of all Members.
"Managers" means the Managing Member or any other Persons who or
which succeed the Managing Member or are added as Managers pursuant to this
Agreement.
"Member" means the Managing Member and each Person who or which
is listed in Schedule A hereto and executes a counterpart of this Agreement as
an Investor Member and each Person who or which may hereafter become a party to
this Agreement as a substitute Member.
"Net Profits" and "Net Loss" shall mean, for each Fiscal Year or
other period, an amount equal to the Company's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from Federal income
tax and not otherwise taken into account in computing Net Profits or Net Loss
shall be added to such taxable income or loss; and
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Net Profits or Net Loss shall be subtracted from such
taxable income or loss.
"Person" means an individual, trust, estate, tax-exempt entity,
partnership, joint venture, association, company, corporation, limited liability
company, government or agency thereof, or other entity.
"Ponder" means Ponder Industries, Inc., a Delaware corporation,
or any successor thereto.
"Prime Rate" means the base rate of interest announced from time
to time by Chase Bank, New York, N.Y.
"Priority Return" means, with respect to a Member, an amount
equivalent to the Priority Return Rate, cumulative but not compounded (pro rated
for any partial year), of the amount of the Adjusted Invested Capital of such
Member from time to time, calculated from time to time during the period to
which the Priority Return relates, commencing on the date the Member is admitted
to the Company.
"Priority Return Rate" means six percent (6%) per annum for the
first one-year period to which the Priority Return Relates; nine percent (9%)
for the second one-year period;
-3- Page 60 of 86 Pages
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twelve percent (12%) for the third one-year period; fifteen percent (15%) for
the fourth one-year period; and eighteen percent (18%) for the fifth one-year
period.
"Treasury Regulations" means all proposed, temporary and final
regulations promulgated under the Code, as such regulations may be amended from
time to time.
"Two-Thirds-in-Interest of the Members" means such of the Members
whose Interests equal (at the time of determination) more than 66 2/3% of the
total Interests of all Members.
ARTICLE II
THE COMPANY AND ITS BUSINESS
2.1 Formation. The Members hereby form a limited liability
company under and pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement.
2.2 Certificate of Formation. A Certificate of Formation has been
filed in the office of the Delaware Secretary of State in accordance with the
provisions of the Act. The Managers shall take any and all other actions
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company under the Act.
2.3 Name. The name of the Company shall be White Owl Investors,
L.L.C., and all business of the Company shall be conducted in such name.
2.4 Place of Business. The office of the Company shall be located
at such place within or without the State of Delaware as may be determined by
the Managers.
2.5 Registered Office and Agent. The registered office of the
Company in the State of Delaware shall be at 1013 Centre Road, Wilmington,
Delaware 19805-1297. The registered agent of the Company for service of process
at the address shall be Corporation Service Company. The Company may, upon
compliance with the Act, change the location of its registered office in the
State of Delaware or its registered agent for service of process in the State of
Delaware as the Managers deem appropriate.
2.6 Purposes. The purposes of the Company shall be (i) to invest
in Ponder, an oilfield service and tool rental company, which investment is more
fully described in the Private Placement Memorandum of the Company dated
December 23, 1997, as the same may hereafter be amended, pursuant to which the
membership interests in the Company were offered, and (ii) to enter into any
lawful transaction and engage in any lawful activities in furtherance of or
incidental to the foregoing purposes. The Company shall not engage in any other
activity except as set forth above.
-4- Page 61 of 86 Pages
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2.7 Title to Property. All real and personal property owned by
the Company shall be owned by the Company as an entity and, insofar as permitted
by applicable law, no Member shall have any ownership interest in such property
in its individual name or right and each Member's Interest shall be personal
property for all purposes.
2.8 Duration. The Company shall commence as of the date the
Certificate of Formation for the Company is filed in the office of the Delaware
Secretary of State and shall continue for a period of five (5) years thereafter,
unless sooner dissolved or terminated pursuant to statute or any provision of
this Agreement.
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Member's Capital. Prior to or upon the execution of this
Agreement, each of the Members shall contribute to the capital of the Company
the sum designated opposite his or its name under the heading "Capital
Contribution" on Schedule A.
3.2 Limitations on Member's Liability and Return of Capital.
Subject to compliance with the other terms of this Agreement, the personal
liability of each Member (in his capacity as a Member) arising out of or in any
manner relating to the Company and its activities and obligations shall be
limited to and shall not exceed the Member's Capital Contributions, except as
provided by the Act. A Member shall not (i) be obligated to lend or advance
funds to the Company for any purpose except as expressly provided in this
Agreement, (ii) be liable for the obligations of any other Member, (iii) be
entitled to the return of his or its Capital Contribution at any fixed time or
upon demand, or (iv) receive any interest on capital.
3.3 Capital Accounts. The Company shall maintain for each Member
a separate Capital Account in accordance with the rules of Treasury Regulations
Section 1.704-1(b). Such Capital Account shall be increased by (i) such Member's
cash contributions, (ii) the agreed fair market value of property contributed by
such Member (net of liabilities secured by such contributed property that the
Company is considered to assume or take subject to under Code Section 752), and
(iii) all items of Company income and gain (including income and gain exempt
from tax) allocated to such Member pursuant to Article IV or other provisions of
this Agreement and decreased by (i) the amount of cash distributed to such
Member, (ii) the agreed fair market value of all actual and deemed distributions
of property made to such Member pursuant to this Agreement (net of liabilities
secured by such distributed property that the Member is considered to assume or
take subject to under Code Section 752), and (iii) all items of Company
deduction and loss allocated to such Member pursuant to Article IV or other
provisions of this Agreement.
-5- Page 62 of 86 Pages
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In the event any Member transfers any Interest in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred Interest.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations and any amendment or
successor provision thereto.
3.4 Member Loans. In the event that additional funds (in excess
of the Members' agreed Capital Contributions) are required by the Company for
any purpose relating to the business of the Company or for any of its
obligations, expenses, costs, or expenditures, including operating deficits, the
Company may borrow such funds as are needed from any Member or other Person for
such period of time and on such reasonable business terms as the Managers and
the lender may agree and at the rate of interest then prevailing for comparable
loans, or if such loan is from a Member or Affiliate, at an interest rate equal
to the rate at which the lending Member or Affiliate has borrowed such funds,
provided that such rate charged by a Member or Affiliate may not exceed the
Prime Rate plus four percent (4%) per annum. Any security interest in the
property of the Company which is given to any Member or Affiliate shall be
subordinate to any security interest in Company property given by the Company to
any lender who is not a Member or Affiliate of a Member. Loans made under this
Section may be repaid out of Available Cash Flow, but any amount of any such
loan that is outstanding at the time of the occurrence of any of the events
described in Article X shall be repaid as provided in Article X.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Allocation of Net Profits and Net Loss of the Company. Except
as otherwise provided in this Article IV, Net Profits and Net Loss of the
Company in each Fiscal Year shall be allocated among the Members as follows:
(a) Net Profits. Net Profits shall be allocated among the Members
as follows:
(i) first, to each of the Members until the cumulative Net
Profits allocated to such Member pursuant to this Section 4.1(a) is equal to the
cumulative Net Loss previously allocated to the Member pursuant to Section
4.1(b);
(ii) second, to the Members until the cumulative Net
Profits allocated to the Members pursuant to this Section 4.1(a)(ii) is equal to
the sum of (A) fifty percent (50%) of such Member's Capital Contribution plus
(B) one hundred percent (100%) of the accrued amount of the Members' Priority
Return; and
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(iii) thereafter, (A) 25% to the Managing Member and (B)
75% to the Members (including the Investor Members and the Managing Member), in
proportion to their Capital Contributions.
(b) Allocation of Net Loss. Except as otherwise provided in this
Article, Net Loss shall be allocated among the Members as follows:
(i) first, in proportion to the positive balances, if any,
in the Members' respective Capital Accounts, until such balances are reduced to
zero; and
(ii) thereafter, to the Members, in proportion to their
Capital Contributions.
4.2 Residual Allocations. Except as otherwise provided in this
Agreement, all items of Company income, gain, loss, deduction, and any other
allocations not otherwise provided for shall be divided among the Members in the
same proportions as they share Net Profits or Net Losses, as the case may be,
for the Fiscal Year.
4.3 Qualified Income Offset. If any Member unexpectedly receives
any adjustments, allocation or distributions described in clauses (4), (5) or
(6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of Company
income shall be specially allocated to such Member in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions as quickly as possible. This Section
4.3 is intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
4.4 Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain during a Fiscal Year, each Member will be allocated, before
any other allocation under this Article IV, items of income and gain for such
Fiscal Year (and if necessary, subsequent years) in proportion to and to the
extent of an amount equal to such Member's share of the net decrease in Company
Minimum Gain determined in accordance with Treasury Regulations Section
l.704-2(g)(2). This Section 4.4 is intended to comply with, and shall be
interpreted consistently with, the "minimum gain chargeback" provisions of
Treasury Regulations Section l.704-2(f).
4.5 Special Allocations. Any special allocations of items of Net
Profits pursuant to Sections 4.3 and 4.4 shall be taken into account in
computing subsequent allocations of Net Profits pursuant to Section 4.l, so that
the net amount of any items so allocated and the gain, loss and any other item
allocated to each Member pursuant to Section 4.l shall, to the extent possible,
be equal to the net amount that would have been allocated to each such Member
pursuant to the provisions of this Article if such special allocations had not
occurred.
4.6 Fees to Members or Affiliates. Notwithstanding the provisions
of Section 4.l, in the event that any fees, interest, or other amounts paid to
any Member or any Affiliate thereof pursuant to this Agreement or any other
agreement between the Company and any
-7- Page 64 of 86 Pages
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Member or Affiliate thereof providing for the payment of such amount, and
deducted by the Company in reliance on Section 707(a) and/or 707(c) of the Code,
are disallowed as deductions to the Company on its federal income tax return and
are treated as Company distributions, then
(i) the Net Profits or Net Loss, as the case may be, for the
Fiscal Year in which such fees, interest, or other amounts were paid shall be
increased or decreased, as the case may be, by the amount of such fees,
interest, or other amounts that are treated as Company distributions; and
(ii) there shall be allocated to the Member to which (or to whose
Affiliate) such fees, interest, or other amounts were paid, prior to the
allocations pursuant to Section 4.l, an amount of gross income for the Fiscal
Year equal to the amount of such fees, interest, or other amounts that are
treated as Company distributions.
4.7 Section 704(c) Allocation. Any item of income, gain, loss,
and deduction with respect to any property (other than cash) that has been
contributed by a Member to the capital of the Company and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
4.8 Distribution in Kind. If assets of the Company are
distributed in kind, Net Profits and Net Losses shall be allocated as if such
assets had been sold for their fair market value on the date of distribution.
For purposes of this allocation, the fair market value of any securities of
Ponder shall be determined as provided in Article XII hereof and the fair market
value of any other assets shall be determined by the Managers, in their sole and
absolute discretion.
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash Flow. Available Cash Flow
shall be distributed as soon as practicable, and securities of Ponder may be
distributed from time to time, to and among the Members as follows:
(i) first, to each of the Members to the extent of its
accrued Priority Return, reduced by any prior distributions made under this
Section 5.1(i);
(ii) second, to each of the Members to the extent of its
Adjusted Invested Capital;
-8- Page 65 of 86 Pages
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(iii) third, and to each of the Members to the extent of
fifty percent (50%) its Capital Contribution; and
(iv) thereafter, (A) 25% to the Managing Member and (B)
75% to the Members (including the Investor Members and the Managing Member), in
proportion to their Capital Contributions.
For the purposes hereof, securities of Ponder distributed to the Members shall
be valued in accordance with Article XII hereof.
5.2 Estimated Taxes and Withholding Notwithstanding the
provisions of Section 5.1, distributions of Available Cash Flow with respect to
any Fiscal Year or other applicable period shall be made on a quarterly basis,
based on estimated results of operations through any applicable quarter, to all
Members to pay any required quarterly estimated federal and state income taxes
with respect to any profits of the Company attributable to such Fiscal Year or
other applicable period, assuming that all Members are subject to the highest
marginal federal and New York income tax rates. Distributions on account of
estimated income taxes shall be made at least ten (10) days prior to the due
date of any quarterly estimated tax payment. Any amounts withheld by the Company
with respect to any profits allocated to any Member as required under the Code
or any provision of applicable state and local income tax law shall be treated
as amounts distributed to the Members pursuant to this Article V. To the extent
any distributions under this Section 5.2 exceed the amounts distributable to the
Members under Section 5.1, any such excess shall be deemed to be an interest
free advance to the Members receiving such excess distributions, payable to the
Company from subsequent distributions as made. The foregoing distributions with
respect to federal and state income taxes shall be made even if as of the
applicable period the Company does not have sufficient Available Cash Flow to
cover such distributions.
ARTICLE VI
CONTROL AND MANAGEMENT
6.1 Management of the Company. The overall management and control
of the business and affairs of the Company shall be vested solely in the
Managers, who shall be responsible for the management of the Company's business.
6.2 Authority and Responsibility of the Managers.
(a) Except as expressly provided in this Agreement, all decisions
respecting any matter set forth in this Agreement or otherwise affecting or
arising out of the conduct of the business of the Company shall be made by the
Managers, and the Managers shall have the exclusive right and full authority to
manage, conduct and operate the Company's business. Specifically, but not by way
of limitation, the Managers shall be authorized and responsible,
-9- Page 66 of 86 Pages
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subject to the limitations elsewhere set forth in this Agreement, in the name
and on behalf of the Company:
(i) to borrow and lend money and, as security therefor, to
mortgage, pledge or otherwise encumber the assets of the Company;
(ii) to cause to be paid on or before the due date thereof
all amounts due and payable by the Company to any Person, including, without
limitation, to Affiliates of the Managers to the extent permitted under this
Agreement;
(iii) to employ such agents, employees, managers,
accountants, attorneys, consultants and other Persons, (including, without
limitation, itself and its Affiliates to the extent permitted under this
Agreement) necessary or appropriate to carry out the business and affairs of the
Company, and to pay such fees, expenses, salaries, wages and other compensation
to such Persons as it shall, in its sole discretion, determine;
(iv) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon such terms as it may
determine and upon such evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim, including taxes, either in favor of
or against the Company;
(v) to pay any and all fees and to make any and all
expenditures which it, in its sole discretion, deems necessary or appropriate in
connection with the organization of the Company, the management of the affairs
of the Company, and the carrying out of its obligations and responsibilities
under this Agreement;
(vi) to cause to be paid any and all taxes, charges and
assessments that may be levied, assessed or imposed upon any of the assets of
the Company;
(vii) to cause all payments and other income which become
due with respect to the Company's investments to be collected;
(viii) to sign checks and make proper disbursements of
Company funds and to issue receipts for and on behalf of the Company;
(ix) to sell or refinance all or any portion of the
Company's investments;
(x) to enter into the agreements and engage in
transactions with entities and persons with which or whom the Managers are, is
or may be affiliated or with other Persons;
(xi) to make all elections required or permitted to be
made by the Company under the Code, except as provided in Section 9.4; and
-10- Page 67 of 86 Pages
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(xii) to assume and exercise all rights, powers, and
responsibilities granted to Managers by the Act and, subject to the limitations
set forth in this Agreement, to do any and all acts and things which shall be in
furtherance of the Company's business as set forth in this Agreement.
(b) With respect to all of its rights, powers and
responsibilities under this Agreement, the Managers are authorized to execute
and deliver, in the name and on behalf of the Company, such notes and other
evidence of indebtedness, contracts, assignments, deeds, leases, loan
agreements, mortgages and other security instruments as it deems proper, all on
such terms and conditions as they deem proper.
6.3 Limitations on Authority of Managers. Notwithstanding
anything to the contrary contained in this Agreement, the Managers shall not
have the authority,
(a) Without the approval of all the Members:
(i) to do any willful act in contravention of this
Agreement;
(ii) to confess a judgment in a material amount against
the Company;
(iii) to convert property of the Company to its own use,
or assign any rights in specific property of the Company for other than a
purpose of the Company;
(iv) to perform any act that would subject the Members
to liability other than as members of a limited liability company in any
jurisdiction;
(v) to pay for any services performed by the Managers
or an Affiliate thereof, except as otherwise permitted in this Agreement;
(vi) to execute or deliver any general assignment for
the benefit of the creditors of the Company; or
(vii) to make any loan to a Manager or its Affiliates; or
(b) without the vote or written consent of a
Majority-in-Interest of the Members:
(i) to admit additional or substitute Members, except
as permitted hereunder; or
(ii) to admit any new Managers, except as permitted
hereunder.
6.4 Participation by Members. No Investor Member shall
participate in or interfere with the management of the Company or the operation
of its business. The exercise by an Investor Member of any of his rights or
powers granted in this Agreement shall not be deemed
-11- Page 68 of 86 Pages
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taking part in control of the business of the Company and shall not constitute a
violation of this Section 6.4. No Investor Member shall have any power or
authority to sign for or to bind the Company in any manner or for any purpose
whatsoever. No Investor Member shall have priority over any other Member with
respect to any rights or duties contained in this Agreement, unless expressly
provided for in this Agreement.
6.5 Other Activities of Managers or Members.
(a) The Managers shall not be required to devote their full time
and effort to the affairs of the Company, but shall devote such time and effort
as may reasonably be required to adequately promote the Company's interests.
(b) The parties hereto expressly agree that any Manager or Member
may at any time engage in and possess interests in other business ventures of
any and every nature and description, independently or with others, including,
but not limited to, engaging in activities which parallel or compete with the
business of the Company, and neither the Company nor any Member shall by virtue
of this Agreement have any right, title or interest in or to such independent
activities or to the income or profits derived therefrom.
6.6 Fees and Expenses; Compensation of Managers.
(a) Except as specifically provided in this Agreement, no fees
shall be paid to any Member or Manager by the Company. However, the Managers
(and/or any Affiliate of the Managers, as the case may be) shall be entitled to
receive fees or other compensation from Ponder for services that it may render
to Ponder, and reimbursement for all reasonable out-of-pocket costs and expenses
incurred on behalf of the Company.
(b) Nothing in this Agreement shall be deemed to limit or
restrict the rights of the Managers or any of their Affiliates to contract for
and receive separate fees and benefits, directly or indirectly, as a result of
their interests in any Person which supplies goods or services to, or otherwise
transacts business with the Company or Ponder; provided, however, that the
material terms of any such transaction with the Company shall be (i) disclosed
to each Member or a predecessor in interest in writing at or prior to his or its
admission to the Company, or (ii) approved by a Majority-in-Interest of the
Members, or (iii) not materially less favorable to the Company than those which
would be obtainable from an unrelated party in an arm's-length transaction.
6.7 Liability for Acts and Omissions; Indemnification. The
Managers shall not be liable, responsible, or accountable in damages or
otherwise to any of the Members for, and the Company shall indemnify and save
harmless the Managers from, any loss or damage incurred by any of them by reason
of an act or omission performed or omitted by any of them in good faith on
behalf of the Company and in a manner reasonably believed by any of them to be
within the scope of the authority granted to them by this Agreement and in the
best interests of the Company, except for willful misconduct.
-12- Page 69 of 86 Pages
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6.8 Number, Tenure and Qualifications of Managers. The number of
Managers of the Company may be amended from time to time by the vote or written
consent of at least Two-Thirds-in-Interest of the all Members. Each Manager
shall hold office until the next annual meeting of Members or until a successor
shall have been elected and qualified. Managers shall be elected by the vote or
written consent of at least a Majority-in-Interest of the Members and need not
be residents of the State of Delaware or Members of the Company. Notwithstanding
the foregoing, the Managing Member shall be the sole Manager of the Company
until it has resigned or been removed for cause as herein provided.
6.9 Resignation of Managers. Any Manager may resign at any time
by giving written notice to the Company. The resignation of any Manager shall
take effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of the
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal as a Member.
6.10 Removal of a Manager.
(a) The Members, at any time, upon the consent of
Two-Thirds-in-Interest of the Members, may remove a Manager for "cause." For
purposes hereof, "cause" means the occurrence of any one or more of the
following acts on the part of the Manager(s):
(1) willful and persistent inattention to the Manager's
duties hereunder;
(2) an act or acts amounting to gross negligence or
willful malfeasance to the material detriment of the Company; or
(3) a material breach of a Manager's obligations and
duties pursuant to this Agreement.
(b) To accomplish removal, the Members shall give notice to the
Manager, who shall have sixty (60) days from such notice to cure the reason or
reasons for such removal, and in the event of such cure he shall remain as a
Manager. If, at the end of sixty (60) days such Manager has not cured the reason
or reasons for such removal, upon a further notice from the Members, the powers
and authorities conferred on such Manager as a Manager under this Agreement
shall cease. If the Manager shall: (i) at or before the expiration of the 60-day
period notify the Members that in his reasonable opinion there is no cause for
such Manager's removal under the standards set forth in this Section 6.10 or
(ii) upon its receipt from the Members of the notice stating he is being
removed, notify the Members that in such Manager's reasonable opinion such
Manager has cured the reason for the proposed removal, then the question of
whether the Manager is to be removed shall be referred to an impartial
arbitrator mutually agreeable to the Manager and the Members, or, failing such
agreement within ten (10) business days, the parties shall apply within fifteen
(15) business days to the American Arbitration Association for appointment of an
independent arbitrator, who, in either case, shall have had no prior dealings
with any Manager or Member. The determination of the arbitrator shall be made
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within sixty (60) business days of the date upon which the arbitrator receives
the question and shall be final, conclusive and binding upon such Manager and
the Members. The costs of the arbitrator shall be borne equally by the Manager
and the Company.
(c) The removed Manager shall have no further right or obligation
to bind or manage the Company. Otherwise, the removal of the Manager shall not
affect any existing rights or obligations of such Manager with respect to the
Company, including such Manager's right to exoneration and indemnification under
Section 6.7 for acts or omissions prior to the date of such removal, or to such
Manager's interest, if any, as a Member in the Company's capital, distributions,
income, gains, losses and deductions.
6.11 Vacancies of Managers. Any vacancy occurring for any reason
in the number of Managers may be filled by the vote or written consent of at
least a majority of the remaining Managers then in office; provided, however,
that if there are no remaining Managers, each vacancy shall be filled by the
vote or written consent of at least a Majority-in-Interest of the Members. A
Manager elected to fill a vacancy shall be elected for the unexpired term of the
Manager's predecessor in office and shall hold office until the expiration of
such term and until the Manager's successor has been elected and qualified. A
Manager chosen to fill a position resulting from an increase in the number of
Managers shall hold office until the next annual meeting of Members and until a
successor has been elected and qualified.
6.12 Place of Managers' Meetings. Regular and special meetings of
the Managers shall be held at any place within or without the State of Delaware
which has been designated from time to time by resolution of the Managers. In
the absence of such designation, all meetings shall be held at the principal
office of the Company.
6.13 Special Meetings of Managers. Special meetings of the
Managers for any purpose or purposes shall be called at any time by any Manager.
Notice of such special meetings, unless waived by attendance thereat or by
written consent to the holding of the meeting, shall be given by written notice
mailed at least ten (10) days before the date of such meeting or be hand
delivered or sent by facsimile at least ten (10) days before the date such
meeting is to be held.
6.14 Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given to absent Managers if the time
and place be fixed at the meeting adjourned.
6.15 Waiver of Notice. The transactions approved or the actions
taken at any meeting of the Managers, however called and noticed or wherever
held, shall be as valid as though such transactions had been approved or such
other actions taken at a meeting duly held after regular call and notice, if (a)
a quorum be present, and (b) either before or after the meeting, each of the
Managers not present signs a written waiver of notice, or a consent to holding
such meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the Company records or made a part of the
minutes of the meeting.
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6.16 Action by Managers; Quorum; Voting; Action Without a
Meeting.
(a) A majority of the total number of Managers shall be necessary
to constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
Managers present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Company, unless a greater number be required by the
Act. The Managers present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough Managers to have less than a quorum.
(b) Each Manager shall have one vote. Any action which under any
provision of this Agreement may be taken at a meeting of the Managers may be
taken without a meeting if authorized by a writing signed by a majority of
Managers who would be entitled to vote upon such action at a meeting, unless the
Agreement requires such action to be taken by the unanimous vote of all of the
Managers, in which case such writing shall be signed by all of the Managers who
would be entitled to vote upon such action at a meeting, in each case filed with
the records of the Company.
6.17 Meetings by Telephone. Managers, or any committee designated
by the Managers, may participate in a meeting of the Managers by means of
conference telephone or similar communications equipment, by means of which all
persons participating in the meeting can hear one another, and such
participation in a meeting shall constitute presence in person at the meeting.
6.18 Adjournment. A majority of the Managers present may adjourn
any Managers' meeting to meet again at a stated day and hour or until the time
fixed for the next regular meeting of the Managers.
6.19 Committees of the Managers. The Managers, by resolution, may
designate from among the Managers one or more committees, each of which shall
comprise one or more of the Managers, and may designate one or more of the
Managers as alternate members of any committee, who may, subject to any
limitations imposed by the Managers, replace absent or disqualified Managers at
any meeting of that committee. Any such committee, to the extent provided in
such resolution, shall have and may exercise all of the authority of the
Managers, subject to the restrictions contained in the Act and hereunder.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings. Meetings of the Members, for any purpose or
purposes, may be called by any Manager or by any Member or Members holding not
less than twenty percent (20%) of the Members' Interests.
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7.2 Place of Meetings. Meetings of the Members may be held at any
place, within or outside the State of Delaware, for any meeting of the Members
designated in any notice of such meeting. If no such designation is made, the
place of any such meeting shall be the principal office of the Company.
7.3 Notice of Meetings. Written notice stating the place, day and
hour of the meeting indicating that it is being issued by or at the direction of
the person or persons calling the meeting, stating the purpose or purposes for
which the meeting is called shall be delivered no fewer than ten (10) nor more
than sixty (60) days before the date of the meeting.
7.4 Record Date. For the purpose of determining the Members
entitled to notice of or to vote at any meeting of Members or any adjournment of
such meeting, or Members entitled to receive payment of any distribution, or to
make a determination of Members for any other purpose, the date on which notice
of the meeting is mailed or the date on which the resolution declaring a
distribution is adopted, as the case may be, shall be the record date for making
such a determination. When a determination of Members entitled to vote at any
meeting of Members has been made pursuant to this Section, the determination
shall apply to any adjournment of the meeting.
7.5 Quorum. Members holding not less than a majority of all
Members' Interests, represented in person or by proxy, shall constitute a quorum
at any meeting of Members. In the absence of a quorum at any meeting of Members,
a majority of the Members' Interests so represented may adjourn the meeting from
time to time for a period not to exceed sixty (60) days without further notice.
However, if the adjournment is for more than sixty (60) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record entitled to vote
at such meeting. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
the meeting of Members' Interests whose absence results in less than a quorum
being present.
7.6 Manner of Acting. If a quorum is present at any meeting, the
vote or written consent of Members holding not less than a majority of Members'
Interests shall be the act of the Members, unless the vote of a greater or less
proportion or number is otherwise required by the Act or this Agreement.
7.7 Proxies.
(a) A Member may vote in person or by proxy executed in writing
by the Member or by a duly authorized attorney-in-fact.
(b) Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless
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otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Member executing it, except as otherwise provided in this Section.
(c) The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy
unless, before the authority is exercised, written notice of an adjudication of
such incompetence or of such death is received by any Manager.
(d) Except when other provision shall have been made by written
agreement between the parties, the record holder of a Member's Interest which he
or it holds as pledgee or otherwise as security or which belong to another,
shall issue to the pledgor or to such owner of such Member's Interest, upon
demand therefor and payment of necessary expenses thereof, a proxy to vote or
take other action thereon.
(e) A proxy which is entitled "irrevocable proxy" and which
states that it is irrevocable, is irrevocable when it is held by (i) a pledgee,
(ii) a Person who has purchased or agreed to purchase the Member's Interest,
(iii) a creditor or creditors of the corporation who extend or continue credit
to the corporation in consideration of the proxy if the proxy states that it was
given in consideration of such extension or continuation of credit, the amount
thereof, and the name of the person extending or continuing credit, (iv) a
Person who has contracted to perform services for the Company, if a proxy is
required by the contract of employment, if the proxy states that it was given in
consideration of such contract of employment, the name of the employee and the
period of employment contracted for, or (v) a nominee of any of the Persons
described in clauses (i)-(iv) of this sentence.
(f) Notwithstanding a provision in a proxy described in Section
7.7(e)(i), (iii) or (iv) stating that it is irrevocable, the proxy becomes
revocable after the pledge is redeemed, or the debt of the Company is paid, or
the period of employment provided for in the contract of employment has
terminated and, in a case provided for in Section 7.7(e)(iii) or (iv) of this
Agreement, becomes revocable three (3) years after the date of the proxy or at
the end of the period, if any, specified therein, whichever period is less,
unless the period of irrevocability is renewed from time to time by the
execution of a new irrevocable proxy as provided in this Section 7.7. This
paragraph does not affect the duration of a proxy under paragraph (b) of this
Section 7.7.
(g) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of a Member's Interest without knowledge of the
existence of such proxy.
7.8 Action by Members Without a Meeting.
(a) Whenever the Members of the Company are required or permitted
to take any action by vote, such action may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken shall be signed by the Members who hold the voting
interests having not less than the minimum number of votes that
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would be necessary to authorize or take such action at a meeting at which all of
the Members entitled to vote therein were present and voted and shall be
delivered to the office of the Company, its principal place of business or a
Manager, employee or agent of the Company.
(b) Every written consent shall bear the date of signature of
each Member who signs the consent, and no written consent shall be effective to
take the action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this Section to the
Company, written consents signed by a sufficient number of Members to take the
action are delivered to the office of the Company, its principal place of
business or a Manager, employee or agent of the Company having custody of the
records of the Company.
(c) Prompt notice of the taking of the action without a meeting
by less than unanimous written consent shall be given to each Member who has not
consented in writing but who would have been entitled to vote thereon had such
action been taken at a meeting.
7.9 Waiver of Notice. Notice of a meeting need not be given to
any Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him.
7.10 Voting Agreements. An agreement between two or more Members,
if in writing and signed by the parties thereto, may provide that in exercising
any voting rights, the Members' Interest held by them shall be voted as therein
provided, or as they may agree, or as determined in accordance with a procedure
agreed upon by them.
ARTICLE VIII
TRANSFERS OF COMPANY INTERESTS
8.1 Investment Representation.
(a) Each Member represents and warrants that it is acquiring its
Interest for its own account for investment purposes only and not with a view to
the distribution or resale thereof, in whole or in part.
(b) Each Member agrees that he will not sell, assign or otherwise
transfer his Interest or any fraction thereof to any Person who does not
similarly represent and warrant and similarly agree not to sell, assign or
transfer such Interest or fraction thereof to any Person who does not similarly
represent and warrant and agree.
8.2 Assignment by Members. Except as otherwise expressly provided
in this Section 8.2, a Member shall not sell, assign, transfer or encumber all
or any part of his Interest to any other Person, whether or not a Member, unless
the assignment is effected by substitution of the assignee as a Member in
compliance with the following conditions:
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(a) the assignment shall be set forth in a written instrument in
the form and substance acceptable to legal counsel to the Company which (i)
states that the assignee desires to be substituted as a Member and accepts and
adopts all of the terms and provisions of this Agreement, and (ii) provides for
the payment by the parties to the assignment of all reasonable expenses incurred
by the Company in connection with the substitution, including, but not limited
to, the cost of obtaining opinions of legal counsel, preparing the necessary
amendment to this Agreement, the filing of an amendment to the Certificate of
Formation, if required, and all legal fees in connection with any of the
foregoing;
(b) a majority of the Managers that are also Members shall
consent to the assignment, which any Manager/Member may refuse to do with or
without cause; and
(c) if requested by the Managers, the Company shall obtain an
opinion of legal counsel acceptable to the Managers, or shall require the
parties to the assignment to provide to the Company an opinion of legal counsel
acceptable to the Managers, to the effect that (i) the assignment is exempt from
registration and qualification under the Securities Act of 1933, as amended, and
all applicable state securities laws and (ii) the assignment will not cause a
termination of the Company for Federal income tax purposes.
8.3 Void Transfers; Effective Date.
(a) Assignment of a Member's Interest to a minor or person
adjudged insane or incompetent is prohibited (unless by will or intestate
succession), and consent of the Managers to any such assignment shall be void
and of no effect.
(b) Any purported assignment of a Member's Interest otherwise
than by way of substitution in accordance with this Article VIII shall be of no
effect as between the Company and the purported assignee and shall be
unenforceable as against the Company and the Members or the Managers. The
Managers shall not be charged with actual or constructive notice of any such
purported assignment and are expressly prohibited from making allocations and
distributions under this Agreement in accordance with any such purported
assignment.
(c) Any substitution of Members shall (unless otherwise agreed by
the Managers or required by law) become effective for all purposes as of the
first day of the month in which all the conditions of the substitution have been
satisfied. Any Person substituted as a Member pursuant to Section 8.2 shall
(except as otherwise expressly provided in this Agreement) be a Member for all
purposes of this Agreement to the extent of the Interest acquired by that
Person.
ARTICLE IX
ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS
9.1 Books and Records. The Managers shall keep at the Company's
principal office separate books of account for the Company which shall show a
true and accurate record of
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all costs and expenses incurred, all charges made, all credits made and received
and all income derived in connection with the operation of the Company business
in accordance with generally accepted accounting principles consistently
applied.
Each Member shall, at its sole expense, have the right, upon
reasonable notice to the Managers, to examine, copy and audit the Company's
books and records during normal business hours.
9.2 Reports. The Managers, at the expense of the Company, shall
cause to be prepared and distributed to the Members within ninety (90) days
after the expiration of each Fiscal Year, a balance sheet and profit and loss
statement prepared by the Accountants.
9.3 Tax Returns. The Managers shall cause the Accountants to
prepare all income and other tax returns of the Company to be filed not later
than the date when such filings are required by law. The Managers shall furnish
to each Member a copy of each such return as soon as it has been filed, together
with any schedules or other information which each Member may require in
connection with such Member's own tax affairs. Each of the Members shall, in its
respective income tax return and other statements filed with the Internal
Revenue Service or other taxing authority, report taxable income in accordance
with the provisions of this Agreement.
9.4 Section 754 Election. In connection with any assignment or
transfer of an Interest described in Sections 734(b) and 743(b) of the Code and
which is permitted by the terms of this Agreement, the Managers shall in their
reasonable discretion cause the Company, at the written request of the
transferor, the transferee or the successor to such Interest, on behalf of the
Company and at the time and in the manner provided in Treasury Regulations
Section 1.754-1(b) (or any like statute or regulation then in effect) to make an
election to adjust the basis of the Company's property in the manner provided in
Section 755 of the Code provided such adjustment increases the basis of Company
property, and such transferee shall pay all costs incurred by the Company in
connection therewith, including, without limitation, reasonable attorneys' and
accountants' fees.
9.5 Tax Matters Partner. The Managers shall designate one Manager
as the "Tax Matters Partner" under Code Section 6231(a)(7), with all powers
attendant thereto, who shall be authorized and required to represent the Company
(at the Company's expense) in connection with all examinations of the Company's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services and costs
associated therewith. Each Member agrees to cooperate with the Managers and the
Tax Matters Partner and to do or refrain from doing any or all things reasonably
required by them to conduct such proceedings. The Managing Member shall be the
initial Tax Matters Partner.
9.6 Withholding. If the Managers, in their reasonable judgment,
determine that the Code requires the Company to withhold any tax with respect to
a Member's distributive share of Company income, gain, loss, deduction or
credit, distributions of Available Cash Flow,
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or liquidating distributions, the Managers shall cause the Company to withhold
and pay the tax. If at any time the amount required to be withheld exceeds the
amount that would otherwise be distributed to the Member to whom the withholding
requirement applies, that Member shall, as a condition to receiving any further
distribution, make an additional Capital Contribution equal to the excess of the
amount required to be withheld (and interest and penalties, if applicable) over
the amount, if any, that would otherwise be distributed to that Member and which
is available to be withheld. Any amount withheld with respect to a Member shall
be deducted from the amount that would otherwise be distributed to that Member
but shall be treated as though it had been distributed to that Member for all
purposes of this Agreement.
9.7 Bank Accounts. The bank accounts of the Company shall be
maintained in such banking institutions as the Managers determine and
withdrawals shall be made only in the regular course of Company business and as
otherwise authorized in this Agreement on such signature or signatures as the
Managers may determine. The funds of the Company shall not be commingled with
the funds of any other person.
ARTICLE X
DISSOLUTION AND TERMINATION
10.1 Withdrawal. Except as otherwise provided in this Agreement,
no Member shall at any time retire or withdraw from the Company or withdraw any
amount out of its Capital Account. Any Member retiring or withdrawing in
contravention of this Section 10.1 shall indemnify, defend and hold harmless the
Company and all other Members (other than a Member who is, at the time of such
withdrawal, in default under this Agreement) from and against any losses,
expenses, judgments, fines, settlements or damages suffered or incurred by the
Company or any such other Member arising out of or resulting from such
retirement or withdrawal.
10.2 Dissolution. The Company shall be dissolved and its business
wound-up upon the earliest to occur of:
(i) the expiration of the term;
(ii) the Managers and a Majority-in-Interest of the Members
determine that the Company should be dissolved;
(iii) the Bankruptcy of the Company;
(iv) the Bankruptcy, dissolution, death, incapacity or withdrawal
of any Manager that is also a Member or the occurrence of any other event that
terminates the continued membership of any such Manager, unless within one
hundred eighty (180) days after such event the Company is continued by the
consent of a Majority-in-Interest of all of the remaining Members; and
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(v) the sale or other disposition of all or substantially all of
the Company's assets.
Except as otherwise set forth herein, upon the dissolution of the
Company, the Managers shall take all actions deemed necessary or appropriate in
their sole discretion to wind-up the business affairs of the Company.
10.3 Distribution Upon Liquidation of the Company. Any proceeds
received by the Company in connection with the liquidation of the Company, or
other distributions made on liquidation (including distributions of securities
of Ponder), shall be distributed (after giving effect to all charges and credits
to Capital Accounts resulting from allocations and prior distributions) as
follows and in the following order or priority:
(a) first, to the payment of debts and liabilities of the Company
to the extent required (including all expenses of the Company incident to any
such liquidation of the Company, other than loans or other debts and liabilities
of the Company due to any Member or any Affiliate of any Member);
(b) second, to the setting up of any reserves which the Managers
deem reasonably necessary for contingent, unmatured or unforeseen liabilities or
obligations of the Company;
(c) third, to the repayment of any unrepaid loans theretofore
made by any Member or any Affiliate of any Member to the Company for Company
obligations, and to the payment of any other debts and liabilities of the
Company to any Member or any Affiliate of any Member;
(d) fourth, to each of the Members to the extent of its accrued
Priority Return, reduced by any prior distributions made under Section 5.1;
(e) fifth, to each of the Members to the extent of its Adjusted
Invested Capital;
(f) sixth, to each of the Members to the extent of fifty percent
(50%) of its Capital Contribution; and
(g) thereafter, (A) 25% to the Managing Member and (B) 75% to the
Members (including the Investor Members and the Managing Member), in proportion
to their Capital Contributions.
For the purposes hereof, securities of Ponder distributed to the Members shall
be valued in accordance with Article XII hereof.
10.4 Capital Account Deficits. If any Member has a deficit
balance in its Capital Account following the liquidation of its Interest, as
determined after taking into account
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all adjustments to such Capital Account for the Fiscal Year of the Company
during which such liquidation occurs (other than those made pursuant to this
Section 10.4), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of any Capital Account shall not be
considered a debt owed by the Member to the Company or to any other Person for
any purpose.
10.5 Certificate of Cancellation. Following the dissolution of
the Company, or at any time there are less than two Members, the Managers shall
file a Certificate of Cancellation with the Secretary of State of Delaware
pursuant to the Act.
ARTICLE XI
AMENDMENTS
11.1 Amendments Adopted Solely by the Managers. The Managers may,
without the consent of any Member, amend any provision of this Agreement and
execute whatever documents may be required in connection therewith to reflect:
(a) a change in the name of the Company or the location of the
principal place of business of the Company;
(b) the admission of a substituted Member in accordance with this
Agreement;
(c) a change which is necessary to qualify the Company under the
laws of any jurisdiction or which is necessary and advisable in the opinion of
the Managers to assure that the Company will not be treated as an association
taxable as a corporation and not as a limited liability company;
(d) a change of address of any Member; or
(e) any other amendment which is ministerial or similar to the
foregoing.
11.2 Amendments to be Adopted by Managers and Members. All
amendments to this Agreement shall be in writing and, except as provided in
Section 11.1, shall be approved by the Managers and by a Majority-in-Interest of
the Members, unless a greater vote or the specific approval of a Member is
required by this Agreement, in which case such greater vote or specific consent
shall be required.
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ARTICLE XII
VALUATION OF SECURITIES OF PONDER
12.1 Normal Valuation. For the purposes of this Agreement, the
value of any security of Ponder as of the date of distribution to the Members
(or, in the event such date is a holiday or other day which is not a business
day, as of the next preceding business day) will be determined as follows:
(a) a security which is listed on a recognized securities
exchange or the National Market System will be valued at its last sales price
or, if no sale occurred on such date, at the last "bid" price; and
(b) a security which is traded on the Nasdaq Bulletin Board will
be valued at its last sales price or, if no sale occurred on such date, at the
last "bid" price;
(c) a security which is traded over-the-counter (other than on
the National Market System or the Nasdaq Bulletin Board) will be valued at the
last "bid" price; and
(d) all other securities will be valued on such date by the
Managing Member at fair market value in such manner as it may reasonably
determine.
12.2 Legal Restrictions on Transfer. Any security which is held
under a representation that it has been acquired for investment and not with a
view to public sale or distribution, or which is held subject to any other legal
restrictions, will be valued at such discount, if any, from the value determined
under 12.1 above as the Managing Member deems reasonably necessary in its sole
discretion to reflect properly the effect of such legal restriction on the
marketability of such security.
12.3 Objection to Valuation. If a Majority-in-Interest of the
Members object to the valuation of any security, the Managing Member will (at
the Company's expense) cause an independent securities expert (mutually
acceptable to the Managing Member and a Majority-in-Interest of the Members),
to review such valuation, and such expert's determination will be binding on the
parties.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices required or permitted by this Agreement
shall be in writing and may be delivered by hand to the party to be served or
may be sent by registered or certified mail, with postage prepaid, return
receipt requested, or may be transmitted by overnight courier service, and
addressed in the case of the Company to 1013 Centre Road, Wilmington,
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Delaware 19805-1297, with a copy to William R. Ziegler, Esq., c/o Parson & Brown
LLP, 666 Third Avenue, New York, New York 10017, and in the case of the Members
as set forth on Schedule A hereto, or to such other address as shall from time
to time be supplied in writing by any party to the other. Notice sent by
registered or certified mail, post-paid, with return receipt requested,
addressed as above provided, shall be deemed given four (4) days after deposit
of same in the United States mail. Any notice or other document sent or
delivered in any other manner shall be effective only if and when received.
13.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, successors and
assigns.
13.3 No Oral Modifications; Amendments. No oral amendment of this
Agreement shall be binding on the Members or the Company. Unless otherwise set
forth hereunder, any modification or amendment of this Agreement must be in
writing signed by all of the Members.
13.4 Captions. Any article, section or paragraph titles or
captions contained in this Agreement and the table of contents are for
convenience of reference only and shall not be deemed a part of this Agreement.
13.5 Terms. Common nouns and pronouns shall be deemed to refer to
the masculine, feminine, neuter, singular and plural, as the identity of the
Person may in the context require. Any references to the Code or other statutes
or laws shall include all amendments, modifications or replacements of the
specific sections and provisions concerned.
13.6 Invalidity. If any provision of this Agreement shall be held
invalid, it shall not affect in any respect whatsoever the validity of the
remainder of this Agreement.
13.7 Further Assurances. The parties hereto agree that they will
cooperate with each other and will execute and deliver or cause to be delivered,
all such other instruments, and will take all such other actions, as either
party hereto may reasonably request from time to time in order to effectuate the
provisions and purposes hereof.
13.8 Complete Agreement. This Agreement constitutes the complete
and exclusive statement of the agreement between the Members. It supersedes all
prior written and oral statements and no representation, statement, condition or
warranty not contained in this Agreement shall be binding on the Members or have
any force or effect whatsoever.
13.9 Attorneys' Fees. If any proceeding is brought by one Member
against one or more of the other Members to enforce, or for breach of, any of
the provisions in this Agreement, the prevailing Member(s) shall be entitled in
such proceeding to recover reasonable attorneys' fees together with the costs of
such proceeding therein incurred.
-25- Page 82 of 86 Pages
<PAGE>
<PAGE>
13.10 Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
13.11 No Third Party Beneficiary. Any agreement to pay any amount
and any assumption of liability herein contained, express or implied, shall be
only for the benefit of the Members and their respective heirs, successors and
assigns, and such agreements and assumption shall not inure to the benefit of
the obligees of any indebtedness or any other Person, whomsoever, it being the
intention of the Members that no one shall be deemed to be a third party
beneficiary of this Agreement.
13.12 Exhibits and Schedules. Each of the Exhibits and Schedules
attached hereto are hereby incorporated herein and made a part hereof for all
purposes, and references herein thereto shall be deemed to include this
reference and incorporation.
13.13 References to this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections, respectively, of this Agreement unless otherwise expressly
stated. The words "herein," "hereof," "hereunder," "hereby," "this Agreement"
and other similar references shall be construed to mean and include this
Agreement and all amendments thereof and supplements thereto unless the context
shall clearly indicate or require otherwise.
13.14 Power of Attorney.
(a) Each of the Members and each successor or assign thereof
irrevocably constitutes and appoints each Manager his true and lawful attorney,
in his name, place and stead, to make, execute, acknowledge, swear to and file
any of the following documents:
(i) any modifications or amendments of this Agreement
as required under the laws of the State of Delaware or any other state;
(ii) any modifications or amendments of the Certificate
of Formation or other instrument which may be required to be filed by the
Company under the laws of the State of Delaware or any other state;
(iii) a certificate of fictitious name for the Company;
(iv) any other instrument which may be required to be
filed by the Company under the laws of any state or government or by any
governmental agency, or which the Managers deem it advisable to file; and
(v) any documents which may be required to effect the
continuation of the Company, the admission of an additional or substituted
Member or the dissolution and termination of the Company, provided such
continuation, admission or dissolution and termination are in accordance with
the terms of this Agreement.
-26- Page 83 of 86 Pages
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(b) The within and foregoing power of attorney:
(i) is a special power of attorney coupled with an
interest and is irrevocable; and
(ii) may be exercised by any Manager for each Member by
listing all of the Members executing any instrument with a single signature of
the Manager acting as attorney-in-fact for all of them.
(c) Pursuant to the power of attorney hereinabove granted by each
Member to each Manager with the execution of this Agreement, as hereinabove
described, each Member authorizes said attorney to take any further action which
said attorney shall consider necessary or convenient in connection with any of
the foregoing, hereby giving said attorney full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the foregoing as fully as said Member might or could do if
personally present, and hereby ratifying and confirming all that said attorney
shall lawfully do or cause to be done by virtue hereof.
13.15 Reliance on Authority of Person Signing Agreement. If a
Member is a trust (with or without disclosed beneficiaries), general
partnership, limited partnership, limited liability company, estate,
corporation, or any entity other than a natural person, the Company and the
Members shall:
(a) not be required to determine the authority of the person
signing this Agreement to make any commitment or undertaking on behalf of such
entity or to determine any fact or circumstance bearing upon the existence of
the authority of such entity or to determine any fact or circumstance bearing
upon the existence of the authority of such person;
(b) not be required to see to the application or distribution of
proceeds paid or credited to persons signing this Agreement on behalf of such
entity;
(c) be entitled to rely on the authority of the person signing
this Agreement with respect to the voting of the Interest of such entity and
with respect to the giving of consent on behalf of such entity in connection
with any matter for which consent is permitted or required under this Agreement;
and
(d) be entitled to rely upon the authority of any general
partner, joint partner, or successor trustee, or president or vice president, as
the case may be, of any such entity the same as if such person were the person
originally signing this Agreement on behalf of such entity.
13.16 Consents and Approvals. Whenever the consent or approval of
a Member is required by this Agreement, such Member shall have the right to give
or withhold such consent or approval in his or its sole discretion, unless
otherwise specified.
-27- Page 84 of 86 Pages
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13.17 Ponder Common Stock. Each of the Members agrees, so long as
he is a Member, not to establish or maintain a short position in the Common
Stock of Ponder.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
MANAGING MEMBER: WHITE OWL CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
_____________________________________
Name: William R. Ziegler
Title: Partner
-28- Page 85 of 86 Pages
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Investor Member Signature Page
INVESTOR MEMBER:
<TABLE>
<S> <C>
________________________________________________
(Signature of Investor)
________________________________________________
(Please print name)
________________________________________________
($ Amt. of Investment, at $100,000 per Interest)
Residence Address of Investor (please Mailing Address if different from residence
print): address (please print):
________________________________ ________________________________
(Street) (Street)
________________________________ ________________________________
(City) (State) (Zip Code) (City) (State) (Zip Code)
________________________________ ________________________________
(Telephone Number) (Telephone Number)
</TABLE>
-29- Page 86 of 86 Pages
