<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended November 30, 1997
-------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From ____________ to ____________.
Commission File Number 0-18656
---------
PONDER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2268672
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
5005 Riverway Drive, Suite 550
Houston, Texas 77056
(Address of principal executive offices, zip code)
(713) 965-0653
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at December 31, 1997
------------------------------ ----------------------------------
Common Stock, $.01 par value 28,733,981
<PAGE> 2
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION (Unaudited)
Item 1: Condensed Consolidated Balance Sheets as of November 30, 1997, and August 31, 1997 3
Condensed Consolidated Statements of Operations for the Three Months Ended
November 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended November 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
PART II OTHER INFORMATION
Item 1: Legal Proceedings 13
Item 2: Changes in Securities 13
Item 3: Defaults Upon Senior Securities 13
Item 4: Submission of Matters to a Vote of Security Holders 13
Item 5: Other Information 13
Item 6: Exhibits and Reports on Form 8-K 13
</TABLE>
-2-
<PAGE> 3
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
November 30, August 31,
ASSETS 1997 1997
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3 $ 4
Receivables, net 4,588 4,134
Parts and supplies 2,752 2,622
Available for sale securities 800 800
Prepaid expenses and other 546 46
-------- --------
Total current assets 8,689 7,606
-------- --------
PROPERTY AND EQUIPMENT 31,711 31,383
Less- Accumulated depreciation and amortization (14,756) (14,278)
-------- --------
16,955 17,105
-------- --------
OTHER ASSETS 178 122
DEFERRED ASSETS, net 77 423
GOODWILL, net 1,341 1,361
-------- --------
1,596 1,906
-------- --------
TOTAL ASSETS $ 27,240 $ 26,617
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-3-
<PAGE> 4
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
November 30, August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,878 $ 8,687
Accounts and notes payable, trade 4,585 5,562
Accrued liabilities and other 1,876 2,203
-------- --------
Total current liabilities 8,339 16,452
-------- --------
LONG-TERM DEBT, less current maturities 7,635 670
-------- --------
OTHER LONG-TERM LIABILITIES 76 765
-------- --------
DEFERRED TAXES PAYABLE 830 881
-------- --------
CONVERTIBLE DEBENTURES -- 6,380
SENIOR CONVERTIBLE NOTES 2,266 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 50,000,000 shares, issued
28,681,620 shares and 17,571,021 shares at November 30, 1997, and
August 31, 1997, respectively 287 176
Additional paid-in capital 32,210 25,307
Cumulative foreign currency translation adjustment 83 49
Accumulated deficit (24,120) (23,696)
Note receivable for common stock (66) (66)
Deferred compensation -- (1)
Unrealized loss on available for sale securities (300) (300)
-------- --------
Total stockholders' equity 8,094 1,469
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,240 $ 26,617
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-4-
<PAGE> 5
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Three Months
Ended November 30
--------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
TOOL RENTALS AND SALES $ 5,101 $ 5,141
COSTS OF SERVICE AND SALES 1,814 2,203
------------ ------------
Gross profit 3,287 2,938
------------ ------------
EXPENSES:
Operating 2,287 2,320
General and administrative 947 1,157
------------ ------------
3,234 3,477
------------ ------------
Operating income (loss) 53 (539)
OTHER INCOME (EXPENSE):
Interest, net (443) (354)
Gain (loss) on disposal of assets (34) --
Other -- 11
------------ ------------
NET INCOME (LOSS) $ (424) $ (882)
============ ============
EARNINGS (LOSS) PER SHARE $ (.02) $ (.07)
============ ============
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 25,029,799 12,243,850
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-5-
<PAGE> 6
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months
Ended November 30
--------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (424) $ (882)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization 549 692
Loss on disposal of assets 34 --
Deferred compensation expense 1 13
Net change in operating assets and liabilities-
Receivables (454) (498)
Parts and supplies (130) (98)
Prepaid expenses and other (500) 57
Accounts and notes payable, trade (977) 1,054
Accrued liabilities and other (460) (404)
------- -------
Net cash used in operating activities (2,361) (66)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (422) (1,210)
------- -------
Net cash used in investing activities (422) (1,210)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (4,198) (946)
Bank overdraft 133 86
Proceeds from long-term debt borrowings 4,347 1,807
Proceeds from Senior Convertible Notes 2,500 --
------- -------
Net cash provided by financing activities 2,782 947
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- 111
------- -------
CASH AND CASH EQUIVALENTS:
Increase (decrease) (1) (218)
Beginning of period 4 398
------- -------
End of period $ 3 $ 180
======= =======
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Three Months
Ended November 30
--------------------------------
1997 1996
---------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 437 $ 91
========== =========
Income taxes $ -- $ --
========== =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued in connection with debenture conversions $ 6,713 $ --
========== =========
Common stock contributed to 401(k) plan $ 66 $ --
========== =========
Assets acquired in connection with acquisitions $ -- $ 812
========== =========
Liabilities assumed in connection with acquisitions $ -- $ 812
========== =========
Common stock issued in connection with acquisitions $ -- $ 19
========== =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-7-
<PAGE> 8
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands, Except Share Information)
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements included herein have been
prepared by Ponder Industries, Inc., and subsidiaries (collectively referred to
as the Company), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. However, all adjustments have been made to
the accompanying financial statements which are, in the opinion of the
Company's management, necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for the periods
covered. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented herein not misleading. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
Annual Report on Form 10-K.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior period balances to conform
with current period presentation.
2. LONG-TERM DEBT:
See Note 4 for a description of Senior Convertible Notes placed in October
1997.
At August 31, 1997, the Company had borrowed approximately $7,300 under a
$10,000 financing agreement with a financial institution. The financing
agreement requires compliance with various financial covenants. As a result of
continued losses, the Company was not in compliance with certain covenants at
August 31, 1997, and the total amount due the financial institution was
classified as a current liability in the Company's balance sheet at August 31,
1997. In January 1998, the Company and the financial institution amended
certain of the covenants governing the financing agreement which has allowed
the Company to classify a substantial portion of the indebtedness due this
financial institution as long-term at November 30, 1997. The amended covenants
provide that the Company must maintain a debt service coverage ratio, as
defined and amended, of not less than 1.0 to 1.0 as of the fiscal quarter
ending February 28, 1998, and 1.25 to 1.0 as of the end of each fiscal quarter
thereafter. The debt service coverage ratio requirement for the quarter ended
November 30, 1997, was waived. The Company must also maintain a tangible net
worth, as defined and amended, of not less than $8,500 as of the fiscal quarter
ended November 30, 1997, and $18,000 as of the end of each fiscal quarter
thereafter.
-8-
<PAGE> 9
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. CONTINGENCIES:
In 1996, the Company sued its placement agent and its principal and related
entities (the "placement agent") in the Company's 1996 convertible debenture
offering and the debenture holders in the United States District Court for the
Western District of New York. In mid-1977, the Company settled with all of the
debenture holders, and the judge ordered the case against the placement agent
transferred to the United States District Court for the Northern District of
Georgia. In response, in September 1997, a case was filed against the Company in
Georgia State Court, which the Company removed to the United States District
Court for the Northern District of Georgia, Atlanta Division, by the placement
agent alleging that, in connection with such offering, the Company tortiously
interfered with its business relationships, breached a Proprietary Information,
Non-Circumvention and Indemnification Agreement between the Company and the
placement agent, defamed the placement agent and engaged in conduct giving rise
to an indemnification in favor of the placement agent. The Federal court has now
consolidated the two lawsuits. The Company is seeking unspecified millions of
dollars in actual and punitive damages from the placement agent and the
placement agent seeks actual damages in an amount not less than $1,000 per
breach, exemplary damages in an amount not less than $2,500, interest, costs and
attorney's fees. Although no assurance can be given, the Company believes it has
meritorious claims against the transfer agent which it intends to prosecute
vigorously and that it has meritorious defenses to the above action and intends
to defend itself vigorously.
The Company is also a party to additional claims and legal proceedings arising
in the ordinary course of business. The Company believes it is unlikely that
the final outcome of any of the claims or proceedings to which the Company is a
party, including those described above, would have a material adverse effect on
the Company's financial statements; however, due to the inherent uncertainty of
litigation, the range of possible loss, if any, cannot be estimated with a
reasonable degree of precision and there can be no assurance that the
resolution of any particular claim or proceeding would not have an adverse
effect on the Company's results of operations for the interim period in which
such resolution occurred.
4. EQUITY TRANSACTIONS:
In September 1997, the Company reached a settlement with those convertible
debenture holders who had not previously converted their debentures. During the
three months ended November 30, 1997, approximately $7,060 of convertible
debentures, including accrued interest, were converted into 10,633,333 shares
of the Company's common stock. The Company also issued to such debenture
holders five-year warrants to purchase 957,000 shares of the Company's common
stock at $1 per share.
In October 1997, the Company completed a private placement of $2,500 Senior
Convertible Notes (Senior Notes) and warrants to purchase 4 million shares of
the Company's common stock at a purchase price of $.625 per share. The warrants
expire on January 1, 2001. The Senior Notes mature on January 1, 1999, are
interest free until June 30, 1998, and then bear interest at the prime rate, as
defined, plus 2 percent. The Senior Notes are convertible at the option of the
holder, at any time prior to the maturity date, into an aggregate of 4 million
shares of the Company's common stock.
5. SUBSEQUENT EVENTS:
In January 1998, the Company acquired all of the outstanding stock of Fishing
Tools, Inc., for $6,500 cash and the issuance of approximately 645,000 shares of
the Company's common stock valued at $1,000. The cash consideration was provided
through an equity placement with affiliates of the purchasers of the Senior
Notes described above. The equity placement consisted of the sale of 11 million
shares of the Company's common stock at $1 per share. Concurrent with this
equity placement, the Senior Notes were converted into 4 million shares of the
Company's common stock.
-9-
<PAGE> 10
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to Ponder Industries, Inc. (the Company),
and its subsidiaries that are based on the beliefs of the Company's management
as well as assumptions made by and information currently available to the
Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and words or phrases of similar
import, as they relate to the Company or its subsidiaries or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitations, competitive factors, general
economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision, seasonality,
distribution networks, product introductions and acceptance, technological
change, changes in industry practices, one-time events and other factors
described herein. Based upon changing conditions, should any one or more of
these risks or uncertainties materialize, or should any underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
The following discussion is included to describe the Company's financial
position and results of operations for the three-month periods ended November
30, 1997 and 1996. The condensed consolidated financial statements and notes
thereto contain detailed information that should be referred to in conjunction
with this discussion.
BUSINESS REVIEW
Ponder is an international oil field service and rental tool company that
specializes in the use of fishing tools for the recovery of unwanted
obstructions in oil and gas wells. The Company also rents specialized oil field
equipment such as pressure control equipment, tools, pipe, tubing and whipstocks
used in the drilling, completion and workover of wells. Ponder currently has 18
locations domestically and 2 international locations serving the North Sea
area.
Demand for the Company's services and rentals depends primarily on the number
of oil and gas wells being drilled, the depth and drilling conditions of such
wells and the level of workover activity. Drilling and workover activity is
largely dependent on the prices for oil and natural gas. Demand for oil and
natural gas allowed for higher prices in 1997 and 1996 than the average prices
for the past several years. However, oil prices, and to a lesser extent,
natural gas prices, have recently declined. The Company is unable to predict
the duration of such price declines or the impact that such declines may have
on the Company's future results of operations.
LIQUIDITY AND CAPITAL RESOURCES
A $2,500,000 bridge loan was obtained in October 1997 from a financial partner
with the intention of providing additional capital for acquisitions and
expansion of the Company's business. The Company, in October 1997, signed a
letter of intent to purchase Fishing Tools, Inc. (FTI), for $6,500,000 cash and
$1,000,000 in stock. In January 1998, the Company acquired all of the
outstanding stock of FTI under the same terms as the letter of intent. The cash
consideration for the purchase of FTI was provided through an equity placement
with the affiliates of the providers of the bridge loan. The equity placement
consisted of the sale of 11 million shares of the Company's common stock at $1
per share. Concurrent with this equity placement, the notes representing the
bridge loan were converted into 4 million shares of the Company's common stock.
See Note 5 of notes to condensed consolidated financial statements.
-10-
<PAGE> 11
In April 1996, the Company raised approximately $10 million, net of fees, by
issuing 8 percent convertible debentures. In September 1997, the Company
reached a settlement whereby those convertible debenture holders who had not
previously converted their debentures with the Company agreed to convert the
then outstanding debenture debt of approximately $7,060,000, including accrued
interest, into 10,633,333 shares of the Company's common stock. The conversion
of the debentures increased the Company's equity by approximately $6.7 million.
At November 30, 1997, and August 31, 1997, the Company had working capital
(deficit) of approximately $.3 million and $(8.8) million, respectively. The
current ratio was approximately 1.04 to 1.0 at November 30, 1997, compared to
.46 to 1.0 at August 31, 1997. As previously discussed, the Company's total
debt of approximately $7.3 million with a financial institution has been
classified as current in the Company's balance sheet as of August 31, 1997. In
January 1998, the Company and the financial institution amended certain of the
covenants governing the Notes which has allowed the Company to classify a
substantial portion of the indebtedness due this financial institution as long
term at November 30, 1997. See Note 2 of notes to condensed consolidated
financial statements.
In November 1996, the Company completed a $10 million financing agreement with a
financial institution. The agreement includes a $4 million Revolving Receivable
Facility, a $2.5 million Revolving Credit Note and a $3.5 million Term Note (the
Notes). The Receivable Facility is a two-year facility that is based on accounts
receivable and will be utilized for short-term liquidity needs. The $2.5 million
Revolving Credit Note is a five-year facility, based on inventory and equipment,
and these funds were used to acquire capital assets to expand the Company's
business. The $3.5 million Term Note is a five and one-half year note, interest
only through May 1997 and amortizes over the remaining five years,
collateralized by equipment. The funds were used to pay off existing bank debt
of approximately $3 million with the balance being used to fund operations and
acquire capital equipment. At November 30, 1997, and August 31, 1997, the
Company had borrowed approximately $7.4 million and $7.3 million, respectively,
under the Notes. The Notes require compliance with various covenants, including
the maintenance of a defined debt service coverage ratio and a defined tangible
net worth. As a result of continued losses, the Company was not in compliance
with certain covenants and the total amount due the financial institution has
been classified as current in the Company's balance sheet at August 31, 1997.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED
NOVEMBER 30, 1997, AND NOVEMBER 30, 1996
A net loss of $424,000, or $.02 per share, was recorded for the three months
ended November 30, 1997, compared to a net loss of $882,000, or $.07 per share,
for the same period of the prior year.
Revenues were approximately $5.1 million for each of the three months ended
November 30, 1997 and 1996. Costs of service and sales decreased $389,000, or 18
percent, to $1,814,000 for the three months ended November 30, 1997, from
$2,203,000 for the same period of the prior year and operating expenses
decreased $33,000, or 1 percent, to $2,287,000 from $2,320,000. The decrease in
costs of service and sales relates primarily to the Company's decision to
utilize salaried fishing tool operators rather than commissioned operators.
Commissions are reflected as a component of costs of service and sales while
salaries are reflected as operating expenses. Operating expenses remained
stable, however, reflecting an increase in salaried fishing tool operators
offset by a reduction in other operating personnel and expenses and the closing
of two of the Company's unsuccessful operating locations. The Company's gross
profit margin was 64 percent for the three months ended November 30, 1997, as
compared to 57 percent for the same period of the prior year. Operating
expenses, as a percentage of sales, were 45 percent for each of the three months
ended November 30, 1997 and 1996.
-11-
<PAGE> 12
General and administrative expenses decreased $210,000, or 18 percent, to
$947,000 for the three months ended November 30, 1997, as compared to
$1,157,000 for the same period of the prior year. In April 1997, the Company
commenced a major cost reduction program which included a reduction in
administrative personnel and related expenses, the sale of certain
nonproductive equipment to reduce debt, resolving the litigation involving its
convertible debentureholders and substantially reducing general and
administrative expenses.
Interest expense, net, increased $89,000 to $443,000 for the three months ended
November 30, 1997, as compared to $354,000 for the same period of the prior
year. The increase is due primarily to an approximate $4.8 million increase in
average indebtedness outstanding during the three months ended November 30,
1997, as compared to the three months ended November 30, 1996, and a higher
interest rate on such indebtedness. This increase was partially offset by a
savings of noncash interest expense of approximately $183,000 related to the
Company's convertible debentures outstanding during the three months ended
November 30, 1996, which were converted into shares of the Company's common
stock in September 1997 as discussed above.
-12-
<PAGE> 13
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - For a description of legal proceedings against the
Company, see Note 3 of the notes to condensed consolidated financial
statements included herein.
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
(c) Pursuant to a Settlement Agreement and Release (the
Settlement Agreement) among the Company, Larry Armstrong,
Eugene L. Butler and certain debentureholders (the
Debentureholders) of the Company dated September 26, 1997,
the Company granted warrants to purchase an aggregate of
957,000 shares of common stock, $.01 par value (Common
Stock), of the Company. The Common Stock underlying the
warrants was not registered under the Securities Act of 1933,
as amended (the Securities Act), pursuant to the exemptions
of such registration provided under Section 4(2) of the
Securities Act. The Company granted such warrants as part of
a settlement of claims underlying a lawsuit involving the
parties to the Settlement Agreement.
Pursuant to a Securities Purchase Agreement (the Purchase
Agreement) among the Company, White Owl Capital Partners,
Arvid Sanger, Antony T. F. Lundy and Karl Bandtel dated
October 15, 1997, the Company sold an aggregate of 100 Units
for an aggregate purchase price of $2,500,000. The 100 Units
consist of an aggregate of $2,500,000 in Convertible Notes,
which are convertible in the aggregate into 4 million shares
of Common Stock, and detachable warrants for the purchase of
an aggregate of 4 million shares of Common Stock at an
exercise price of $.625 per share. The Common Stock
underlying the Units was not registered under the Securities
Act pursuant to the exemptions of such registration provided
under Section 4(2) of the Securities Act. The Company relied
upon certain representations and warranties of the Purchasers
(as that term is defined in the Purchase Agreement),
including, among others, that the Purchasers are each
accredited investors (as that term is defined in Rule 501(a)
of Regulation D promulgated under the Securities Act), and
that the Common Stock was acquired solely for each
Purchaser's own account for investment and not with a view to
distribution.
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*4.1 - Registration Rights Agreement among the Company, White Owl
Capital Partners, Arvid Sanger, Antony T. F. Lundy and Karl
Bandtel dated October 15, 1997.
-13-
<PAGE> 14
*10.1 - Settlement Agreement and Release among the Company, Eugene L.
Butler, Larry Armstrong and certain Debentureholders dated
September 26, 1997.
*10.2 - Securities Purchase Agreement among the Company, White Owl
Capital Partners, Arvid Sanger, Antony T. F. Lundy and Karl
Bandtel dated October 15, 1997.
*11 - Computation of Earnings (Loss) Per Share.
*27 - Financial Data Schedule.
(b) Reports on Form 8-K
None
- - ---------------
* Filed herewith
-14-
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PONDER INDUSTRIES, INC.
By /s/ Eugene L. Butler
-----------------------------
Eugene L. Butler
President, Chief Executive
Officer and Chairman of
the Board of Directors
By /s/ Gerald A. Slaughter
-----------------------------
Gerald A. Slaughter
Senior Vice President and
Chief Financial Officer
Dated: January 14, 1998
-15-
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- -----------
<S> <C>
4.1 - Registration Rights Agreement among the Company, White Owl
Capital Partners, Arvid Sanger, Antony T. F. Lundy and Karl
Bandtel dated October 15, 1997.
10.1 - Settlement Agreement and Release among the Company, Eugene L.
Butler, Larry Armstrong and certain Debentureholders dated
September 26, 1997.
10.2 - Securities Purchase Agreement among the Company, White Owl
Capital Partners, Arvid Sanger, Antony T. F. Lundy and Karl
Bandtel dated October 15, 1997.
11 - Computation of Earnings (Loss) Per Share.
27 - Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
================================================================================
REGISTRATION RIGHTS AGREEMENT
By and Among
PURCHASERS OF UNITS
and
PONDER INDUSTRIES, INC.
--------------------------------------------------
Common Stock, par value $.01 per share
--------------------------------------------------
Dated as of October 15, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Registration Under Securities Act, etc . . . . . . . . . . . . . . . . 1
1.1 Registration on Request . . . . . . . . . . . . . . . . . . . 1
1.2 Piggy-Back Registration . . . . . . . . . . . . . . . . . . . 3
1.3 Registration Procedures . . . . . . . . . . . . . . . . . . . 4
1.4 Underwritten Offerings . . . . . . . . . . . . . . . . . . . 6
1.5 Preparation: Reasonable Investigation . . . . . . . . . . . . 7
1.6 Qualification to Obligations under Registration Covenants . . 8
1.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 8
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . 12
4. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . 12
5. Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . . 13
6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. Calculation of Percentage Interests in Registrable Securities . . . 14
9. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . 14
10. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT, dated as of October 15, 1997,
among Ponder Industries, Inc., a Delaware corporation (the "Company") and each
of the undersigned Purchasers of Units identified on the signature page hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
This Agreement is being entered into in connection with a
Securities Purchase Agreement, of even date herewith between the Company and
the Purchasers (the "Purchase Agreement") providing for the issuance by the
Company to the Purchasers of Units consisting of Senior Convertible Notes
(collectively, the "Notes") of the Company and Warrants (collectively, the
"Warrants") entitling the holders thereof to purchase, upon conversion of the
Notes and exercise of the Warrants, up to 8,000,000 shares (subject to
adjustment) of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"), upon the terms and subject to the conditions set forth
therein. It is a condition precedent to the obligations of the Company and the
Purchasers to consummate the transactions contemplated by the Purchase
Agreement that the Company and the Purchasers enter into this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meanings
given them in the Purchase Agreement.
1. Registration Under Securities Act, etc.
1.1 Registration on Request.
(a) Request. At any time, or from time
to time, upon the written request of one or more holders (the "Initiating
Holders") of Registrable Securities representing not less than 50% (25% in the
case of a registration on Form S-3) of the Registrable Securities that the
Company effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities, the Company promptly will give
written notice of such requested registration to all registered holders of
Registrable Securities, and thereupon the Company will use its best efforts to
effect, at the earliest possible date, the registration under the Securities
Act of (i) the Registrable Securities which the Company has been so requested
to register by such Initiating Holders, and (ii) all other Registrable
Securities which the Company has been requested to register by the holders
thereof (such holders together with the Initiating Holders hereinafter are
referred to as the "Selling Holders") by written request given to the Company
within 30 days after the giving of such written notice by the Company, all to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered.
(b) Registration of Other Securities.
Whenever the Company shall effect a registration pursuant to this Section 1.1,
no securities other than Registrable Securities and other securities subject to
registration rights granted by the Company shall be included among the
securities covered by such registration unless Initiating Holders of greater
than 51% of the Registrable Securities to be included in such registration
shall have consented in writing to the inclusion of such other securities,
which consent shall not be unreasonably withheld or delayed.
<PAGE> 4
(c) Registration Statement Form.
Registrations under this Section 1.1 shall be on such appropriate registration
form of the Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A
registration requested pursuant to this Section 1.1 shall not be deemed to have
been effected unless a registration statement with respect thereto has become
effective and remained effective in compliance with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of at least 120 days, or
earlier if all Registrable Securities have been sold pursuant to such
registration statement.
(e) Selection of Underwriters. If the
Selling Holders of at least 50% of all Registrable Securities to be covered by
a registration so elect, the offering of such Registrable Securities pursuant
to this Section 1.1 shall be in the form of an underwritten offering. The
underwriter or underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Selling Holders of at
least 50% of the Registrable Securities to be included in such registration and
shall be reasonably acceptable to the Company.
(f) Priority in Requested Registration.
If the managing underwriter of an underwritten offering shall advise the
Company in writing (and the Company shall so advise each Selling Holder of
Registrable Securities requesting registration of such advice) that, in its
opinion, the number of securities requested to be included in such registration
is sufficiently large to materially adversely affect the success of the
offering, the Company, except as provided in the following sentence, will
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration, pro rata among the Selling
Holders requesting such registration on the basis of the estimated gross
proceeds from the sale thereof. To the extent Registrable Securities so
requested to be registered are excluded from the offering, the holders of such
Registrable Securities shall be deemed not to have used a demand registration
pursuant to this Section 1.1.
(g) Limitations on Registration on
Request. Notwithstanding anything in this Section 1.1 to the contrary, the
Company shall not be required to take any action to file a registration
statement pursuant to this Section 1.1:
(i) during the period starting with the sixty
days prior to the Company's good faith estimate of the date of
filing of, and ending 120 days following the effective date
of, any subsequent registered offering of the Company's
securities to the general public;
(ii) in any registration of less than 20% of the
Registrable Securities, unless the aggregate sales price
(before deduction of underwriting discounts and expenses of
sale) is at least $2,000,000 (or $1,000,000 in the case of a
registration on Form S-3); or
2
<PAGE> 5
(iii) after the Company has effected an aggregate
of two such registrations on Form S-3 and two such
registrations on any other form available to the Company
(including additional registrations on Form S-3).
(h) Expenses. The Company will pay all
Registration Expenses in connection with any registration requested pursuant to
this Section 1.1 and each Selling Holder shall pay all underwriting discounts
or commissions with respect to the Registrable Securities sold by such Selling
Holder in such registration.
1.2 Piggy-Back Registration.
(a) Right to Include Registrable Securities. If
the Company at any time proposes to file a registration statement to register
any of its equity securities (or any security convertible into or exchangeable
for any equity security of the Company) under the Securities Act (except for
registration on Form S-4 or S-8 or any successor or similar forms), whether or
not for sale for its own account, it will each such time give prompt written
notice to all registered holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 30
days after the receipt of any such notice (20 days if the Company states in
such written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly
thereafter, stating that (i) such registration will be on Form S-3 and (ii)
such shorter period of time is required because of a planned filing date), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Requesting Holders thereof. No registration
effected under this Section 1.2 shall relieve the Company of its obligation to
effect any registration upon request under Section 1.1.
(b) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall deliver a written
opinion to the holders of Registrable Securities that the total amount of
Registrable Securities requested to be included in such registration would have
a material adverse effect on such offering, then the Company will include in
such registration, to the extent of the number which the Company is so advised
can be sold in (or during the time of) such offering, first, all securities
proposed by the Company to be sold for its own account, and second, such
Registrable Securities requested to be included in such registration pursuant
to this Agreement and the securities of all other holders who possess
registration rights (the "Other Holders"), pro rata among Requesting Holders
and Other Holders on the basis of the estimated gross proceeds from the sale
thereof; provided that the number of securities included in such registration
by the Requesting Holders and the Other Holders shall not be less than 20% of
the total number of shares included in such registration and, if securities are
being offered for the account of other persons or entities as well as the
Company, such reduction shall not represent a greater fraction of the number of
securities intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities they intended to offer.
3
<PAGE> 6
(c) Expenses. The Company will pay all
Registration Expenses in connection with any registration effected pursuant to
this Section 1.2 and each Selling Holder shall pay all underwriting discounts
or commissions with respect to the Registrable Securities sold by such Selling
Holder in such registration.
1.3 Registration Procedures. If and whenever the Company
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 1.1 and 1.2, the Company will, as
expeditiously an possible use its best efforts to:
(i) prepare and (within 90 days after the end of
the period within which requests for registration may be given
to the Company or in any event as soon thereafter as
practicable) file with the Commission the requisite
registration statement to effect such registration and
thereafter use its best efforts to cause such registration
statement to become effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by
such registration statement for a period of at least 120 days
or until all such Registrable Securities have been sold,
whichever is earlier;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement such number
of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably
request;
(iv) register or qualify all Registrable
Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such
States of the United States of America where an exemption is
not available and as the sellers of Registrable Securities
covered by such registration statement shall reasonably
request; keep such registration or qualification in effect for
so long as such registration statement remains in effect; and
take any other action which may be reasonably necessary or
advisable to enable such sellers to consummate the disposition
in such jurisdictions of the securities to be sold by such
sellers, except that the Company shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subdivision (iv) be obligated
to be so qualified or to consent to general service of process
in any such jurisdiction;
4
<PAGE> 7
(v) cause all Registrable Securities covered by
such registration statement to be registered with or approved
by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to
the Company and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(vi) furnish at the effective date of such
registration statement and, if applicable, the date of the
closing under the underwriting agreement, to each seller of
Registrable Securities, and each such seller's underwriters,
if any, a signed counterpart of (x) an opinion of counsel for
the Company, dated the effective date of such registration
statement and (y) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent
to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in underwritten
public offerings of securities and, in the case of the
accountants' comfort letter, such other financial matters,
and, in the case of the legal opinion, such other legal
matters, as the sellers of the Registrable Securities covered
by such registration statement, or the underwriters, may
reasonably request;
(vii) notify each seller of Registrable Securities
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of
the circumstances under which they were made, and at the
request of any such seller promptly prepare and furnish to it
a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they
were made;
(viii) otherwise comply with all applicable rules
and regulations of the Commission, and, if required, make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities
5
<PAGE> 8
Act and Rule 158 promulgated thereunder, and promptly furnish
to each such seller of Registrable Securities a copy of any
amendment or supplement to such registration statement or
prospectus;
(ix) keep each Selling Holder and each Requesting
Holder advised in writing as to the initiation and progress of
any registration under Section 1.1 or 1.2 hereunder, as the
case may be;
(x) provide and cause to be maintained a transfer
agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration; and
(xi) list all Registrable Securities covered by
such registration statement on any national securities
exchange on which Registrable Securities of the same class
and, if applicable, series, covered by such registration
statement are then listed or on the National Association of
Securities Dealers Automated Quotations ("NASDAQ") if the
Registrable Securities are reported on NASDAQ.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities, as is required
by law or the Commission to be included within the registration statement or as
the company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company
of the happening of any event of the kind described in subdivision (vii) of
this Section 1.3 , such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(vii) of this Section 1.3 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.
1.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offering by holders of
Registrable Securities pursuant to a registration requested under Section 1.1,
the Company will use all reasonable efforts to enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of that type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 1.7. The holders of the Registrable Securities proposed to
be sold by such underwriters will reasonably cooperate with the Company in the
6
<PAGE> 9
negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or
agreements with the Company other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution or any other representations required
by applicable law.
(b) Incidental Underwritten Offerings. If the
Company proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such Requesting Holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding such Requesting Holder, such Requesting Holder's
Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law.
1.5 Preparation: Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company (i) shall give the
holders of Registrable Securities registered under such registration statement,
their underwriters, if any, and their respective counsel and accountants the
reasonable opportunity to participate (at the expense of such holder or
holders) in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, (ii) shall give each of them such reasonable access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act and (iii) shall promptly notify the
registered holders of Registrable Securities and their counsel of any stop
order issued or threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
7
<PAGE> 10
1.6 Qualification to Obligations under Registration
Covenants. The Company shall be entitled to postpone for a reasonable period
of time (but not exceeding 90 days) the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 1.1 if
the Company determines, in its reasonable judgment, that such registration and
offering would interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of
its affiliates and promptly gives the holders of Registrable Securities
requesting registration thereof pursuant to Section 1.1 written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, holders of
Registrable Securities requesting registration thereof pursuant to Section 1.1
and representing not less than 50% of the Initiating Holders shall have the
right to withdraw the request for registration by giving written notice to the
Company within 30 days after receipt of the notice of postponement and, in the
event of such withdrawal, such request shall not be counted for purposes of the
requests for registration to which holders of Registrable Securities are
entitled pursuant to Section 1.1 hereof.
1.7 Indemnification.
(a) Indemnification by the Company. The Company
will, and hereby does, indemnify and hold harmless, in the case of any
registration statement filed pursuant to Section 1.1 or 1.2, each seller of any
Registrable Securities covered by such registration statement and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, and their respective
directors, officers, partners, employees and affiliates against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or any such director, officer, partner, employee, affiliate or
controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company will reimburse such seller or underwriter and each
such director, officer, partner, employee, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such seller or underwriter, as the
case may be, specifically stating that it is for use in the
8
<PAGE> 11
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, employee, affiliate, partner or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a
condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking satisfactory to it
from the prospective seller of such Registrable Securities, to indemnify and
hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 1.7) the Company, and each director of the
Company, each officer of the Company and each other Person, if any, who
participates as an underwriter in the offering or sale of such securities and
each other Person who controls the Company or any such underwriter within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement; provided,
however, that the liability of such indemnifying party under this Section
1.7(b) shall be limited to the amount of proceeds received by such indemnifying
party in the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of this
Section 1.7, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 1.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation, provided, however, that if the indemnified party reasonably
believes it is advisable for it to be represented by separate counsel because
there exists a conflict of interest between its interests and those of the
indemnifying party with respect to such claim, or there exist defenses
available to such indemnified party which may not be available to the
indemnifying party, or if the indemnifying party shall fail to assume
responsibility for such
9
<PAGE> 12
defense, the indemnified party may retain counsel satisfactory to it and the
indemnifying party shall pay all reasonable fees and expenses of such counsel.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification
provided for in this Section 1.7 shall for any reason be held by a court to be
unavailable to an indemnified party under subparagraph (a) or (b) hereof in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under subparagraph (a) or
(b) hereof, the indemnified party and the indemnifying party under subparagraph
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement which
resulted in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Company
and such prospective sellers from the offering of the securities covered by
such registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. Such prospective sellers' obligations to contribute as
provided in this subparagraph (d) are several in proportion to the relative
value of their respective Registrable Securities covered by such registration
statement and not joint. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
section 1.7 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The
indemnification and contribution required by this Section 1.7 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or
liability is incurred.
2. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:
10
<PAGE> 13
"Affiliate" means any person that directly or indirectly
controls or is controlled by or is under common control with any Purchaser.
For purposes of this definition, an Affiliate of any Purchaser shall be deemed
to include any corporation, partnership, limited liability company or other
entity in which such Purchaser (whether directly, or indirectly through any
other Person that is an Affiliate) is an officer or director, general partner,
managing member or otherwise holds a significant equity interest.
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Common Stock" is defined in the second introductory paragraph
on page 1.
"Company" is defined in the first introductory paragraph on
page 1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such similar Federal statute.
"Initiating Holder" is defined in Section 1.1.
"Person" means any individual, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Purchaser" and "Purchasers" are defined in the first
introductory paragraph on page 1.
"Purchase Agreement" is defined in the second introductory
paragraph on page 1.
"Registrable Securities" means (i) any shares of Common Stock
issued from time to time upon conversion of the Notes or exercise of the
Warrants and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (b) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act, (c)
they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by the
Company and subsequent public distribution of them shall not require
registration of them under the Securities Act, or (d) they shall have ceased to
be outstanding. All references to percentages of Registrable Securities shall
be calculated pursuant to Section 8.
11
<PAGE> 14
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the reasonable fees and
disbursements of counsel for the Company (and one special counsel to the
Selling Holders) and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities) with respect to an
underwritten offering.
"Related Registrable Securities" means any securities of the
Company issued or issuable with respect to the Registrable Securities by way of
a dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
"Securities Act" means the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
"Warrants" is defined in the second introductory paragraph on
page 1.
3. Rule 144 and Rule 144A. The Company shall take all
actions reasonably necessary to enable holders of Registrable Securities to
sell such securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, or (c) any
similar rules or regulations hereafter adopted by the Commission, including,
without limiting the generality of the foregoing, filing on a timely basis all
reports required to be filed by the Exchange Act. Upon the request of any
holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether the Company has complied with such
requirements.
4. Amendments and Waivers. This Agreement may be
amended (including to add as parties hereto future purchasers of securities of
the Company) and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act of the holder or holders of at least two thirds of the Registrable
Securities affected by such amendment, action or omission to act. Each holder
of any Registrable Securities at the time or thereafter outstanding shall be
bound by any consent authorized by this Section 4, whether or not such
Registrable Securities shall have been marked to indicate such consent.
12
<PAGE> 15
5. Nominees for Beneficial Owners. In the event that
any Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election in writing delivered
to the Company, be treated as the holder of such Registrable Securities for
purposes of any request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities hold by any holder or holders of
Registrable Securities contemplated by this Agreement. If the beneficial owner
of any Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
6. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telex, telegram, telecopier, reputable courier service or personal delivery:
(a) if to the Purchasers, addressed to them in
the manner set forth in the Purchase Agreement, or at such
other address as it shall have furnished to the Company in
writing;
(b) if to any other holder of Registrable
Securities, at the address that such holder shall have
furnished to the Company in writing, or, until any such other
holder so furnishes to the Company an address, then to and at
the address of the last holder of such Registrable Securities
who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the
manner set forth in the Purchase Agreement, or at such other
address as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being sent by reputable courier service; three business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
7. Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns and, with respect
to each Purchaser, any holder who is an affiliate or successor entity to such
Purchaser or a transferee therefrom of any Registrable Securities, subject to
the provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. Notwithstanding the foregoing, a
Purchaser may not assign its rights hereunder to a competitor of the Company or
to a transferee that is acquiring beneficial ownership of fewer than 50,000
shares of Common Stock, with appropriate adjustments for recapitalizations and
the like. The Company must be given notice of any such assignment by a
Purchaser and the transferee must agree to be bound by the terms of this
Agreement. The Purchasers named on the
13
<PAGE> 16
signature page of this Agreement (and not any other holder of Registrable
Securities or any other Person) shall be permitted, in connection with a
transfer or disposition of Registrable Securities, to eliminate or impose
conditions or constraints on the ability of the transferee, as a holder of
Registrable Securities, to request a registration pursuant to Sections 1.1 and
1.2 and shall provide the Company with copies of such conditions or constraints
and the identity of such transferees.
8. Calculation of Percentage Interests in Registrable
Securities. For purposes of this Agreement, all references to a percentage of
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding at the time such calculation is made.
9. No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Securities
in this Agreement. The grant of registration rights to other securities
holders of the Company shall not, by itself, be deemed to be inconsistent with
this Agreement.
10. Remedies. Each holder of Registrable Securities, is
entitled to exercise all rights granted by law, including recovery of damages;
such rights not to extend to incidental or consequential damages.
11. Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby, it being intended that all of the rights and
privileges of the Purchaser shall be enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
13. Descriptive Headings. The descriptive headings of
the several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
14
<PAGE> 17
15. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
PONDER INDUSTRIES, INC.
By:
-----------------------------------
Name: Eugene L. Butler
Title: President
PURCHASERS:
WHITE OWL CAPITAL PARTNERS
By:
-----------------------------------
William R. Ziegler, General Partner
--------------------------------------
Arvind Sanger
--------------------------------------
Antony T. F. Lundy
--------------------------------------
Karl Bandtel
15
<PAGE> 1
EXHIBIT 10.1
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (the "Settlement
Agreement") is made as of September 26, 1997 (the "Effective Date") by and
among Ponder Industries, Inc. ("Ponder"), Eugene L. Butler ("Butler"), Larry
Armstrong ("Armstrong") and all of the debentureholders listed in paragraph 1
below (each being referred to individually as "Investor" and all being referred
to collectively as "Investors").
In consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Ponder, Butler, Armstrong, and the
Investors agree as follows:
1. Unless otherwise noted, as used herein,
"Claims" means all actions, causes of action, suits, debts,
dues, sums of money, accounts, controversies, agreements, promises, variances,
trespasses, damages, judgments, abstracts of judgments, liens, executions,
claims, and demands, losses and liabilities, of every kind and nature, in law
or equity, and in whatever form denominated, including without limitation
claims, counterclaims, cross-claims and/or third party claims, related to or
arising from the Debentures, the offering or subscription of the Debentures, or
the subject matter of the Lawsuit that Ponder or the Investors asserted or
could have asserted in the Lawsuit from the beginning of time to the Effective
Date of this settlement.
"Debentures" means Ponder Industries, Inc. 8% Convertible
Debentures Due April 26, 1999, including without limitation the governing
subscription agreement and all documents or agreements necessary or related
thereto.
<PAGE> 2
"Investor" or "Investors" means, individually or collectively,
AG Superfund International Partners, L.P., The Gifford Fund, Cameron Capital
Ltd., Darissco Diversified Investments, Inc., GAM Arbitrage, Inc., KA
Investments, LDC, Lake Management LDC, Leonardo, L.P., Raphael, L.P., Richcourt
$ Strategies, Inc., The Tail Wind Fund, Windward Island Limited, and Wood Gundy
London, Ltd.
"Lawsuit" means all allegations and/or matters related to or
contained in Civil Action No. 96-CV-9357T, Cameron Capital Ltd. v. Ponder
Industries, Inc., in the United States District Court for the Western District
of New York, and in Civil Action No. 96-CV-6534T, Lake Management LDC and KA
Investments LDC v. Ponder Industries, Inc., in the United States District Court
for the Western District of New York.
"Outstanding Unredeemed Balance" means, with respect to each
of the following Investors, the following dollar amounts:
<TABLE>
<CAPTION>
INVESTOR OUTSTANDING UNREDEEMED BALANCE
- - -------- ------------------------------
<S> <C>
AG Superfund International Partners, L.P. $ 150,000.00
The Gifford Fund $ 750,000.00
Cameron Capital Ltd. $ 800,000.00
Darissco Diversified Investments, Inc. $ 180,000.00
GAM Arbitrage, Inc. $ 250,000.00
KA Investments, LDC $ 150,000.00
Lake Management LDC $ 850,000.00
Leonardo, L.P. $ 1,250,000.00
Raphael, L.P. $ 300,000.00
Richcourt $ Strategies, Inc. $ 200,000.00
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
The Tail Wind Fund $ 600,000.00
Windward Island Limited $ 150,000.00
Wood Gundy London, Ltd. $ 750,000.00
--------------
$ 6,380,000.00
==============
</TABLE>
For the sake of convenience, the number of shares to be issued
pursuant to paragraph 4 hereof are as follows:
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- - -------- ----------------
<S> <C>
AG Superfund International Partners, L.P. 250,000
The Gifford Fund 1,250,000
Cameron Capital Ltd. 1,333,333
Darissco Diversified Investments, Inc. 300,000
GAM Arbitrage, Inc. 416,667
KA Investments, LDC 250,000
Lake Management LDC 1,416,667
Leonardo, L.P. 2,083,333
Raphael, L.P. 500,000
Richcourt $ Strategies, Inc. 333,333
The Tail Wind Fund 1,000,000
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
Windward Island Limited 250,000
Wood Gundy London, Ltd. 1,250,000
----------
10,633,333
==========
</TABLE>
"Swartz" means Eric S. Swartz or any entity he directly or
indirectly owns or controls, including without limitation Swartz Investments
L.L.C. and/or Swartz Investments, Inc., as well as any of their officers,
directors, employees, partners, shareholders, representatives, subsidiaries or
affiliates.
2. Within two (2) business days after delivery to each Investor
of the common stock certificates as required by paragraph 4 hereof and the
5-year non-callable warrants required by paragraph 6 hereof, counsel to each of
the parties shall execute a Stipulation of Dismissal With Prejudice and Without
Costs in the form attached as Exhibit "A" (the "Stipulation of Dismissal"),
which will dismiss with prejudice all Claims of the parties to this Settlement
Agreement against each other; provided, however, that neither Ponder nor the
Investors are releasing or are dismissing any of their Claims against Swartz,
and Ponder and the Investors expressly reserve and retain all such Claims. The
fully-executed Stipulation of Dismissal shall be delivered to the law firm of
Nixon, Hargrave, Devans & Doyle, attention: Carolyn G. Nussbaum, Esq., which
will, within two (2) business days after receiving the same, cause it to be
filed with the Court with an accompanying request that the Stipulation of
Dismissal be "So Ordered" by the Court.
3. Each of Ponder, Butler and Armstrong, on the one hand, and the
Investors, on the other hand, together with each of their respective
predecessors, successors, heirs, executors, administrators, assigns, parent
companies, subsidiaries and affiliates, their past and present directors,
officers, employees, agents, servants, attorneys, shareholders
4
<PAGE> 5
and/or partners hereby remise, release, acquit and forever discharge each
other, and each other's respective predecessors, successors, heirs, executors,
administrators, assigns, parent companies, subsidiaries and affiliates, their
past and present directors, officers, employees, agents, attorneys (including
without limitation each of the attorneys and law firms that appeared in the
Lawsuit on behalf of any party to this Settlement Agreement), servants,
shareholders, and/or partners from any and all Claims; provided, however, that
each and all of the parties to this Settlement Agreement specifically preserve,
and this release shall not apply to, any and all Claims that each or all of the
parties hereto ever had, now have or hereafter can, shall or may have against
Swartz; and provided further that the foregoing release shall not affect,
waive, limit, modify or otherwise change in any manner the obligations or
liabilities of any party under this Settlement Agreement or any instrument or
agreement executed and delivered pursuant to this Settlement Agreement, which
shall remain in full force and effect.
4. Ponder agrees to convert, or cause to be converted, each
Investor's Outstanding Unredeemed Balance and issue shares of Ponder common
stock to each said Investor at a conversion price of $0.60/share, subject to
adjustments for stock splits, reverse splits and the like, with no restrictions
placed upon the sale of such common stock. Within three (3) business days of
the Effective Date, Ponder shall cause to be delivered to the Investors
certificates representing such freely tradable shares, without restrictions and
bearing no legend. Ponder warrants that such shares will be unrestricted,
freely tradable and will not bear any legend. Ponder further warrants that it
will never interfere with or do anything intentionally to prevent, impede or
delay any Investor's freely trading any shares issued pursuant to this
Settlement Agreement, and Ponder acknowledges that this is a material
5
<PAGE> 6
representation on which each Investor will rely in executing this Settlement
Agreement and without which no Investor would execute this Settlement
Agreement. If, following the Effective Date, an Investor requests that the
certificates representing such shares be reregistered in street or nominee
name, and if Ponder's transfer agent fails to comply with such request within
thirty days following such request, any release executed by such Investor shall
be null and void, and such Investor shall no longer be bound by this Settlement
Agreement, and as to such Investor this Settlement Agreement shall become null
and void and shall have no further force and effect and neither this Settlement
Agreement, any of its provisions, nor any of the negotiations and proceedings
relating thereto: (a) shall be offered, received in evidence or otherwise used
in the Lawsuit or in any other action or proceeding for any purpose, or (b)
shall prejudice the rights of any of the parties hereto, who shall be restored
to their respective positions immediately prior to the execution of this
Settlement Agreement. Further, Ponder agrees that in the event subsequent
transfers of such shares are prohibited or enjoined by order of any court or
other governmental body, it shall, at its expense, upon the written request of
Investors holding 10% or more of the Outstanding Unredeemed Balance, promptly
file and cause to become effective a registration statement covering the resale
of the shares of Ponder common stock issued to the Investors and the shares
underlying the warrants held by the Investors, as described in paragraph 6
hereof. In such event, Ponder shall notify the other Investors and offer them
the opportunity to participate in such registration. The other Investors shall
have ten (10) days from the date of Ponder's notice to notify Ponder in writing
of their desire to participate. Ponder shall be required to file only one
registration statement pursuant to this paragraph (provided that it becomes
effective).
6
<PAGE> 7
5. In conjunction with the issuance of the shares of Ponder
common stock to the Investors, each Investor agrees to execute an irrevocable
proxy, on behalf of itself and its principals and affiliates, granting the
President of Ponder, ex-officio, the right to vote the shares of common stock
issued to Investors pursuant to paragraphs 4 and 6 for the election of the
persons nominated as Directors by the Board of Directors of Ponder at each
annual or special meeting of stockholders of Ponder; provided, however, that
Investors will not transfer or exchange their shares with anyone solely for the
purpose of terminating any such proxy, and it is understood, without
limitation, that a cash sale of shares to unaffiliated third-parties with no
restrictions or contractual buy-back rights is presumed not to be a transfer or
exchange solely for the purpose of terminating such proxy; and provided further
that this proxy shall expire on the earlier of the tenth anniversary of the
effective date of this Settlement Agreement or the transfer or exchange of such
shares in compliance with the preceding proviso.
6. Within three (3) business days of the Effective Date, Ponder
will deliver to each Investor 5-year non-callable warrants sufficient to
purchase a number of additional shares of Ponder common stock having an
aggregate purchase price equal to 15% of each Investor's Outstanding Unredeemed
Balance at a price of $1.00/share, such shares to be unrestricted, freely
tradable, unlegended and subject to the same provisions and protections
described in paragraph 4 and with the same attendant registration rights
described in paragraph 4 hereof. In the event that prior to the date upon
which any or all of the warrants are exercised, Ponder shall (a) declare a
dividend or make a distribution on the outstanding shares of its common stock
in shares of common stock, (b) subdivide or reclassify the outstanding shares
of its common stock into a greater number of shares, or (c) combine
7
<PAGE> 8
or reclassify the outstanding shares of its common stock into a smaller number
of shares, then the terms of all outstanding warrants shall be adjusted
accordingly. In the event that prior to the expiration of the warrants Ponder
merges with or into, or all of the outstanding common stock of Ponder is
acquired by, another person or entity, the terms of the warrants shall provide
that the holders of the warrants shall have the right thereafter upon payment
of the exercise price to purchase upon exercise of a warrant the kind and
amount of securities or cash receivable upon such consolidation or merger had
the warrant been exercised immediately prior to such action.
7. The Investors agree (a) to assign to Ponder, to the maximum
extent permitted by the law of whichever state Ponder selects to govern said
assignments, any and all Claims they each may have against Swartz, and (b) to
execute any and all documents Ponder may reasonably deem necessary to assign
and prosecute at Ponder's expense such Claims; provided, however, that, in
addition to paying expenses (including legal expenses) in connection with such
cooperation and assistance, Ponder agrees to take steps to minimize any
inconvenience or burden upon the Investors and agrees to maintain as
confidential such assignments except as may be required by law or necessary for
the prosecution or settlement of such Claims.
8. In the event that any Person (a "Third Party"), including
without limitation Swartz, asserts a claim against any or all of the Investors
which seeks to require that such Investor(s) pay to such Third Party (by way of
contribution, indemnification or otherwise, directly or indirectly) (a) an
amount in respect of the sums paid by such Third Party to Ponder or an amount
sought from such Third Party by Ponder, and (b) which in any way relates to the
subject matter of the Lawsuit or this Settlement Agreement ("Third Party
8
<PAGE> 9
Claim"), then Ponder shall take whatever actions are necessary to cause the
dismissal with prejudice of any/all such Third Party Claim(s), including, but
not limited to, the dismissal of Ponder's claims against the Third Party to the
extent contribution is sought against any or all of the Investors, within ten
(10) days of notice to Ponder of such Third Party Claim(s). In addition, in
the event any such Third Party Claim(s) is/are asserted, Ponder hereby agrees
to indemnify and hold harmless each and all of the Investors for all such
amounts sought thereby, plus attorneys' fees, costs and expenses incurred by
each and all of the Investors in connection with such Third Party Claim(s), up
to the amount which Ponder has collected or seeks to collect from such Third
Party(ies). In addition to the foregoing, it is agreed that the provisions of
New York General Obligations Law Section 15-108 shall be applicable in their
entirety to the settlement provided herein.
9. Ponder warrants that it is solvent, that the transactions
contemplated by this Settlement Agreement will not directly or indirectly
result in its insolvency, and that it has no present plans or intention to file
for or otherwise seek relief or protection under the bankruptcy laws of the
United States. Ponder further warrants that, for a period ending 366 days
after the Effective Date, if Ponder files a voluntary petition in bankruptcy,
or otherwise has an order for relief entered under 11 U.S.C. Section 101 et
seq., Ponder shall, at the sole discretion and written request of the
Investors, convert back to Debentures all or some of the shares issued
hereunder (according to the Investors' Outstanding Unredeemed Balances as
defined herein) and, to the extent Ponder may lawfully do so, restore the
parties to the status quo ante in every respect.
10. Ponder, Butler, Armstrong, and the Investors each represent
that prior to the execution of this Settlement Agreement they have fully
informed themselves of its
9
<PAGE> 10
terms, contents, conditions and effects and that no promise or representation
of any kind has been made to them except as expressly stated in this Settlement
Agreement. Ponder, Butler, Armstrong, and the Investors each represent that
they have relied solely and completely upon their own judgment and the advice
of their counsel in signing this Settlement Agreement and that this document
represents and expresses the entire agreement by and among the Investors and
Ponder, Butler and Armstrong concerning the subjects it purports to cover.
11. Ponder, Butler and Armstrong represent and warrant to the
Investors, and the Investors represent and warrant to Ponder, Butler and
Armstrong that they have not sold, assigned, transferred, conveyed or otherwise
disposed of any claim, demand, right or cause of action, relating to any matter
which is covered by this Settlement Agreement, that each is the sole owner of
such claim, demand, right or cause of action, and each has the power and
authority and has been duly authorized to enter into and perform this
Settlement Agreement, and that this agreement is the binding obligation of
each, enforceable in accordance with its terms.
12. Neither the execution of this Settlement Agreement nor
anything herein contained is intended to be, nor shall be construed to be, an
admission by Ponder, Butler and Armstrong or the Investors of any liability to
the other, now, in the past or in the future, or an admission of the existence
of facts upon which liability could be based. This Settlement Agreement is
contractual and it has been entered into to compromise disputed claims and to
avoid the uncertainty and expense of further litigation. This Settlement
Agreement and each of its provisions and any orders of the Court relating to it
shall not be offered or received in evidence in this Lawsuit or in any other
action or proceeding or otherwise used as an
10
<PAGE> 11
admission or concession as to the merits of the Lawsuit or the liability of any
nature on the part of any of the parties hereto except to enforce its terms.
13. It is expressly understood and agreed that except for the
persons and entities listed in paragraph 3 hereof as being released, there are
no intended third party beneficiaries of this Settlement Agreement and that no
persons other than the parties hereto shall have the rights and privileges to
enforce the provisions of this Settlement Agreement.
14. This Settlement Agreement may be amended, modified, waived or
discharged only by mutual written agreement of the affected parties hereto.
Any such amendment, modification, waiver or discharge shall not be deemed a
waiver of any other provision of this Settlement Agreement unless so specified.
15. Notwithstanding the place where this Settlement Agreement may
be executed by any of the parties, or any other factor, all terms and
provisions hereof shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be fully
performed in that State and without regard to the principles of conflicts of
laws thereof and any action brought to enforce, or otherwise arising out of
this Settlement Agreement, shall be brought only in either a federal or state
court sitting in the state of New York.
16. The failure of a party to insist upon strict adherence to any
of the terms of this Settlement Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Settlement
Agreement.
17. This Settlement Agreement and the Stipulation of Dismissal
together constitute the entire agreement among the parties hereto with respect
to the subject matter
11
<PAGE> 12
hereof, and supersede all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, respecting such subject matter.
18. This Settlement Agreement may be executed in multiple
originals or counterparts, each of which shall be deemed an original for all
purposes, but all such counterparts together shall constitute one and the same
instrument. Facsimile copies of this Settlement Agreement shall be considered
originals for all purposes.
19. Ponder, Butler, Armstrong, and the Investors hereby agree, on
their behalf and on behalf of their agents, employees, and legal and other
representatives that they each will keep confidential the terms of this
settlement hereunder and the other terms of this Settlement Agreement, and that
they will not disclose said terms to anyone other than their counsel of record.
Notwithstanding the foregoing, nothing contained herein shall prevent the
parties from responding to any inquiry about this settlement or its underlying
facts and circumstances by the Securities and Exchange Commission, any
self-regulatory organization or disclosing this Settlement Agreement or its
terms if ordered to do so by a court of competent jurisdiction or if otherwise
required to do so by law.
20. The parties hereto agree to execute, have acknowledged and
deliver to each other such other documents and instruments, if any, as may be
necessary or appropriate to evidence or carry out the terms of this Settlement
Agreement.
21. This Settlement Agreement shall be deemed to have been
mutually prepared by the parties hereto and shall not be construed against any
of them solely by reason of authorship.
12
<PAGE> 13
22. This Settlement Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, legal
representatives and successors; provided, however, that no assignment by any
party hereto shall operate to relieve such party of its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this
Settlement Agreement as of the date herein written above.
Dated: September 26, 1997
_________________________________________
PONDER INDUSTRIES, INC.
By:______________________________________
_________________________________________
EUGENE L. BUTLER
_________________________________________
LARRY ARMSTRONG
_________________________________________
CAMERON CAPITAL LTD.
_________________________________________
AG SUPERFUND INTERNATIONAL PARTNERS, L.P.
13
<PAGE> 14
By:______________________________________
_________________________________________
GAM ARBITRAGE, INC.
By:______________________________________
_________________________________________
LEONARDO, L.P.
By:______________________________________
_________________________________________
RAPHAEL, L.P.
By:______________________________________
_________________________________________
THE GIFFORD FUND
By:______________________________________
_________________________________________
DARISSCO DIVERSIFIED INVESTMENTS, INC.
By:______________________________________
_________________________________________
KA INVESTMENTS, LDC
By:______________________________________
_________________________________________
LAKE MANAGEMENT LDC
By:______________________________________
14
<PAGE> 15
_______________________________________________
RICHCOURT $ STRATEGIES, INC.
By:____________________________________________
_______________________________________________
THE TAIL WIND FUND
By:____________________________________________
_______________________________________________
WINDWARD ISLAND LIMITED
By:____________________________________________
_______________________________________________
WOOD GUNDY LONDON, LTD.
By:____________________________________________
15
<PAGE> 1
EXHIBIT 10.2
- - --------------------------------------------------------------------------------
PONDER INDUSTRIES, INC.
-----------------------------
SECURITIES PURCHASE AGREEMENT
DATED AS OF OCTOBER 15, 1997
-----------------------------
UNITS
CONSISTING OF
SENIOR NOTES
AND
WARRANTS
- - --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
<S> <C> <C>
1.1 Authorization and Description of the Units . . . . . . 1
1.2 Sale and Purchase of the Units . . . . . . . . . . . 1
1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Application of Proceeds . . . . . . . . . . . . . . . 2
1.5 Conditions of Closing . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the
Company; Stock Ownership . . . . . . . . . . . . . . . 3
2.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 4
2.3 Qualification; Enforceability . . . . . . . . . . . . 4
2.4 Business and Property; Financial Statements . . . . . 5
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc . . . . . . . . . . . . . . . . . . 5
2.6 Consents and Approvals . . . . . . . . . . . . . . . 6
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . 6
2.8 Private Offering. . . . . . . . . . . . . . . . . . . 6
2.9 No Defaults; Debt, etc; Liens . . . . . . . . . . . . 6
2.10 Full Disclosure . . . . . . . . . . . . . . . . . . . 7
2.11 Environmental Matters . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation . . . . . . . . . . . . . . 8
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information . . . . . . . . . . 11
4.2 Certain Restrictions . . . . . . . . . . . . . . . . 12
4.3 Maintenance of Office . . . . . . . . . . . . . . . . 13
4.4 Corporate Existence . . . . . . . . . . . . . . . . . 13
4.5 Compliance with Laws; Government Filings . . . . . . 13
</TABLE>
- ii -
<PAGE> 3
<TABLE>
<S> <C> <C>
4.6 Environmental Matters . . . . . . . . . . . . . . . . 13
4.7 Certain Contracts . . . . . . . . . . . . . . . . . . 14
4.8 Participation Rights. . . . . . . . . . . . . . . . . 14
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default . . . . . . . . . . . . . . . . . . 15
5.2 Appointment of Director . . . . . . . . . . . . . . . 16
ARTICLE VI
MISCELLANEOUS
6.1 Expenses . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Reliance on and Survival of Representations . . . . . 17
6.3 Amendment and Waiver . . . . . . . . . . . . . . . . 17
6.4 Register . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Directly or Indirectly . . . . . . . . . . . . . . . 19
6.6 Successors and Assigns . . . . . . . . . . . . . . . 19
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . 19
6.8 LAW GOVERNING . . . . . . . . . . . . . . . . . . . . 19
6.9 SUBMISSION TO JURISDICTION;
Service of Process . . . . . . . . . . . . . . . . . 19
6.10 Headings, etc . . . . . . . . . . . . . . . . . . . . 20
6.11 Entire Agreement . . . . . . . . . . . . . . . . . . 21
6.12 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . 21
6.13 No Waiver . . . . . . . . . . . . . . . . . . . . . . 21
6.14 Applicable Interest Rate . . . . . . . . . . . . . . 21
6.15 Indemnification . . . . . . . . . . . . . . . . . . . 22
6.16 Interpretive Provision . . . . . . . . . . . . . . . 23
6.17 Severability . . . . . . . . . . . . . . . . . . . . 23
6.18 Counterparts . . . . . . . . . . . . . . . . . . . . 23
6.19 Finder's Fee . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<TABLE>
<S> <C>
Schedules:
Schedule 1.2 Purchasers
Schedule 1.4 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Required Consents
Schedule 2.7 Litigation
Schedule 2.9 Debts; Liens
</TABLE>
- iii -
<PAGE> 4
<TABLE>
<S> <C>
Exhibits:
Exhibit A Form of Senior Note
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Company Counsel
Exhibit D Form of Registration Rights Agreement
</TABLE>
- iv -
<PAGE> 5
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October 15, 1997,
between PONDER INDUSTRIES, INC., a Delaware corporation, and each of the
PURCHASERS who have executed this Agreement.
WHEREAS, the capitalized terms used herein have the meaning given
to such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of and wishes to
sell to each Purchaser the number of Units set forth opposite such Purchaser's
name in Schedule 1.2; and
WHEREAS, each Purchaser wishes to purchase the number of Units
set forth opposite such Purchaser's name in Schedule 1.2, subject to the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the Company
and each Purchaser, intending to be mutually bound, agree as follows:
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units.
The Company has authorized the issuance and sale of 100 Units,
consisting of Senior Notes in the aggregate principal amount of $2,500,000 and
Warrants to purchase an aggregate of 4,000,000 shares of Common Stock. Each
Senior Note shall be in the form of Exhibit A attached hereto and each Warrant
in the form of Exhibit B attached hereto, in each case with such appropriate
insertions therein to reflect the number of Units so purchased and the date of
the purchase.
1.2 Sale and Purchase of the Units.
The Company will sell to each of the Purchasers and each
Purchaser severally will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company contained herein and in the Exhibits hereto, such
number of Units as are set forth in Schedule 1.2, at the purchase price set
forth in Schedule 1.2.
<PAGE> 6
1.3 Closing.
The initial sale and purchase of Units shall take place on the
date hereof (the "Closing") at the offices of Parson & Brown LLP, 666 Third
Avenue, 9th Floor, New York, New York 10017. At the Closing the Company will
deliver to each Purchaser one or more Senior Notes and one or more Warrants in
the aggregate amount to be purchased by each Purchaser, each dated the date of
the Closing and registered in the name of such Purchaser, against delivery by
each Purchaser of the purchase price therefor by check or wire transfer of such
purchase price to such account as the Company shall designate. The failure of
any Purchaser to deliver such purchase price shall not excuse any other
Purchaser from delivery of his purchase price.
1.4 Application of Proceeds.
The Company shall apply the proceeds from the sale of the Units
as set forth in the Schedule 1.4 attached hereto.
1.5 Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the Units to
be purchased by him is subject to satisfaction, prior to or simultaneously with
the closing, of the following conditions:
(a) The Company shall have delivered a certificate of an
officer of the Company, dated the Closing Date, certifying that the
representations and warranties of the Company contained in this Agreement and
any Exhibit to which the Company is a party are true and correct in all
material respects and that the Company has performed in all material respects
all agreements and complied with all conditions contained in this Agreement and
in any Exhibit to which it is a party that are required to be performed or
complied with on or before the Closing Date.
(b) The Company shall have delivered a certificate of the
Secretary of the Company, dated the Closing Date, certifying as to (A) the
certificate of incorporation of the Company and any amendments thereto, (B) the
by-laws of the Company, and (C) resolutions of the Board of Directors of the
Company authorizing the execution and delivery of the Senior Notes, the
Warrants, this Agreement and all Exhibits to which the Company is a party and
reserving for issuance such number of shares of Common Stock as is required to
deliver shares of Common Stock upon exercise of rights therefor as provided in
the Senior Notes and the Warrants.
(c) The Company shall have executed and delivered to the
Purchasers the Registration Rights Agreement.
(d) Each of the other Exhibits hereto shall have been executed
and delivered to the Purchasers by the parties thereto.
- 2 -
<PAGE> 7
(e) Fulbright & Jaworski L.L.P., counsel for the Company,
shall have delivered to the Purchasers the Opinion of Company Counsel.
(f) All proceedings taken in connection with the
authorization, issuance and sale of the Units and the consummation of the
transactions contemplated hereby to occur on or prior to the Closing and all
documents and papers relating thereto shall be satisfactory in form, scope and
substance to the Purchasers and their counsel, and each Purchaser and their
counsel shall have received copies (executed or certified as may be
appropriate) of such documents and papers as each may reasonably request in
connection therewith.
(g) The Company shall have paid the reasonable legal fees and
other expenses of the Purchasers' counsel and all other expenses for which the
Company is obligated to pay pursuant to Section 6.1 and for which the Company
shall have received invoices on or prior to the closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own or hold under lease the
property it purports to own or hold under lease, to carry on its business as
now conducted, to enter into this Agreement and the other Exhibits to which it
is or is to be a party, to issue and sell the Units (including the Senior Notes
and the Warrants), to perform its obligations under this Agreement, the Units
(including the Senior Notes and the Warrants), and the other Exhibits to which
it is or is to be a party and to consummate the transactions contemplated
hereby and thereby. The Company has, by all necessary corporate action (no
action of stockholders of the Company being required by law, by its charter or
by-laws, or otherwise in connection therewith), duly authorized the execution
and delivery of this Agreement, the Units (including the Senior Notes and the
Warrants), and the other Exhibits to which it is or is to be a party, the
performance of its obligations hereunder and thereunder and the consummation of
the transactions contemplated hereby and thereby.
(b) Schedule 2.1(b) sets forth the authorized capital stock of
the Company. All such authorized capital stock has been duly and validly
authorized, and either are, or will be when issued, duly and validly issued and
outstanding and are, or will be, fully paid and nonassessable. Such capital
stock is not subject to any rights (either preemptive or otherwise) or warrants
to subscribe for or to purchase, nor any options for the purchase of, nor any
agreements providing for the issue (contingent or otherwise) of, nor any calls,
commitments or claims of any
- 3 -
<PAGE> 8
character relating thereto or any stock or securities convertible into or
exchangeable for any capital stock, other than as set forth in Schedule 2.1(b).
All securities of the Company have been issued in compliance with the
Securities Act and applicable state securities laws. The shares of Common
Stock that will be issuable pursuant to the Senior Notes and the Warrants in
the manner referred to in the Senior Notes and the Warrants have been duly
authorized and reserved for issuance, are not subject to any preemptive or
similar rights on the part of the holders of any shares of capital stock or
other securities of the Company, and when issued in the manner referred to in
the Senior Notes and the Warrants will be validly issued, fully paid and
nonassessable.
(c) Schedule 2.1(c) sets forth the authorized, issued and
outstanding capital stock of each Subsidiary, including the record ownership
thereof, and the ownership interests of the Company (direct and indirect), in
any other Person. There are no liens on any capital stock of any Subsidiary or
on the Company's ownership interests in any other Person, except as set forth
in Schedule 2.1(c). There are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from the
Company or any Subsidiary of any shares of capital stock of any Subsidiary or
any other securities convertible into or exchangeable for any shares of capital
stock of any Subsidiary, except as set forth in Schedule 2.1(c).
2.2 Subsidiaries.
Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own or hold
under lease the property it purports to own or hold under lease, and to carry
on its business as conducted by it.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified
or licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect.
(b) This Agreement, the Senior Notes, the Warrants and the
other Exhibits hereto have been (or at the Closing will be, as the case may be)
duly executed and delivered by the Company, and, assuming due execution and
delivery by the Purchasers of this Agreement and the Exhibits that require
execution by the Purchasers, constitute (or upon execution and delivery at the
Closing, will constitute) the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect relating to or affecting the enforcement of creditors' rights generally
or by the application of equitable principles (whether such application is
considered in equity or in law).
- 4 -
<PAGE> 9
2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and complete
copy of the Unit Offering Disclosure Documents. The Unit Offering Disclosure
Documents correctly describe in all material respects the business and material
properties of the Company and its Subsidiaries and the nature of their
operations as of the date thereof. The Financial Statements included in the
Unit Offering Disclosure Documents, were prepared in accordance with GAAP,
applied on a consistent basis throughout the periods specified, and present
fairly in all material respects the financial position of the Company and its
Subsidiaries for the respective periods specified. Except as specifically
described in the Financial Statements contained in the Unit Offering Disclosure
Documents, neither the Company nor any Subsidiary has as of the date thereof
any material liabilities, contingent or otherwise, which under GAAP are
required to be disclosed therein.
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc.
(a) Except as set forth in Schedule 2.5, neither the Company
nor any Subsidiary is (i) in violation of any term or provision of its
corporate charter or by-laws or (ii) in violation of or default under (A) any
term or provision of any agreement, indenture, mortgage, instrument, permit or
license to which it is a party or by which it or any of its properties may be
bound or affected or (B) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties (including,
without limitation, any statute, law, rule, regulation, ordinance or order
relating to occupational health and safety standards, or equal employment
practice requirements), the consequences of which violation or default, either
in any one case or taken together with all other such violations or defaults,
(x) could have a Material Adverse Effect or (y) could materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, the Senior Notes, the Warrants or any other Exhibit to which the
Company is a party.
(b) Except as set forth in Schedule 2.5, neither the
execution, delivery or performance by the Company of this Agreement, the Senior
Notes or the Warrants (including, without limitation, the issuance of Common
Stock pursuant to the Senior Notes or the Warrants), or any other Exhibit to
which it is a party, nor compliance by the Company with the respective terms
hereof and thereof will result in (i) any violation of or be in conflict with
or constitute a default under (A) any term or provision of the corporate
charter or by-laws of the Company or any Subsidiary, (B) any term or provision
of any agreement, indenture, mortgage, instrument, permit or license to which
it is a party or by which it or any of its properties may be bound or affected,
or (C) to the Company's knowledge, any existing statute, law, governmental
rule, regulation or ordinance, or any order of any court, arbitrator or
Governmental Body applicable to it or its properties, or (ii) the creation of
(or impose any obligation on the Company or any Subsidiary to create) any lien
upon any of the properties or assets of the Company or any Subsidiary.
- 5 -
<PAGE> 10
2.6 Consents and Approvals.
Except for the Required Consents set forth in Schedule 2.6, no
consent, approval or authorization of, or filing or registration with, or the
taking of any other action in respect of, any Governmental Body or any other
Person (including any trustee or holder of any indebtedness, securities or
other obligations of the Company or any Subsidiary) is required (i) for or in
connection with the valid execution and delivery by the Company of, or the
performance by the Company of any obligation under, this Agreement or any
Exhibit to which it is a party or the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation,
the offer, issue, sale and delivery of the Senior Notes or the Warrants
(including without limitation, the issuance of stock pursuant to the Senior
Notes or the Warrants) or (ii) as a condition to the legality, validity or
enforceability as against the Company of this Agreement or any Exhibit to which
it is a party. The Company shall use all reasonable efforts to obtain the
Required Consents on or before the Closing. In the event of the failure of
the Company to receive the Required Consents within ten Business Days of the
date hereof, this Agreement shall terminate, except for the obligations of the
Company pursuant to Section 6.1.
2.7 Litigation.
Except as set forth on Schedule 2.7, there are no actions, suits
or proceedings pending (or, to the knowledge of the Company, threatened)
against the Company or any Subsidiary or affecting any of their respective
properties in any court or before any arbitrator of any kind or before or by
any Governmental Body, which (i) question the validity or legality of this
Agreement, the Senior Notes or the Warrants or any other Exhibit or any action
taken or to be taken pursuant hereto or thereto or (ii) might result, either in
any one case or in the aggregate, in (A) a material impairment of the ability
of the Company to perform its obligations under this Agreement or any other
Exhibit to which it is a party, or (B) a Material Adverse Effect.
2.8 Private Offering.
Neither the Company nor any other person acting on behalf of the
Company has taken, or will take, any action which would subject the issuance or
sale of the Units, Senior Notes or Warrants to Section 5 of the Securities Act
or to the registration or qualification requirements of any securities law of
the State of New York or the State of Texas.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 correctly lists (i) all secured and unsecured
funded debt of the Company and any Subsidiary and (ii) any liens (other than
Permitted Liens) on any assets of the Company or any Subsidiary, in each case,
as of the date hereof. Upon receipt of any Required Consent, no default or
event of default, after giving effect to the issuance and sale of the Units and
the consummation of the other transactions contemplated by this Agreement and
the Exhibits, will exist (or, but for the waiver thereof, would exist) under
any instrument or agreement evidencing, providing for the issuance or securing
of, or otherwise relating to, any such debt or liens.
- 6 -
<PAGE> 11
(b) There is no pending foreclosure with respect to any assets
or properties of the Company or any Subsidiary, and as of the Closing there
will not be any pending foreclosure with respect thereto.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Unit Offering Disclosure
Documents or any document, certificate or instrument delivered to the
Purchasers by or on behalf of the Company in connection with the transactions
contemplated by this Agreement as of their respective dates contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which the same were made, not misleading.
2.11 Environmental Matters.
(a) To the Company's knowledge, the Company and the
Subsidiaries hold all Environmental Permits required under all Environmental
Laws except to the extent failure to have any such Environmental Permit has not
had and will not have a Material Adverse Effect.
(b) To the Company's knowledge, the Company and the
Subsidiaries currently are, and at all times heretofore have been, in
compliance with all terms and conditions of all such Environmental Permits and
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws except to the extent failure to comply therewith, in any one
case or in the aggregate, has not had and will not have a Material Adverse
Effect.
(c) Neither any of the Company nor any Subsidiary has ever
received, and, to the Company's knowledge, no predecessor in interest of any
the Company and the Subsidiaries has ever received in respect of any of the
Company Premises, from any Governmental Body or other Person any written notice
of, and the Company has no knowledge of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
that could reasonably be expected to interfere with or prevent compliance or
continued compliance in all material respects with the Environmental Permits
referred to in Section 2.11(a) or any scheduled renewals thereof or any
Environmental Laws, or that could reasonably be expected to give rise to any
liability on the part of any the Company and the Subsidiaries or otherwise form
the basis of any claim, action, demand, request, notice, suit, proceeding,
hearing, study or investigation (collectively, "Environmental Claims")
involving any of the Company and the Subsidiaries based on or related to (i) a
violation of any Environmental Law or (ii) the manufacture, refining,
generation, processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport, arranging for transport or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Substance, other than liabilities or Environmental Claims referred to in this
Section 2.11(c) that have not had and will not have, either in any one case or
in the aggregate, a Material Adverse Effect.
- 7 -
<PAGE> 12
(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
Senior Notes and of the Warrants hereby acknowledges that the Senior Notes and
the Warrants are not being registered (i) under the Securities Act of 1933, as
amended (the "Act") or (ii) under any applicable state securities law; and that
the Company's reliance on the Section 4(2) exemption of the Act and under
applicable state securities laws is predicated in part on the representations
hereby made to the Company in the Agreement.
(b) The Purchaser of the Senior Notes will not sell or
transfer all or any part of the Senior Notes unless and until he shall first
have given notice to the Company describing such sale or transfer and, if
requested by the Company, furnished to the Company either (a) an opinion,
reasonably satisfactory to counsel for the Company, of counsel skilled in
securities matters (selected by the Purchaser and reasonably satisfactory to
the Company) to the effect that the proposed sale or transfer may be made
without registration under the Act and without registration or qualification
under applicable state law, or (b) an interpretive letter from the Securities
and Exchange Commission to the effect that no enforcement action will be
recommended if the proposed sale or transfer is made without registration under
the Act. The Purchaser acknowledges that the Senior Notes and the Warrants
(and upon any exercise thereof,
- 8 -
<PAGE> 13
the certificates representing the Common Stock) subscribed for hereby will bear
a legend restricting transfer thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM
THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL
AND STATE SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT
REPRESENTATION ON THE PART OF THE PURCHASER THEREOF.
THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH
THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM."
(c) The Company may refuse to recognize a transfer of the
Senior Notes or the Warrants on its books should a Purchaser attempt to
transfer the Senior Notes or the Warrants otherwise than in compliance with
this Section 3.1.
(d) The Purchaser has adequate means of providing for his
current needs and possible personal contingencies, he anticipates no need now
or in the foreseeable future to sell the Senior Notes or the Warrants (or upon
any exercise thereof, the Common Stock) which he is purchasing and he can
afford the loss of his entire investment in the Company.
(e) The Purchaser is an "accredited investor," as defined in
Rule 501 of Regulation D, promulgated under the Act.
(f) The Purchaser has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of investment in the Company and of making an informed investment
decision.
(g) Each Purchaser will be the only owner, beneficial or
otherwise, of the Senior Notes and the Warrants (and upon any exercise thereof,
the Common Stock) being purchased by the Purchaser hereunder.
(h) The Purchaser has received and read and is familiar with
the Unit Offering Disclosure Documents and confirms that all documents, records
and books pertaining to his proposed investment in the Company have been made
available to him. The Purchaser is aware that no federal or state agency has
passed upon the Senior Notes, the Warrants or the Common Stock or made any
finding or determination concerning the fairness of the investment represented
thereby.
(i) The Purchaser had an opportunity to ask questions of and
receive answers from representatives of the Company concerning the terms and
conditions of this investment, and
- 9 -
<PAGE> 14
all such questions have been answered to the full satisfaction of the
Purchaser. The Purchaser understands that no person other than the Company has
been authorized to make any representation or warranty other than as contained
herein (inclusive of the Exhibits hereto) or in the Unit Offering Disclosure
Documents and, if made, such representation may not be relied on unless it is
made in writing and signed by the Company. The Company has not rendered any
investment or tax advice to the Purchaser with respect to the suitability of an
investment in the Senior Notes and the Warrants (and upon any exercise thereof,
the Common Stock) or the tax consequences thereof. The Company has urged each
Purchaser to consult his own tax adviser concerning any tax matters relating to
this investment.
(j) The Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) which Purchaser is acquiring will be acquired for
his own account for investment. The Purchaser intends to hold the Senior Notes
and the Warrants (and upon any exercise thereof, the Common Stock) indefinitely
and he is not purchasing such securities with a view toward distribution in a
manner which would require registration under the Securities Act, and he does
not presently have any reasons to anticipate any change in his circumstances or
other particular occasion or event which would cause him to sell, the Senior
Notes and the Warrants (or upon any conversion or exercise thereof, the Common
Stock) which he is purchasing hereunder, subject, nevertheless, to any
requirement of law that the disposition of his property shall at all times be
within his control.
(k) The Purchaser acknowledges that it has been called to his
attention both in the Unit Offering Disclosure Documents and by those
individuals with whom he has dealt in connection with his investment in the
Company that his investment in the Company involves a high degree of risk.
(l) The Purchaser has received no representations or
warranties from the Company other than those contained herein (inclusive of the
Exhibits hereto) or in the Unit Offering Disclosure Documents or otherwise
furnished in writing and signed by the Company.
(m) The Purchaser, if a corporation, partnership, trust or
other form of business entity: is authorized and otherwise duly qualified to
purchase and hold the Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) and to enter into this Agreement and the Exhibits
hereto to which it is a signatory; represents that the purchase of the Senior
Notes and the Warrants (and upon any conversion or exercise thereof, the Common
Stock) will not result in a breach of or violation of the terms or provisions
of, or constitute a default under, the certificate of incorporation, by-laws,
or other charter document of such entity or any indenture or other agreement or
instrument by which the entity or its property is bound, or violate any
applicable law, administrative regulation, or court decree; and represents that
such entity has its principal place of business as set forth on its signature
page and that such entity has not been formed for the specific purpose of
acquiring the Senior Notes and the Warrants (or upon any exercise thereof, the
Common Stock). If the Purchaser is one of the aforementioned entities, it
shall supply any additional written information that may be required by the
Company.
- 10 -
<PAGE> 15
(n) All of the information that the Purchaser has heretofore
furnished or which is set forth in this Agreement and the Schedules and
Exhibits hereto with respect to his financial position and business status is
correct and complete as of the date of this Agreement and, if there should be
any material change in such information prior to the Closing, the Purchaser
will immediately furnish the revised or corrected information to the Company.
ARTICLE IV
COVENANTS
The Company, so long as any Senior Note shall be outstanding,
agrees to perform and comply with each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Holder of the Senior Notes the
following:
(a) Financial Information. The Company shall send, or cause
to be sent, to each Holder (i) its consolidated audited annual financial
statements, fairly and accurately presenting in all material respects the
financial condition and the results of operations and cash flows of the Company
and its Subsidiaries, prepared in accordance with GAAP, as soon as is
practicable after the same have been issued but in any case within ninety days
of the end of its fiscal year, together with the report thereon by independent
public auditors, (ii) its unaudited quarterly consolidated financial
statements, of each of the first three fiscal quarters of its fiscal year,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the end of each fiscal quarter but in any case within forty-five days of the
end of its fiscal quarters, certified by its duly authorized chief financial
officer, together with a certificate signed by its duly authorized chief
executive officer or treasurer to the effect that, based upon due inquiry and
investigation, during such fiscal quarter no Event of Default, or event which
with the passing of time or giving of notice would constitute an Event of
Default, occurred, (iii) a copy of any monthly financial report or statement of
the Company and/or any of its Subsidiaries as may be prepared by or for the
directors of such company or for any other Person, as soon as same is
available, and (iv) such financial or other information relating to the Company
and its Subsidiaries or any of the transactions contemplated by this Agreement
or any Exhibit to which the Company is a party, as may be reasonably requested
by a Majority-in-Interest of the Holders.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any other holder of funded debt
of the Company or Subsidiary, or any notices which are so furnished, in each
case pursuant to the terms of any indenture, loan, credit or similar
- 11 -
<PAGE> 16
agreement and not otherwise required to be furnished pursuant to any other
clause of this Section 4.1
(c) Commission and Other Reports. Promptly upon their
becoming available (and in any event within five Business Days thereafter),
copies of (i) all financial statements, reports, notices, proxy statements and
other information sent or made available generally by the Company to any class
of its security holders (in their capacity as such) or by any Subsidiary to any
class of its security holders other than the Company or another Subsidiary,
(ii) all regular and periodic reports and all registration statements, forms
and prospectuses filed by the Company or any of its Subsidiaries with any
securities exchange or with the Commission, and (iii) all press releases and
other statements made available generally by the Company or any of its
Subsidiaries to the public concerning material developments in the business of
the Company or any of its Subsidiaries.
(d) Defaults, etc. Promptly upon and in any event within five
Business Days after any officer of the Company obtaining knowledge of any
condition or event which constitutes a Default or an Event of Default or
becoming aware that the Holder of any Senior Note has given any notice or taken
any other action with respect to a claimed Default or Event of Default or that
any person has given any notice to the Company or any of its Subsidiaries or
taken any other action with respect to a claimed default under or in respect of
any debt for borrowed money in excess of $100,000 or with respect to the
occurrence or existence of any event or condition of such type, written notice
in reasonable detail specifying the facts and circumstances of such condition,
event or action.
(e) Litigation, etc. Promptly and in any event within five
Business Days after any officer of the Company obtains knowledge of any
litigation, administrative proceeding or judgment (i) affecting the Company or
any of its Subsidiaries which involves claims against the Company or its
Subsidiaries aggregating, when taken together with all other such litigation,
proceedings and judgments, $100,000 which are not considered by the Company, in
its reasonable judgment, to be covered by insurance, or (ii) relating in any
material way to this Agreement, the Senior Notes, or any other Exhibit, notice
thereof specifying in each case in reasonable detail the facts and
circumstances surrounding such litigation, proceeding or judgment.
4.2 Certain Restrictions.
(a) The Company shall not pay any dividend or distribution in
respect of any class of its capital stock or make any payment on account of the
purchase, redemption or other retirement of any of its shares of capital stock
without the prior written consent of the Majority-in-Interest of the Holders of
the Senior Notes.
(b) Without the prior written consent of the Majority-in-
Interest of the Holders of the Senior Notes, for so long as the Senior Notes
are outstanding, the Company shall not, and shall not permit any Subsidiary to,
mortgage, pledge, create a lien or security interest in or otherwise encumber
any assets or property of the Company or any Subsidiary, except as
- 12 -
<PAGE> 17
contemplated by any loan or security document specifically referenced in any of
the Schedules to this Agreement and except for Permitted Liens.
(c) Without the prior written consent of the Majority-in-
Interest of the Holders of the Senior Notes, the Company shall not, and shall
not permit any Subsidiary to, voluntarily liquidate or dissolve, or consolidate
or merge with or into any other Person (except where the Company or Subsidiary
is the surviving entity and the net worth of such surviving entity is at least
equal to the net worth of the Company or Subsidiary, as the case may be,
immediately prior thereto), or sell, lease, transfer, contribute or otherwise
dispose of all or substantially all of its assets to any other Person (other
than sales of inventory and worn out and obsolete assets in the ordinary course
of business).
4.3 Maintenance of Office.
Until the principal of and interest on the Senior Notes has been
paid in full to the Holders, (i) the Company shall maintain its principal
office at a location in the United States of America where notices,
presentations and demands in respect of this Agreement and the Senior Notes may
be made upon it, and (ii) shall notify each Holder of a Senior Note in writing
of any change of location of such office at least 20 days prior to such change
of location. Such principal office shall first be maintained at 5005 Riverway,
Suite 550, Houston, Texas 77056.
4.4 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to, do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
4.5 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries to,
comply in all material respects with all laws, statutes, rules, regulations and
ordinances and all orders of, and restrictions imposed by, any court,
arbitrator or Governmental Body in respect of the conduct of the business of
the Company or Subsidiary and the ownership of the properties of the Company or
Subsidiary (including, without limitation, applicable laws, statutes, rules,
regulations, ordinances and orders relating to occupational health and safety
standards, consumer protection and equal employment opportunities), except to
the extent that the applicability or validity of any such law, statute, rule,
regulation, ordinance or order is being contested in good faith by appropriate
and timely actions or proceedings diligently pursued, and for which such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made.
4.6 Environmental Matters.
(a) The Company shall, and shall cause each of its
Subsidiaries to, (i) obtain and maintain in full force and affect all
Environmental Permits that may be required from time to time in order for the
Company and such Subsidiary to comply in all material respects with all
Environmental Laws applicable to the Company or such Subsidiaries and (ii) be
and remain in
- 13 -
<PAGE> 18
compliance in all material respects with all terms and conditions of all such
Environmental Permits and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present
at any time on, in, under or above the Company Premises or any part thereof or
(B) the Company Premises or any part thereof to be used at any time to
manufacture, generate, refine, process, distribute, use, sell, treat, receive,
store, dispose of, transport, arrange for transport of, handle, or be involved
in any other activity involving, any Hazardous Substance, or (ii) conduct any
such activities described in the foregoing clause (i) on the Company Premises
or anywhere else, except, in each case referred to in the foregoing clauses (i)
and (ii), in a manner that is in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits or to an extent that
will not have a Material Adverse Effect.
4.7 Certain Contracts.
The Company shall notify the Holders of the Senior Notes promptly
following receipt of notice of any default or assertion of any material breach
under any existing Material Contract, and shall notify the Holders of the
Senior Notes promptly following the entering into of any new Material Contract.
4.8 Participation Rights.
The Holders of the Senior Notes, acting by a Majority-in-
Interest, shall have a preferred right to participate in any future debt or
equity financing of the Company effected prior to January 1, 1999, on the
following basis. The Company agrees to negotiate in good faith with the
Holders of the Senior Notes for the provision of any such debt or equity
financing before negotiating with any other potential provider of any such
financing. If the Company and such Holders cannot agree upon the terms of such
debt or equity financing, the Company may negotiate with third parties for the
provision of such debt or equity financing, and may obtain debt financing
without being required to offer to allow the Holders to provide such debt
financing on the same terms. If the Company and any such third party reach an
agreement upon the terms of any equity financing, the Company shall give notice
to the Holders specifying such terms and the Holders shall have the option,
exercisable within 30 days of receipt of such notice, to provide such equity
financing on the same terms. If the Holders waive such option, or do not
exercise such option within such 30-day period, the Company may, for a period
of 60 days from the date of such waiver or the expiration of such period,
obtain such equity financing from such third party on the terms specified in
the notice or on terms no less favorable to the Company.
- 14 -
<PAGE> 19
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. In the event that:
(i) the Company defaults for more than five days after written
notice from any Holder hereof in making any payment required to be made on the
Senior Notes; or
(ii) any other obligation of the Company or any Subsidiary for
the payment of borrowed money in excess of $100,000 becomes or is declared to
be due and payable prior to its expressed maturity, unless the validity of any
such indebtedness or obligation is being contested in good faith by appropriate
proceedings; or
(iii) the Company defaults in the observance or performance in
any material respect of any of the covenants and agreements (other than
covenants and agreements with respect to the payment of principal or interest
on the Senior Notes) contained in this Agreement or in any Exhibit hereto and
if the same is capable of being cured the continuance of the same for 30 days
after written notice of such default from any Holder; or
(iv) any warrant of attachment, execution or other writ is
levied upon any property or assets of the Company or any Subsidiary in excess
of $100,000 and is not discharged or stayed (including stays resulting from the
filing of an appeal) within 30 days; or all or any substantial part of the
assets or properties of the Company or any Subsidiary are condemned, seized or
appropriated by any government or governmental authority; or any order is
entered in any proceeding directing winding up, dissolution or split-up of the
Company or any Subsidiary; or
(v) any representation or warranty of the Company made in this
Agreement or any Exhibit hereto or in connection herewith or therewith shall
prove to have been false or incorrect or breached in any material respect on
the date on which made, and if the same is capable of being cured the
continuance of same for 20 days after receiving notice of such default from any
Holder; or
(vi) the Company or any Subsidiary hereafter makes an
assignment for the benefit of creditors, or files a petition in bankruptcy as
to itself, is adjudicated insolvent or bankrupt, petitions a receiver of or any
trustee for the Company or any Subsidiary or any substantial part of the
property of the Company or any Subsidiary under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or if there is hereafter
commenced against the Company or any Subsidiary any such proceeding and an
order approving the petition is entered or such proceeding remains undismissed
for a period of 60 days, or the Company or any Subsidiary by any act or
omission to act indicates its consent to or approval of or acquiescence in any
such proceeding or the appointment of any receiver of, or trustee for, the
Company or any
- 15 -
<PAGE> 20
Subsidiary or any substantial part of its properties, or suffers any such
receivership or trusteeship to continue undischarged for a period of 60 days;
then, and in any such event, and at any time thereafter, if such event shall
then be continuing, any Holder as to Section 5.1(i) and a Majority-in-Interest
of all Holders as to any other Event of Default may, by written notice to the
Company, declare the Senior Notes due and payable, whereupon the same shall be
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived.
5.2 Appointment of Director.
Until such time as the entire principal and interest on the
Senior Notes shall have been paid in full, the Majority-in-Interest may, but
need not, designate up to two persons to serve as directors of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I hereof
are consummated (unless the failure to consummate such transactions is due to a
breach by the Purchasers of their obligations hereunder), the Company shall:
(a) directly pay the reasonable fees and expenses of special counsel to the
Purchasers incurred in connection with such transactions (up to $35,000), in
connection with compliance by the Purchasers with any obligations imposed by or
under the Securities Exchange Act as a consequence of the issuance of the
Senior Notes and Warrants or the conversion or exercise thereof (including,
without limitation, pursuant to Sections 13(d) and 16 of that Act) (up to
$10,000 for the initial filings under Sections 13(d) and 16 of that Act and up
to $2,500 per year thereafter so long as the Purchasers are subject to such
Sections), or in connection with any actual or proposed amendment, waiver or
consent pursuant to the provisions hereof, and all other expenses in connection
with the foregoing (including, without limitation, document production and
reproduction expenses); (b) reimburse each Purchaser for his reasonable out-of-
pocket expenses in connection with each such actual or proposed amendment,
waiver or consent pursuant to the provisions of this Agreement, and any items
of the character referred to in clause (a) which shall have been paid by any
Purchaser; and (d) pay all documentary, stamp or similar taxes (including
interest and penalties) which may be payable in respect of the execution and
delivery or issuance (but not the transfer) of any of the Senior Notes or of
any amendment of, or waiver or consent under or with respect to, this
Agreement, any of the Senior Notes or any other Exhibit and save each Purchaser
of the Senior Notes harmless against each Purchaser any loss or liability
resulting from nonpayment or delay in payment of any such tax. The obligations
of the Company under this Section shall survive payment and transfer of any
Senior Notes.
- 16 -
<PAGE> 21
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of the
Company herein or in any Exhibit or of (or on behalf of) the Company in any
certificate or other instrument delivered pursuant hereto or thereto shall: (a)
be deemed to be material and to have been relied upon by each Purchaser,
notwithstanding any investigation heretofore or hereafter made by each
Purchaser or on his behalf, and (b) survive the execution and delivery of this
Agreement and the execution and delivery of the Senior Notes to each Purchaser
and any investigation made at any time by him or on his behalf or any
disposition of any of the Senior Notes, and all representations and warranties
contained in Article II hereof and in any Exhibit hereto and in any Financing
Document shall expire and terminate upon payment in full of the Senior Notes
including all accrued interest thereon.
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of
this Agreement, the Senior Notes or the Warrants or any other Exhibit hereto
may, with the written consent of the Company, be amended or modified, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Holder or Holders of
not less than 66 2/3% in aggregate unpaid principal amount of all Senior Notes
and 66 2/3% in number of the Warrants at the time outstanding (except that
amendments or waivers to the Senior Notes shall not require the consent of
Holders of Warrants and amendments or waivers to the Warrants shall not
require the consent of Holders of Senior Notes); provided, that
(i) with respect to the Senior Notes no such amendment,
modification or waiver shall (A) change the principal of, or change the
rate of interest or change the time of payment of principal, or premium,
if any, or interest on any of the Senior Notes, (B) change the
percentage of Holders of Senior Notes required to accelerate or rescind
any acceleration of the Senior Notes, or (C) modify any provision of
this Section, without the consent of the Holders of all Senior Notes
then outstanding,
(ii) with respect to the Warrants no such amendment,
modification or waiver shall change the Warrant Price, as provided in
the Warrant, without the consent of the Holders of all Warrants then
outstanding, and
(iii) no such amendment, modification or waiver shall extend to
or affect any obligation not expressly waived or impair any right
consequent thereon.
(b) Any amendment, modification or waiver pursuant to this
Section 6.3 shall apply equally to all the Holders of the Senior Notes or the
Warrants, as the case may be, and shall be binding upon them, upon each future
holder of any Senior Note or Warrants, as the case may be, and upon the
Company, in each case, whether or not a notation thereof shall have been placed
on any Senior Note. Promptly after any amendment, modification or waiver
pursuant to
- 17 -
<PAGE> 22
this Section 6.3 has become effective, the Company shall deliver to each Holder
of a Senior Note or Warrant, as the case may be, a true and complete copy of
the written instruments pursuant to which such amendment, modification or
waiver was effected, signed by the Holder or Holders of the requisite
percentage and setting forth any such amendment or modification or the terms of
any such waiver.
(c) Each Holder shall continue to make its own analysis and
decisions in taking or not taking action under this Agreement. In no event
shall the Majority-in-Interest be deemed to be an agent or fiduciary for the
Purchasers, and shall not be required to keep informed as to the performance or
observance by the Company of this Agreement or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Company. No Holder shall have any duty or responsibility to provide any other
Holder with any credit or other information concerning the affairs, financial
condition or business of the Company that may come into the possession of such
Holder.
6.4 Register.
(a) The Senior Notes and the Warrants shall be issued in
registered form only. The Company shall keep a register (the "Senior Note
Register") in which provision shall be made for the registration of the Senior
Notes and the registration of transfers of the Senior Notes and a register (the
"Warrant Register") in which provisions shall be made for the registration of
the Warrants and the registration of transfers thereof. Such Registers shall
be kept at the principal office of the Company and the Company is hereby
appointed "Senior Note Registrar" and the "Warrant Registrar" for the purpose
of registering the Senior Notes and the Warrants, respectively, and transfers
of the Senior Notes. Subject to compliance with the provisions of Article III
hereof by a transferee, upon surrender for registration of transfer of any
Senior Note or Warrant at the principal office of the Company and compliance
with the provisions of Section 3.1, if applicable, the Company shall execute
and deliver, in the name of the designated transferee, a new Senior Note or
Warrant, as the case may be, of a like amount. The Company shall make or cause
to be made a notation on each new Senior Note of the amount of all payments of
principal previously made on the surrendered Senior Note and the date to which
interest accrued on the surrendered Senior Note has been paid. The Company
shall treat the individual or entity in whose name each Senior Note is
registered on the Senior Note Register or Warrant on the Warrant Register, as
the case may be, as the sole and absolute owner thereof, notwithstanding any
contrary notice.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Senior Note or
Warrant and of a letter of indemnity reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incident
thereto, and upon surrender or cancellation of a Senior Note or Warrant, if
mutilated, the Company will make and deliver a new Senior Note or Warrant of
like tenor in lieu of such lost, stolen, destroyed or mutilated Senior Note or
Warrant.
- 18 -
<PAGE> 23
6.5 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be
taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether the action in question is taken directly
or indirectly by such person.
6.6 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of
the respective parties hereto shall bind and inure to the benefit of their
respective successors and, in the case of any Holder of a Senior Note or
Warrant, registered assigns. The provisions of this Agreement are intended to
be for the benefit of all Holders from time to time of the Senior Notes, and
shall be enforceable by any such Holder, whether or not an express assignment
to such Holder of rights under this Agreement has been made by the Purchaser or
his successors or assigns.
6.7 Notices.
Unless otherwise expressly provided in this Agreement, all
notices, opinions and other communications provided for in this Agreement shall
be in writing and delivered by hand or mailed, first class postage prepaid,
return receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at 5005 Riverway, Suite 550,
Houston, Texas 77056 (with a copy sent by telefax transmission to it at (713)
850-7730), marked to the attention of the President, with a copy to Fulbright &
Joworski L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas 78205,
telecopy number (210) 270-7205, to the attention of Phillip Renfro, Esq., or at
such other address as the Company may hereafter designate by notice to each
Holder of Senior Notes or Warrants at the time outstanding, or (b) if to the
Purchasers, at the address of each Purchaser as set forth in Schedule 1.2 or at
such other address as such Purchaser may hereafter designate by notice to the
Company, or (c) if to any other Holder of any Senior Note or Warrant, at the
address of such Holder as it appears on the Senior Note Register or the Warrant
Register, as the case may be.
6.8 LAW GOVERNING.
THIS AGREEMENT AND THE SENIOR NOTES AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN
THE STATE OF NEW YORK.
6.9 SUBMISSION TO JURISDICTION;
Service of Process.
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK,
- 19 -
<PAGE> 24
STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE SENIOR NOTES OR WARRANTS OR ANY OTHER EXHIBIT
MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT
MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Agreement or any Exhibit, and for the exclusive benefit of the
Holders, the Company irrevocably and unconditionally submits to the non-
exclusive jurisdiction of the United States District Court for the Southern
District of New York, and to the non-exclusive jurisdiction of any court of the
State of New York located in the City and County of New York, for the purposes
of any suit, action or other proceeding arising out of, or relating to, this
Agreement or any Exhibit or any of the transactions contemplated hereby or
thereby, and hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, that it is not personally subject to the jurisdiction of
the above named courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum, or that the venue of such suit,
action or proceeding is improper, or that this Agreement or any Exhibit or the
subject matter hereof may not be enforced in or by such courts. The Company
hereby agrees that process against it may be served by mail or delivery of
service of process in any of the aforementioned action, suits or proceedings to
C T Corporation System, 1633 Broadway, New York, New York 10019 (such agent
being hereinafter called the "Process Agent"), which the Company hereby
irrevocably designates and appoints as its attorney-in-fact to receive service
of process in any action, suit or proceeding with respect to any matter as to
which it submits to jurisdiction as set forth above, it being agreed that
service to such office or upon such agent shall constitute valid service upon
the Company. The Company hereby directs the Process Agent to receive and
accept all process on its behalf. The Company shall promptly notify the
Purchasers of any change in the address of the Process Agent and may, with
prior notice given to Holders, appoint a successor Process Agent; provided,
however, that if the Process Agent shall at any time cease to exist or its
agency shall for any reason cease, the Company shall designate forthwith a
successor Process Agent in the County and State of New York and shall give
prompt notice of such designation to the Holders, together with evidence of the
acceptance of any such appointment. The Company agrees irrevocably to the
service of process of any of the aforementioned courts in any suit, action or
proceeding described above by mailing of copies of such process to the Company
at its address specified in Section 6.7 hereof. Nothing herein shall preclude
service of process in any other manner permitted by applicable law or prohibit
any Holder from commencing legal proceedings against the Company or any of its
properties in any other jurisdiction.
6.10 Headings, etc.
The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning or construction of any
of the terms hereof. Unless otherwise specified, any reference in this
Agreement to a particular section, clause or other subdivision, or a particular
schedule or exhibit, shall be considered a reference to that section, clause or
other subdivision of, or to that schedule or exhibit to, this Agreement.
- 20 -
<PAGE> 25
6.11 Entire Agreement.
This Agreement (inclusive of the Exhibits hereto) embodies the
entire agreement and understanding among the Company and the Purchasers and
supersedes all prior agreements and understandings among such parties relating
to the subject matter hereof.
6.12 WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE
PURCHASERS IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.13 No Waiver.
No failure on the part of any Holders of the Senior Notes to
exercise any right or remedy hereunder with respect to the Company, whether
before or after the happening of an Event of Default, shall constitute waiver
of any such subsequent Event of Default or of any other Event of Default. No
failure to accelerate the debt of the Company evidenced hereby by reason of an
Event of Default or indulgence granted from time to time shall be construed to
be a waiver of the right to insist upon prompt payment thereafter; or shall be
deemed to be a novation of the Senior Notes or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any Holders of the
Senior Notes may have, whether by the laws of the state governing the Senior
Notes, by agreement or otherwise; and the Company hereby expressly waives the
benefit of any statute or rule of law or equity that would produce a result
contrary to or in conflict with the foregoing.
6.14 Applicable Interest Rate.
The Holders of the Senior Notes, on the one hand, and the
Company, on the other hand, intend that the obligations evidenced by the Senior
Notes conform strictly to the applicable usury laws from time to time in force.
All agreements between the Company and any Holder of the Senior Notes, whether
now existing or hereafter arising and whether oral or written, hereby are
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed
to be paid to such Holder, or collected by such Holder, by or on behalf of the
Company for the use, forbearance or detention of the money to be loaned to the
Company hereunder or otherwise, or for the payment or performance of any
covenant or obligation contained herein of the Company to such Holder, or in
any other document evidencing, securing or pertaining to such indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable usury
law. If under any circumstances whatsoever fulfillment of any provision
thereof or any other document, at the time
- 21 -
<PAGE> 26
performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances any Holder of Senior Notes ever shall receive from or on behalf
of the Company an amount deemed interest, by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder and under the Senior Notes and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and such
other indebtedness, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to the Company or to any other person making such
payment on the Company's behalf.
6.15 Indemnification.
In consideration of the execution and delivery of this Agreement
by each Purchaser, the Company hereby agrees to indemnify, defend and hold each
Purchaser and each Holder from time to time of any Senior Notes, and such
Purchaser's and their respective officers and directors, general and limited
partners (and directors and officers thereof), employees and agents (herein
called the "Indemnitees") free and harmless from and against any and all
claims, actions, causes of action, suits or other proceedings (whether or not
any such Indemnitee is a party thereto), losses, liabilities and damages, and
expenses in connection therewith, including, without limitation, reasonable
fees and disbursements of counsel, consultants and experts and claims relating
to personal injury or property damage (herein called the "Indemnified
Liabilities", which term shall not include, however, in respect of any
particular Indemnitee, liabilities incurred by reason of the gross negligence
or willful misconduct of such Indemnitee) incurred by the Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any transaction
financed or to be financed in whole or in part directly or indirectly with
proceeds from the sale of any Senior Note, or (b) any failure of any
representation or warranty set forth in Section 2.11 to be true and correct
when made or any failure by the Company to comply with any of its covenants or
agreements set forth in Section 4.6. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment of each of the Indemnified
Liabilities which is permissible under applicable law. The provisions of, and
obligations of the Company under, this Section 6.15 shall survive the execution
and delivery of this Agreement, the delivery, payment or transfer of any Senior
Note, the enforcement of any provision hereof or thereof, the consummation of
the transactions to occur on the Closing Date, and any amendments or waivers,
and shall be enforceable by each Indemnitee separately or together without
necessity of accelerating the maturity of any Senior Notes; and any such
Indemnitee seeking to enforce the indemnification provided for hereunder may
initially proceed directly against the Company without first resorting to any
other rights of indemnification or otherwise that it may have.
- 22 -
<PAGE> 27
6.16 Interpretive Provision.
Wherever any representation, warranty or other statement made by
the Company in this Agreement is limited to the Company's knowledge, such
limitation shall mean the actual knowledge or awareness of any person who, on
the date hereof, is an executive officer or director of the Company after due
inquiry of the circumstances thereof.
6.17 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or enforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
6.18 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
6.19 Finder's Fee.
(a) The Company represents and warrants that it has not
incurred any obligation or liability to any broker or finder for any fee or
payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Purchasers harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of the Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not
incurred any obligation or liability to any broker or finder for any fee or
payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Company harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of such Purchaser.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first before written.
COMPANY:
PONDER INDUSTRIES, INC.
By:
-------------------------------
Name:
Title:
- 23 -
<PAGE> 28
PURCHASERS:
WHITE OWL CAPITAL PARTNERS
By:
-------------------------------
William R. Ziegler, General Partner
-----------------------------------
Arvind Sanger
-----------------------------------
Antony T. F. Lundy
-----------------------------------
Karl Bandtel
- 24 -
<PAGE> 29
APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the
meanings ascribed thereto:
"Agreement" means this agreement, as it may be amended from time
to time, including all schedules and exhibits thereto.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"Closing" has the meaning set forth in Section 1.3.
"Commission" means the Securities and Exchange Commission or any
other United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company having a par
value of $.01 per share.
"Company" means Ponder Industries, Inc., a Delaware corporation.
"Company Premises" means real property in which (a) the Company,
(b) any Subsidiary of any person referred to in clause (a) of this definition
or (c) any person which has at any time been a Subsidiary of any person
referred to in clause (a) of this definition at any time has or ever had any
direct or indirect interest, including, without limitation, ownership thereof,
or any arrangement for the lease, rental or other use thereof, or the retention
or claim of any mortgage or security interest therein or thereon.
"Environmental Claims" has the meaning set forth in Section
2.11(c).
"Environmental Law" any past, present or future Federal, state,
local or foreign statutory or common law, or any regulation, ordinance, code,
plan, Order, permit, grant, franchise, concession, restriction or agreement
issued, entered, promulgated or approved thereunder, relating to (a) the
environment, human health or safety, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Substances,
"Environmental Permit" means any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to or in order to comply with any Environmental Law.
- 25 -
<PAGE> 30
"Event of Default" has the meaning set forth in Section 5.1.
"Exhibit" means any of the exhibits to this Agreement, including
such exhibits as executed and delivered pursuant to the terms of this
Agreement.
"Financial Statements" means (i) the consolidated balance sheet
of the Company and the Subsidiaries as of August 31, 1996, and the consolidated
statement of operations and cash flows for the year ended August 31, 1996, and
(ii) the consolidated balance sheets of the Company and the Subsidiaries as of,
and the consolidated statements of operations and cash flows for the fiscal
quarters ended November 30, 1996, February 28, 1997, and May 31, 1997, in each
case, together with the notes thereto.
"GAAP" means generally accepted accounting principles as from
time to time set forth in the opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any Federal, state, municipal, local or
other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority of any country.
"Hazardous Substances" collectively, contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; polychlorinated biphenyls; medical wastes; infectious
wastes; asbestos; paint containing lead; and urea formaldehyde.
"Holder" means initially a Purchaser and thereafter such person
who from time to time is the registered Holder of a Senior Note or a Warrant,
as the case may be, or a Holder of either.
"Indemnified Liabilities" has the meaning set forth in Section
6.15.
"Indemnitees" has the meaning set forth in Section 6.15.
"Majority-in-Interest" means the Holders of at least two-thirds
of the outstanding principal amount of the Senior Notes and two-thirds of the
outstanding Warrants, provided, however, that if fewer than one-half of the
principal amount of Senior Notes or Warrants originally issued pursuant to this
Agreement are outstanding then Majority-in-Interest means 50.1% of such
outstanding principal amount of Senior Notes and Warrants.
"Material Adverse Effect" means any circumstance or event which
is material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole, or which may
reasonably be expected to result in or cause an Event of Default.
- 26 -
<PAGE> 31
"Material Contract" means any contract of the Company or any
Subsidiary with any Person that is presently in effect and (i) that either (A)
accounted for 10 percent or more of the annual revenues of the Company or any
Subsidiary during any of the past three fiscal years or (B) is expected to
account for 10 percent or more of the annual revenues of the Company or any
Subsidiary during the present fiscal year or (ii) the expiration or termination
of which would have a Material Adverse Effect.
"Opinion of Company Counsel" means the legal opinion of Fulbright
& Jaworski L.L.P., counsel for the Company, in favor of the Purchasers, in the
form of Exhibit C hereto
"Permitted Liens" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business securing
sums not overdue; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms
of government insurance or benefits, relating to employees, securing sums (a)
not overdue or (b) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of the
Company in conformity with GAAP, (iii) liens for taxes (a) not yet due or (b)
being diligently contested in good faith, provided that adequate reserves with
respect thereto are maintained on the books of the Company in conformity with
GAAP.
"Person" means a corporation, a partnership, an organization or
business, an individual, a government or political subdivision thereof or
governmental agency.
"Purchaser" means a person set forth on Schedule 1.2 with respect
to that number of Units set forth opposite his name, and Purchasers means two
or more Purchasers.
"Registration Rights Agreement" means that certain registration
rights agreement to be entered into between the Company and the Purchasers in
the form of Exhibit D hereto.
"Required Consents" means the approvals, consents and agreements
set forth on Schedule 2.6.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Note" means a Senior Convertible Promissory Note of the
Company in the form of Exhibit A.
"Senior Note Register" has the meaning set forth in Section 6.4.
"Subsidiary" means any corporation or other legal entity 50% or
more of the voting stock of which is owned by the Company or another Subsidiary
of the Company. For these purposes voting stock means the capital stock or
other form of ownership which ordinarily,
- 27 -
<PAGE> 32
in the absence of contingencies, entitles the holder to elect corporate
directors or persons performing similar functions.
"Unit" means a unit of securities consisting of a $25,000
principal amount Senior Note and a detachable Warrant, issued by the Company.
"Unit Offering Disclosure Documents" means the Annual Report on
Form 10-K of the Company for the fiscal year ended August 31, 1996, and the
Forms 10-Q of the Company for the fiscal quarters ended November 30, 1996,
February 28, 1997, and May 31, 1997, as filed with the Commission, together
with the Financial Statements.
"Warrant" means a warrant of the Company to purchase 1.6 shares
of Common Stock for each $1 principal amount of Senior Note, in the form of
Exhibit B.
"Warrant Register" has the meaning set forth in Section 6.4.
- 28 -
<PAGE> 33
SCHEDULE 1.2
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No.
and Tax Identification No. No. Units
of Purchaser Subscribed For Subscription Price
- - -------------------------------------- -------------- ------------------
<S> <C> <C>
White Owl Capital Partners 76 $1,900,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Arvind Sanger 10 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-2913
SSN:
Antony T. F. Lundy 10 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-7976
SSN:
Karl Bandtel 4 $100,000
c/o Wellington Management Co., LLP
75 State Street, 18th Floor
Boston, MA 02109
Fax: (617) 428-3649
SSN:
TOTAL: 100 $2,500,000
</TABLE>
<PAGE> 34
SCHEDULE 1.4
USE OF PROCEEDS
<PAGE> 35
SCHEDULE 2.1(b)
CAPITALIZATION OF COMPANY
<PAGE> 36
SCHEDULE 2.1(C)
CAPITALIZATION OF SUBSIDIARIES
<PAGE> 37
SCHEDULE 2.5
NONCONTRAVENTION
<PAGE> 38
SCHEDULE 2.6
REQUIRED CONSENTS
<PAGE> 39
SCHEDULE 2.7
LITIGATION
<PAGE> 40
SCHEDULE 2.9
DEBTS; LIENS
<PAGE> 1
EXHIBIT 11
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Three Months Ended
November 30
----------------------------------
1997 1996
------------ ------------
<S> <C> <C>
COMPUTATION OF PRIMARY LOSS PER SHARE:
Net loss $ (424) $ (882)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 25,029,799 12,243,850
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON ASSUMED CONVERSION OF OPTIONS
AND WARRANTS (b) -- --
------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS USED FOR COMPUTATION 25,029,799 12,243,850
============ ============
PRIMARY LOSS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS $ (.02) $ (.07)
============ ============
COMPUTATION OF FULLY DILUTED LOSS PER SHARE:
Net loss $ (424) $ (882)
Interest not incurred upon assumed conversion of Senior Notes (1997) and
convertible debentures (1996) 24 182
------------ ------------
Net loss available to common stockholders used for computation $ (400) $ (700)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 25,029,799 12,243,850
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON ASSUMED CONVERSION OF OPTIONS
AND WARRANTS 3,704,885 15,994
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON ASSUMED CONVERSION OF SENIOR
NOTES (1997) AND CONVERTIBLE DEBENTURES (1996) 1,318,681 6,492,311
------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS USED FOR COMPUTATION 30,053,365 18,752,155
============ ============
EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENT ASSUMING FULL DILUTION $ (.01)(a) $ (.04)(a)
============ ============
</TABLE>
(a) This calculation is submitted in accordance with Item 601(b)(11) of
Regulation S-K although it is not required by APB Opinion No. 15 because
it is antidilutive.
(b) The options and warrants have an antidilutive effect in periods with
losses and are, therefore, excluded from the computation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PONDER
INDUSTRIES, INC.'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1997,
AND ITS CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 3
<SECURITIES> 800
<RECEIVABLES> 5,260
<ALLOWANCES> 672
<INVENTORY> 2,752
<CURRENT-ASSETS> 8,689
<PP&E> 31,711
<DEPRECIATION> 14,756
<TOTAL-ASSETS> 27,240
<CURRENT-LIABILITIES> 8,339
<BONDS> 9,901
0
0
<COMMON> 287
<OTHER-SE> 7,807
<TOTAL-LIABILITY-AND-EQUITY> 27,240
<SALES> 5,101
<TOTAL-REVENUES> 5,101
<CGS> 1,814
<TOTAL-COSTS> 1,814
<OTHER-EXPENSES> 3,234
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 443
<INCOME-PRETAX> (424)
<INCOME-TAX> 0
<INCOME-CONTINUING> (424)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (424)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
