<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Queen Sand Resources, Inc.
--------------------------
(Name of Issuer)
Common Stock, par value $.0015 per share
----------------------------------------
(Title of Class of Securities)
747927 10 1
---------------------------
(CUSIP Number)
Julia Heintz Murray, General Counsel - Finance
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
(713) 853-4794
--------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 6, 1997
-----------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 747927 10 1 PAGE 1 OF 1 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Joint Energy Development Investments Limited Partnership
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
N/A (b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF -0-
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
10,009,839
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
10,009,839
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
10,009,839
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
32.7%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 747927 10 1 PAGE 1 OF 1 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
N/A (b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF -0-
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
10,009,839
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
10,009,839
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
10,009,839
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
32.7%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $0.0015 per share
(the "Common Stock"), of Queen Sand Resources, Inc., a Delaware corporation (the
"Issuer"). The address of the principal executive offices of the Issuer is 3500
Oak Lawn, Suite 380, L.B. #31, Dallas, Texas 75219-4398.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed by (i) Joint Energy Development Investments
Limited Partnership, a Delaware limited partnership ("JEDI"), which is engaged
primarily in the business of investing in and managing certain energy related
assets and (ii) Enron Corp., a Delaware corporation ("Enron"), which is an
integrated natural gas company that engages, primarily through subsidiaries, in
the gathering, transportation and wholesale marketing of natural gas, the
exploration for and production of natural gas and crude oil, the production,
purchase, transportation and worldwide marketing and trading of natural gas
liquids, crude oil and refined petroleum products, the production and sale of
cogenerated electricity and steam and the purchasing and marketing of long-term
energy-related commitments. JEDI and Enron are referred to herein as the
"Reporting Entities." Additional entities that may be deemed to be control
persons of JEDI are (a) Enron Capital Management Limited Partnership, a Delaware
limited partnership and the general partner of JEDI ("ECMLP"), whose principal
business is to manage oil and gas related investments, (b) Enron Capital Corp.,
a Delaware corporation and the general partner of ECMLP ("ECC"), whose principal
business is to manage oil and gas related investments and (c) Enron Capital &
Trade Resources Corp., a Delaware corporation ("ECT"), whose principal business
is the purchase of natural gas, gas liquids and power through a variety of
contractual arrangements and marketing these energy products to local
distribution companies, electric utilities, cogenerators and both commercial and
industrial end-users. ECT also provides risk management services. ECC is a
wholly owned subsidiary of ECT, which is a wholly owned subsidiary of Enron.
The address of the principal business and the principal office of JEDI,
ECMLP, ECC, ECT and Enron is 1400 Smith, Houston, Texas 77002. Schedule I
attached hereto sets forth certain additional information with respect to each
director and each executive officer of ECC and Enron. The filing of this
statement on Schedule 13D shall not be construed as an admission that Enron,
ECT, ECC, ECMLP or any person listed on Schedule I hereto is, for the purposes
of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial
owner of any securities covered by this statement.
None of the Reporting Entities, nor, to their knowledge, ECMLP, ECC, ECT or
any person listed on Schedule I hereto, has been, during the last five years (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, U.S.
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
JEDI purchased 9,600,000 shares of the Issuer's Series A Participating
Convertible Preferred Stock (the "Preferred Stock"), each of which is
convertible at the option of the holder into one share of Common Stock (subject
to antidilution adjustments), and warrants to purchase 409,839 shares of Common
Stock (subject to antidilution adjustments) for consideration consisting of (i)
$5,000,000 in cash and (ii) the execution and delivery of an Earn Up Agreement
(the "Earn Up Agreement") pursuant to which JEDI could be required to pay to the
Issuer up to an additional $9,400,000 in cash. The source of the $5,000,000
paid to the issuer was borrowings under JEDI's Revolving Credit Agreement with
The Chase Manhattan Bank, as agent for certain other banks (the "Credit
Agreement"). Any amounts payable by JEDI pursuant to the Earn Up Agreement may
be paid with borrowings under the Credit Agreement or from other available
sources.
ITEM 4. PURPOSE OF TRANSACTION.
The transactions described in Item 3 above occurred as a result of
negotiated transactions with the Issuer. The securities acquired by JEDI were
acquired for investment purposes. JEDI intends to review its investment in the
Issuer on a continuing basis and, depending upon the price of, and other market
conditions relating to, the Common Stock, subsequent developments affecting the
Issuer, the Issuer's business and prospects, other investment and business
opportunities available to JEDI, general stock market and economic conditions,
tax considerations and other factors deemed relevant, may decide to increase or
decrease the size of its investment in the Issuer.
In connection with the transactions described in Item 3 above, the Issuer
has granted to JEDI the right (the "Maintenance Right") to purchase shares of
Common Stock (or securities convertible into or exercisable for Common Stock)
sufficient to
<PAGE>
maintain its proportionate interest in the Issuer on the same terms as the
Issuer proposes to issue such securities. Until December 31, 1998, in the event
that JEDI elects not to exercise its Maintenance Right, the Issuer is required
to issue to JEDI a one-year warrant to purchase the securities that the
Maintenance Right would have entitled JEDI to purchase. The Maintenance Right
terminates if JEDI owns beneficially less than 10% of the outstanding voting
stock of the Issuer and in certain other circumstances.
In connection with the transactions described in Item 3, the Issuer also
granted to JEDI warrants to purchase up to 3,000,000 shares of Common Stock
(subject to antidilution adjustments) that may become exercisable in the event
that JEDI is required to make any payments pursuant to the Earn Up Agreement.
If such warrants become exercisable, they will be exercisable at a price of
$2.50 per share for a three-month period beginning October 1, 1998 and ending
December 31, 1998.
The terms of the Preferred Stock (which converts automatically into shares
of the Issuer's Series B Participating Convertible Preferred Stock, which does
not entitle the holders thereof to the rights described below, upon transfer by
JEDI to any person other than certain of its affiliates) include the right of
the holders of Preferred Stock, acting separately as a class, to elect a number
of members of the Board of Directors that would represent a percentage of the
entire Board of Directors of the Issuer that is as close as possible to the
percentage of the outstanding voting stock of the Issuer then represented by the
Preferred Stock. Such terms also include the right of the holders of Preferred
Stock, for so long as at least 960,000 shares of Preferred Stock remain
outstanding, to vote as a class on (i) any amendment, alteration or repeal of
the Issuer's Certificate of Incorporation or Bylaws, (ii) the authorization,
creation or issuance of, or the increase in the authorized amount of, any
securities ranking in parity with or prior to the Preferred Stock in the payment
of dividends or the distribution of assets upon liquidation, dissolution or
winding up of the Issuer, or any securities convertible into such securities,
(iii) the merger, consolidation or sale of all or substantially all of the
assets of the Issuer, or (iv) any reorganization, restructuring,
recapitalization or other similar transaction that requires the approval of the
stockholders of the Issuer. The terms of the Preferred Stock also include
certain remedies available to holders of Preferred Stock in the event the Issuer
breaches certain covenants contained in the Securities Purchase Agreement dated
March 27, 1997 between the Issuer and JEDI (the "Securities Purchase
Agreement"), which relates to the transactions described in Item 3 above.
Depending on which covenants are breached, such remedies include (i) the right
of holders of Preferred Stock to receive a preferential dividend on the
Preferred Stock, (ii) the right of holders of Preferred Stock to elect a number
of persons to serve on the Board of Directors of the Issuer that, together with
any members of the Board of Directors previously elected by the holders of the
Preferred Stock, will constitute a majority of the members of the Board of
Directors, and (iii) the right of the holders of the Preferred Stock to require
the Issuer to repurchase the Preferred Stock.
Other than as described above, none of the Reporting Entities, nor, to
their knowledge, ECMLP, ECC, ECT or any person listed on Schedule I hereto, has
any plan or proposal that would result in any of the consequences listed in
paragraphs (a) - (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
JEDI beneficially owns and has the power to vote and dispose of 10,009,839
shares of Common Stock, representing approximately 32.7% of the shares of Common
Stock outstanding. Because ECC is an indirect, wholly owned subsidiary of
Enron, Enron may also be deemed to beneficially own such shares. Enron
disclaims beneficial ownership of all of such shares.
Except as described herein, none of the Reporting Entities, nor, to their
knowledge, ECMLP, ECC, ECT or any of the persons named in Schedule I hereto, has
effected any transactions in any shares of Common Stock during the past sixty
days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Certain registration rights granted to JEDI by the Issuer are set forth in
a Registration Rights Agreement dated May 6, 1997. JEDI has entered into a
Stockholders Agreement dated May 6, 1997 with the Issuer and certain other
stockholders of the Issuer that limits the ability of JEDI to transfer its
shares of Common Stock or common stock equivalents (including the Preferred
Stock and the warrants acquired by JEDI) before May 6, 1999 and limits the
ability of certain members of the Issuer's management to transfer 6,600,000
shares of Common Stock in which they have an interest until the earlier of May
6, 2002 or such time as JEDI and its affiliates own beneficially less than 10%
of the voting stock of the Issuer. In addition, the Stockholders Agreement
provides that until May 6, 1999 the Issuer and certain members of the Issuer's
management have a right of first refusal to purchase shares of Common Stock or
common stock equivalents proposed to be transferred by JEDI, except if such
proposed transfer is pursuant to an exercise of registration rights pursuant to
the Registration Rights Agreement described above. As described in Item 4, the
holders of Preferred Stock may be entitled, upon the breach by the Issuer of
certain covenants made by it in the Securities Purchase Agreement, to cause the
Issuer to repurchase the Preferred Stock.
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Securities Purchase Agreement dated as of March 27, 1997
between the Issuer and JEDI (incorporated by reference to Exhibit 1.1 to the
Issuer's Current Report on Form 8-K dated March 27, 1997).
Exhibit 2 - Stockholders Agreement dated May 6, 1997 between the Issuer,
JEDI and certain other stockholders of the Issuer.
Exhibit 3 - Registration Rights Agreement dated May 6, 1997 between the
Issuer and JEDI.
Exhibit 4 - Certificate of Designation of Series A Convertible Preferred
Stock of the Issuer.
Exhibit 5 - Common Stock Purchase Warrant.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
May 15, 1997 JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited Partnership,
its general partner
By: Enron Capital Corp., its general partner
By: /s/ Peggy B. Menchaca
________________________________
Name: Peggy B. Menchaca
_______________________________
Title: Vice President and Secretary
______________________________
ENRON CORP.
By: /s/ Peggy B. Menchaca
_________________________________
Name: Peggy B. Menchaca
_______________________________
Title: Vice President and Secretary
______________________________
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL CORP.
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
1400 Smith Street
Houston, Texas 77002
James V. Derrick, Jr. U.S.A. Director
Kenneth D. Rice U.S.A. Director
John J. Esslinger U.S.A. Director, Vice Chairman and
Managing Director
Gene E. Humphrey U.S.A. President and Managing Director
Richard A. Causey U.S.A. Managing Director
Andrew S. Fastow U.S.A. Managing Director
Mark E. Haedicke U.S.A. Managing Director and General
Counsel
Jeremy M. Blachman U.S.A. Vice President
Richard B. Buy U.S.A. Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control
Officer
William D. Gathmann U.S.A. Vice President, Finance and Treasurer
Robert J. Hermann U.S.A. Vice President, Tax
Clifford P. Hickey U.S.A. Vice President
Peggy B. Menchaca U.S.A. Vice President and Secretary
Kristina M. Mordaunt U.S.A. Vice President and Assistant General
Counsel
Julia Heintz Murray U.S.A. Vice President, General Counsel,
Finance, and Assistant Secretary
Andrea Vail U.S.A. Vice President
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
Robert A. Belfer U.S.A. Director
767 Fifth Avenue, 46th Floor Chairman, President and Chief
New York, NY 10021 Executive Officer,
Belco Oil & Gas Corp.
Norman P. Blake, Jr. U.S.A. Director
USF&G Corporation Chairman, President and CEO,
6225 Smith Ave. LA0300 USF&G Corporation
Baltimore, MD 21209
Ronnie C. Chan U.S.A. Director
Hang Lung Development Chairman of Hang Lung
Company Limited Development Group
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director
5851 San Felipe, Suite 850 Investments
Houston, TX 77057
Joe H. Foy U.S.A. Director
404 Highridge Dr. Retired Senior Partner,
Kerrville, TX 78028 Bracewell & Patterson, L.L.P.
Wendy L. Gramm U.S.A. Director
P. O. Box 39134 Former Chairman, U.S. Commodity
Washington, D.C. 20016 Futures Trading Commission
Robert K. Jaedicke U.S.A. Director
Graduate School of Business Professor (Emeritus), Graduate
Stanford University School of Business, Stanford
Stanford, CA 94305 University
Charles A. LeMaistre U.S.A. Director
13104 Travis View Loop President (Emeritus),
Austin, Texas 78732 University of Texas
M.D. Anderson Cancer Center
<PAGE>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
John A. Urquhart U.S.A. Director and Vice Chairman,
John A. Urquhart Associates Enron Corp.,
111 Beach Road President, John A. Urquhart
Fairfield, CT 06430 Associates
John Wakeham U.K. Director
Pinglestone House Former U.K. Secretary of State
Old Alresford for Energy and Leader of the
Hampshire S024 9TB Houses of Commons and Lords
United Kingdom
Charls E. Walker U.S.A. Director
Walker & Walker, LLC Chairman, Walker & Walker, LLC
10220 River Road, Ste. 105
Potomac, Maryland 20854
Herbert S. Winokur, Jr. U.S.A. Director
Winokur & Associates, Inc. President, Winokur & Associates,
30 East Elm St. Inc.
Greenwich, CT 06830
1400 Smith Street
Houston, Texas 77002
Kenneth L. Lay U.S.A. Director, Chairman and
Chief Executive Officer
Jeffrey K. Skilling U.S.A. Director, President and Chief
Operating Officer
J. Clifford Baxter U.S.A. Senior Vice President, Corporate
Development
Richard A. Causey U.S.A. Senior Vice President and Chief
Accounting and Information
Officer
Edmund P. Segner, III U.S.A. Executive Vice President and
Chief of Staff
James V. Derrick, Jr. U.S.A. Senior Vice President and
General Counsel
Andrew S. Fastow U.S.A. Senior Vice President, Finance
Stanley C. Horton U.S.A. Chairman and Chief Executive
Officer, Enron Gas Pipeline
Group
<PAGE>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
Rebecca P. Mark U.S.A. Chairman and Chief Executive
Officer, Enron International,
Inc.
Thomas E. White U.S.A. Chairman and Chief Executive
Officer, Enron Ventures Corp.
Rodney L. Gray U.S.A. Chairman, President and Chief
Executive Officer, Enron Global
Power & Pipelines L.L.C.
<PAGE>
EXHIBIT 2
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement ("Agreement") dated as of May 6, 1997 is by
and among Edward J. Munden, Ronald I. Benn, Bruce I. Benn, Robert P. Lindsay
(each, a "Management Stockholder" and collectively, the "Management
Stockholders"), EIBOC Investments Ltd., a corporation organized under the laws
of Barbados ("EIBOC"), Queen Sand Resources, Inc., a Delaware corporation (the
"Company"), and Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI"). Initially capitalized terms used but not
otherwise defined herein have the meanings ascribed to such terms in the
Securities Purchase Agreement dated as of March 27, 1997 between the Company and
JEDI (the "Purchase Agreement").
WHEREAS, JEDI and the Company have entered into the Purchase Agreement
pursuant to which JEDI will purchase certain securities of the Company; and
WHEREAS, EIBOC is the legal owner of 6,600,000 shares of Common Stock which
are represented by certificate no. 3949 (the "Shares"); and
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of JEDI and the Company to consummate the
transactions contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFERS OF SHARES.
(a) No Stockholder shall, without the prior written consent of JEDI,
Transfer any of the Shares or any interest therein except as
specifically permitted by Section 1(b) or (c) of this Agreement.
For purposes of this Agreement, the term "Stockholder" means
EIBOC, the Management Stockholder and any Person who is required
by the terms of this Agreement to execute an Adoption Agreement,
as described in the following sentence and the term "Transfer"
means any direct or indirect sale, assignment, donation,
transfer, devise, pledge, hypothecation, encumbrance or other
disposition of any shares or any interest therein. Any Person
who is required by the terms of this Agreement to become a party
to this Agreement shall do so by executing an Adoption Agreement
in the form attached as Exhibit A or in any other form
satisfactory to the Company and JEDI, whereupon such person or
entity shall be deemed a "Stockholder" and shall have all of the
rights and obligations of a Stockholder under this Agreement and
the Shares or any
<PAGE>
interest therein held by any such Person shall be subject to the
provisions hereof.
(b) Notwithstanding the restrictions contained in paragraph (a) of
this Section 1, after October 1, 1997 (i) any Stockholder may
Transfer Shares, provided that the number of Shares to be
Transferred together with the number of all Shares Transferred
by all Stockholders during the preceding twelve months does not
exceed the lesser of (x) four percent of the shares of Common
Stock outstanding as shown by the most recent report or
statement published by the Company and filed with the
Commission, (y) four times the average weekly reported volume of
trading, excluding any trades made by Stockholders, in Common
Stock on all national securities exchanges and/or reported
through the automated quotation system of a registered
securities association during the four calendar weeks preceding
the date of Transfer and (z) four times the average weekly
volume of trading, excluding any trades made by Stockholders, in
Common Stock reported through the consolidated transaction
reporting system, contemplated by Rule 11Aa3-1 under the
Exchange Act during the four-week period specified in clause (y)
of this paragraph (b); and (ii) Stockholders may Transfer Shares
in a registered underwritten public offering of Common Stock;
provided, however, that no Stockholder may transfer Shares
pursuant to this paragraph (b) if after such transfer the
Management Stockholders would beneficially own less than
4,950,000 Shares in the aggregate, subject (1) to a
proportionate adjustment in the event of a stock split, reverse
stock split, combination of shares, stock dividend or
distribution or other similar change in the outstanding shares
of Common Stock and (2) reduction by the number of Shares
Transferred in accordance with paragraph (d) of this Section 1
to the estate of a deceased Management Stockholder or to a
Disabled Management Stockholder. As used herein, the term
"beneficial owner" shall have the meaning set forth in paragraph
(a)(2) of Rule 16a-1 under the Exchange Act.
(c) Nothing in this Section 1: (i) shall prevent any Stockholder
from (x) voting their Shares or other Voting Securities in any
vote of stockholders of the Company on a merger or consolidation
of the Company with or into any other Person, (y) Transferring
their Shares in exchange for consideration payable in respect of
such Shares in connection with a merger or consolidation of the
Company with or into any other Person or (z) Transferring their
Shares pursuant to a tender or exchange offer that the Board of
Directors of the Company endorses or does not oppose, (ii) shall
prevent EIBOC from Transferring Shares to the Management
Stockholders in proportion to their percentage beneficial
interests in the EIBOC Shares, (iii) shall prevent a Management
Stockholder from Transferring Shares to his Family Group;
provided, that no Transfer may be made to a Management
Stockholder's Family Group until the transferee has executed an
Adoption Agreement agreeing in be bound by the terms of this
Agreement. "Family
2
<PAGE>
Group" means, with respect to a Management Stockholder, (x) the
spouse of the Management Stockholder, (y) any entity of which
the Management Stockholder or his spouse legally and
beneficially owns 100% of the equity interests, provided such
interests are not transferrable and provided further that
concurrently with such Transfer, such entity agrees in writing
with JEDI that it will not issue any equity interest to any
Person other than the Management Stockholder and his spouse, or
(z) any trust solely for the benefit of the Management
Stockholder, the Management Stockholder's spouse, and/or their
respective ancestors and/or descendants, including any
descendants by adoption; provided, however, that the trustee or
trustees (including any substitute or replacement trustee or
trustees) shall have been approved by JEDI, which approval may
not be unreasonably withheld, or (iv) shall prevent EIBOC from
transferring or otherwise allocating any Shares to Robert P.
Lindsay.
(d) Notwithstanding the restrictions contained in paragraph (a) or
(b) of this Section 1, upon the death or Disability of a
Management Stockholder, EIBOC may Transfer Shares to the estate
of the Management Stockholder or a Disabled Management
Stockholder, or the Disabled Management Stockholder's personal
representative, in proportion to his percentage beneficial
interest in the Shares owned by EIBOC. "Disability" shall exist,
and a Management Stockholder shall be "Disabled," if such
Management Stockholder becomes incapacitated by accident,
sickness or other circumstance which renders him mentally or
physically incapable of, or would have been incapable of, had he
been an employee of the Company at the time he became disabled,
performing the duties and services required of the Management
Stockholder under the Employment Agreement between the Company
and such Management Stockholder for a period of 120 consecutive
days, or if, in any 12-month period, for a period of 180 days,
regardless of whether or not such days are consecutive, as
determined in good faith by the Company's Board of Directors.
2. RESTRICTIONS ON TRANSFER BY JEDI.
(a) JEDI agrees that until the second anniversary of the date of
this Agreement and except pursuant to its registration rights
contained in the Registration Rights Agreement, it will not
Transfer any shares of Common Stock or other securities that are
convertible into or exchangeable or exercisable for Common Stock
("Common Stock Equivalents") to any Person that is not an
Affiliate of JEDI except in blocks of at least 600,000 shares of
Common Stock or blocks of Common Stock Equivalents that are
convertible into or exchangeable or exercisable for at least
600,000 shares of Common Stock.
(b) JEDI agrees that, until the second anniversary of the date of
this Agreement and except pursuant to its registration rights
contained in the Registration
3
<PAGE>
Rights Agreement, it will not Transfer any shares of Common
Stock or Common Stock Equivalents to any Person that is not an
Affiliate of JEDI without first providing the Company and the
Management Stockholders the right to purchase the shares to be
Transferred in accordance with the following provisions:
(i) If JEDI desires to Transfer shares of Common Stock or
Common Stock Equivalents to a Person that is not an Affiliate of JEDI, JEDI
shall deliver to the Company and, provided the Management Stockholders
beneficially own more than 10% of the voting power of all the voting power
of all the outstanding Voting Securities of the Company, to each of the
Management Stockholders a written notice (a "Transfer Notice"), which shall
specify the proposed transferee, the number of shares of Common Stock or
Common Stock Equivalents to be Transferred (the "Subject Shares"), the
proposed consideration to be paid therefor (the "Proposed Sale Price"), and
other material terms of the proposed Transfer, and which notice shall
include a copy of any agreement with respect to the proposed Transfer.
(ii) The Company shall have the right, for a period of thirty
days following its receipt of a Transfer Notice to elect to acquire all,
but not less than all, of the Shares specified in the Transfer Notice at a
cash price equal to the Proposed Sale Price or, at the Company's election
if the Proposed Sale Price consists of noncash consideration, for
substantially identical consideration The Company may exercise the
foregoing right by delivering to JEDI, within thirty days after receipt of
the Transfer Notice, written notice (an "Acceptance Notice") of its
intention to purchase the Subject Shares. The closing of any acquisition
of Subject Shares by the Company shall be consummated within five Business
Days following delivery of the Acceptance Notice, at the principal offices
of JEDI (unless otherwise mutually agreed), at which time the purchase
price (in the form of a wire transfer to an account designated by JEDI or,
if other than cash, in a form reasonably acceptable to JEDI) shall be
delivered to JEDI or its representative and JEDI shall deliver to the
Company certificates representing the Subject Shares, duly endorsed for
transfer or accompanied by duly executed stock powers.
(iii) If the Company elects not to acquire the Subject Shares, so
long as the Management Stockholders beneficially own, in the aggregate,
Capital Stock of the Company representing more than 10% of the voting power
of all the outstanding Voting Securities of the Company, the Management
Stockholders shall have the right to acquire all, but not less than all, of
the Subject Shares on the same terms as the Company could acquire the
Subject Shares, as provided in paragraph (b), by delivering an Acceptance
Notice, signed by each Management Stockholder and specifying the number of
Subject Shares to be purchased by each Management Stockholder, to JEDI
within thirty days following receipt by the Company of a Transfer Notice.
The right to purchase Subject Shares shall be allocated among the
Management Stockholders in a manner determined by the Management
Stockholders.
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<PAGE>
(iv) If neither the Company nor the Management Stockholders
deliver an Acceptance Notice within thirty days after delivery of the
Transfer Notice or the party delivering an Acceptance Notice fails to
complete the purchase of the Subject Shares within five Business Days of
delivery of the Acceptance Notice, JEDI shall be free to consummate the
proposed Transfer on the terms set forth in the Transfer Notice, provided
the proposed Transfer of the Subject Shares on the terms set forth in the
Transfer Notice is consummated within 90 days after the date of receipt of
the Transfer Notice.
3. REPRESENTATIONS OF MANAGEMENT STOCKHOLDERS. Edward J. Munden, Bruce
I. Benn and Ronald I. Benn jointly and severally represent to JEDI that EIBOC is
the sole legal owner of the Shares.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EIBOC. EIBOC hereby
represents, warrants and agrees with JEDI as follows:
(a) EIBOC is a corporation duly organized, validly existing and in
good standing under the laws of Barbados. EIBOC (i) has
conducted no business since its formation other than ownership
of the Shares, (ii) owns the Shares free and clear of all Liens,
and (iii) has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement.
(b) This Agreement has been duly executed on behalf of EIBOC and
constitutes the legal, valid and binding obligation of EIBOC,
enforceable against it in accordance with its terms.
(c) ATC is the sole holder of Capital Stock of EIBOC and managing
director of EIBOC, with sole power and authority to act on its
behalf.
(d) The authorized Capital Stock of EIBOC consists of an unlimited
number of shares, 120 of which are outstanding and represented
by certificate no. 1, registered in the name of ATC. There are
no outstanding securities convertible into or exchangeable for
any shares of Capital Stock of EIBOC or any contract,
commitment, agreement, understanding or arrangement of any kind
to which EIBOC is a party relating to the issuance of any
Capital Stock of EIBOC. EIBOC owns the Shares, free and clear of
all Liens.
(e) EIBOC will not (i) issue any Capital Stock or permit any of its
Capital Stock to be Transferred, (ii) enter into any contract,
agreement, commitment, understanding or arrangement of any kind
relating to any issuance of Capital Stock of EIBOC or (iii)
engage in any trade or business or engage in any other activity
other than ownership of the Shares, provided, however, that this
subsection 4(e) shall not prohibit any Transfer to any successor
trustee of the Capital Stock of EIBOC; provided, that written
consent is obtained from JEDI, which consent shall not be
unreasonably withheld.
5
<PAGE>
5. LEGEND ON CERTIFICATES; STOP TRANSFER ORDERS. The parties hereto
agree to the placement on certificates representing securities covered by
Section 1 or Section 2 of a legend, in the form of Exhibit B attached hereto,
indicating that such securities may not be transferred except in accordance with
this Agreement and to the entry of a stop transfer order with the transfer agent
for such securities against the transfer of such securities except in accordance
with this Agreement.
6. ESCROW OF THE SHARES. On the date of this Agreement, the Shares shall
be deposited in escrow with an escrow agent pursuant to an escrow agreement
mutually acceptable to EIBOC, the Management Stockholders and JEDI, and the
Shares shall be held in such escrow until the earlier of (i) the Transfer of all
the Shares in accordance with this Agreement to a Person other than a Management
Stockholder or his Family Group, or (ii) the termination of this Agreement
pursuant to Section 10(a). Upon termination of this Agreement or if EIBOC, the
Management Stockholders and JEDI determine that a proposed Transfer of Shares
may be effected in compliance with this Agreement, then EIBOC, the Management
Stockholders and JEDI shall promptly send a notice to such escrow agent to
release the Shares to EIBOC or the Management Stockholders at the place
requested by EIBOC and the Management Stockholders.
7. ESCROW OF THE EIBOC SHARES. On the date of this Agreement, all of the
shares of issued and outstanding Capital Stock of EIBOC (the "EIBOC Shares")
shall be deposited in escrow with an escrow agent pursuant to an escrow
agreement mutually acceptable to EIBOC, the Management Stockholders and JEDI,
and the EIBOC Shares shall be held in such escrow until the earlier of (i) the
Transfer of all of the Shares in accordance with this Agreement to a Person
other than a Management Stockholder or his Family Group, or (ii) the termination
of this Agreement pursuant to Section 11(a). Upon termination of this Agreement
or if EIBOC, the Management Stockholders and JEDI agree that the EIBOC Shares
may be Transferred, then EIBOC, the Management Stockholders and JEDI shall
promptly send a notice to such escrow agent to release the EIBOC Shares to the
Management Stockholders at the place requested by the Management Stockholders.
8. PROXY. EIBOC hereby irrevocably appoints Bruce I. Benn, Ronald I.
Benn, Edward J. Munden and Robert P. Lindsay, collectively, as its attorney-in-
fact and proxy, with full power and substitution, to vote and otherwise act (by
written consent or otherwise) with respect to the Shares which EIBOC is entitled
to vote at any meeting of stockholders (whether annual or special and whether or
not an adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on all matters. EIBOC ACKNOWLEDGES THAT THIS PROXY IS COUPLED WITH
AN INTEREST AND IS IRREVOCABLE AND SHALL NOT BE TERMINATED BY OPERATION OF LAW
UPON THE OCCURRENCE OF ANY EVENT.
9. TRANSFERS IN VIOLATION OF AGREEMENT DEEMED FRAUDULENT. Any Transfer
of EIBOC Shares or any Shares contrary to the provisions of this Agreement and
any Transfer of any interest of any Stockholder intended to circumvent the
restrictions set forth herein or in violation of this Agreement shall be deemed
fraudulent and such Transfer shall be void ab initio and of no force and effect.
6
<PAGE>
10. MISCELLANEOUS.
(a) Except as to provisions that, by their terms, terminate earlier,
this Agreement shall terminate at the earlier of (i) the fifth
anniversary of the date of this Agreement or (ii) such time as
JEDI and its Affiliates beneficially own, in the aggregate,
Capital Stock of the Company representing less than 10% of the
voting power of all then outstanding Voting Securities of the
Company.
(b) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto.
Notwithstanding the foregoing, the rights and obligations of the
parties hereunder shall not be assignable, except that JEDI's
rights and obligations hereunder shall be assigned to an
Affiliate of JEDI if and to the extent that such Affiliate
becomes the owner of shares of Common Stock or Common Stock
Equivalents.
(c) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which counterparts, when so executed and delivered, shall be
deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement.
(d) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(e) The laws of the State of Texas shall govern this Agreement
without regard to principles of conflict of laws.
(f) Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof or affecting or impairing the validity or
enforceability of such provision in any other jurisdiction.
(g) This Agreement, together with the Purchase Agreement, and the
other Basic Documents, 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
This Agreement, the Purchase Agreement and the other Basic
Documents supersede all prior agreements and understandings
between the parties with respect to such subject matter.
(h) This Agreement may be amended only by means of a written
amendment signed by all of the parties hereto.
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<PAGE>
(i) All notices provided for hereunder shall be given by telecopy
(confirmed by overnight delivery), air courier guaranteeing
overnight delivery or personal delivery at the following
addresses:
If to a Management Stockholder, to such Management Stockholder at:
Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 280, L.B. #31
Dallas, Texas 75219-1398
Telecopier: (214) 521-9960
and
Queen Sand Resources, Inc.
60 Queen Street, Suite 1400
Ottawa, Ontario, Canada K1P 5Y7
Telecopier: (613) 230-6055
If to JEDI:
Joint Energy Development Investments Limited Partnership
1400 Smith Street
Houston, Texas 77002-7361
Attention: Donna Lowry, Director - 28th Floor
Telecopier: (713) 646-3602
If to EIBOC:
EIBOC Investments Ltd.
c/o Company Directors Ltd.
P.O. Box 30592
S.M.B. Cayside, 2nd Floor
Harbour Drive
George Town, Grand Cayman
Cayman Islands VW1
Telecopier: (345) 949-7926
or to such other address as any such party may designate by notice in the manner
provided above. All such notices shall be deemed to have been delivered and
received at the time delivered by hand, if personally delivered, when receipt
acknowledged, if telecopied, and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
THE MANAGEMENT STOCKHOLDERS
/s/ EDWARD J. MUNDEN
___________________________________
Edward J. Munden
/s/ RONALD I. BENN
___________________________________
Ronald I. Benn
/s/ BRUCE I. BENN
___________________________________
Bruce I. Benn
/s/ ROBERT P. LINDSAY
___________________________________
Robert P. Lindsay
EIBOC INVESTMENTS LTD.
By: /s/ ROBERT F. GOVAERTS
_______________________________
Name: Robert F. Govaerts
_____________________________
Title: Director
____________________________
QUEEN SAND RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
_______________________________
Name: Edward J. Munden
Title: President and Chief
Executive Officer
and
By: /s/ ROBERT P. LINDSAY
_______________________________
Name: Robert P. Lindsay
Title: Chief Operating Officer
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By: /s/ STEVEN M. EMSHOFF
_______________________________
Steven M. Emshoff
Attorney-in-Fact
9
<PAGE>
QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of __________________________ executes this Consent
and Agreement to acknowledge her joining the Stockholders Agreement (a copy of
which is annexed hereto) with respect to her community property interest in the
Shares, as such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
____________________________ ____________________________
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<PAGE>
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Agreement") is executed by the person or entity
named as "Transferee" below pursuant to the terms of the Stockholders' Agreement
dated as of March __, 1997 ("Stockholders' Agreement"), relating to Shares of
Common Stock, $.0015 per share, of Queen Sand Resources, Inc., a Delaware
corporation. Initially capitalized terms used but not otherwise defined herein,
shall have the meanings ascribed to them in the Stockholders' Agreement.
1. Acknowledgment. Transferee acknowledges that Transferee is acquiring
certain Shares, or interest therein subject to the terms and conditions of the
Stockholders' Agreement.
2. Agreement. Transferee (a) agrees that Transferee and the Shares
acquired by Transferee shall be bound by and subject to the terms of the
Stockholders' Agreement and (b) adopts the Stockholders' Agreement with the same
force and effect as if Transferee were a "Stockholder" thereunder.
3. Notice. Any notice required or permitted by the Stockholders'
Agreement shall be given to Transferee at the address listed below Transferee's
signature.
4. Joinder. The spouse of Transferee, if applicable, executes this
Agreement to acknowledge that it is fair and in such spouse's best interests and
to bind such spouse's community interest, if any, in the Shares to the terms of
the Stockholders' Agreement.
This Agreement is executed by Transferee on .
TRANSFEREE: SPOUSE (if applicable):
____________________________ ______________________________
Signature Signature
____________________________ ______________________________
Print Name Print Name
____________________________
____________________________
Address
QUEEN SAND RESOURCES, INC.
By:
__________________________
President
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<PAGE>
EXHIBIT B
Legend for Stock Certificates:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT DATED APRIL _____, 1997 BY AND AMONG EDWARD J.
MUNDEN, RONALD I. BENN, BRUCE I. BENN, ROBERT P. LINDSAY, EIBOC
INVESTMENTS LTD., QUEEN SAND RESOURCES, INC. AND JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP AND MAY NOT BE SOLD, TRANSFERRED PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH."
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<PAGE>
EXHIBIT 3
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 6, 1997
BY AND BETWEEN
QUEEN SAND RESOURCES, INC.
AND
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED
PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I..................................................................... 1
Section 1.01. Definitions.................................................. 1
ARTICLE II.................................................................... 2
Section 2.01. Demand Registration.......................................... 2
Section 2.02. Piggy-Back Registration...................................... 3
Section 2.03. Registration Procedures...................................... 5
Section 2.04. Expenses..................................................... 8
Section 2.05. Indemnification.............................................. 8
ARTICLE III................................................................... 10
Section 3.01. Communications............................................... 10
Section 3.02. Successor and Assigns........................................ 11
Section 3.03. Counterparts................................................. 11
Section 3.04. Headings..................................................... 11
Section 3.05. Governing Law................................................ 11
Section 3.06. Severability of Provisions................................... 11
Section 3.07. Entire Agreement............................................. 11
Section 3.08. Attorneys' Fees.............................................. 12
Section 3.09. Amendment.................................................... 12
Section 3.10. Registrable Securities Held by the Company or Its Affiliates. 12
Section 3.11. Assignment of Rights......................................... 12
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered
into as of May 6, 1997, by and between Queen Sand Resources, Inc., a Delaware
corporation (the "Company"), and Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement
(the "Purchase Agreement") dated as of March 27, 1997 between the Company and
the Purchaser. In order to induce the Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the registration and other rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the Closing (as defined in the Purchase Agreement) under the
Purchase Agreement.
The parties agree as follows:
ARTICLE I
Section 1.01. Definitions. Capitalized terms used and not otherwise
defined herein which are defined in the Purchase Agreement are used herein as so
defined. The terms set forth below are used herein as so defined:
"Holder" means the record holder of any shares of Convertible
Preferred Stock, Robertson Warrants, Purchaser Warrants, Maintenance Warrants or
Registrable Securities.
"Registrable Securities" means the Conversion Shares, the Robertson
Warrant Shares, the Purchaser Warrant Shares and the Maintenance Warrant Shares
and all other securities receivable upon the conversion of Convertible Preferred
Stock or the exercise of Robertson Warrants, the Purchaser Warrants or the
Maintenance Warrants and, if held by a Person who is the record holder of shares
of Convertible Preferred Stock or other Registrable Securities, any other shares
of Common Stock or other securities of the same class as those receivable upon
conversion of Convertible Preferred Stock or exercise of Robertson Warrants, the
Purchaser Warrants or the Maintenance Warrants, until such time as such
securities cease to be Registrable Securities pursuant to Section 1.02 hereof.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a Registration Statement (as defined herein).
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<PAGE>
Section 1.02. Registrable Securities. Any Registrable Security will
cease to be a Registrable Security when (i) a Registration Statement covering
such Registrable Security has been declared effective by the Commission and such
Registrable Security has been issued, sold or disposed of pursuant to such
effective Registration Statement or (ii) such Registrable Security is disposed
of pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, (iii) such Registrable Security is eligible to be disposed of
pursuant to paragraph (k) of Rule 144 (or any similar provision then in force)
under the Securities Act or (iv) such Registrable Security is held by the
Company or one of its Subsidiaries.
ARTICLE II
Section 2.01. Demand Registration. (a) Any time after the date of
this Agreement, any Holder or Holders who collectively beneficially own at least
a majority of the Registrable Securities outstanding at such time may request (a
"Request Notice") the Company to register under the Securities Act all or any
portion (provided that such portion will have an aggregate offering price of at
least $1,000,000) of the Registrable Securities that are held or will be held
upon the conversion of shares of Convertible Preferred Stock or the exercise of
Warrants by such Holder or Holders (collectively, the "Requesting Holder") for
sale in the manner specified in the Request Notice.
(b) Promptly following receipt of a Request Notice, the Company shall
immediately notify any Person who is a Holder of Registrable Securities (except
the Requesting Holder) of the receipt of a Request Notice and shall use its best
efforts to file a registration statement under the Securities Act (each such
registration statement is hereinafter referred to as a "Registration Statement")
effecting the registration under the Securities Act, for public sale in
accordance with the method of disposition specified in such Request Notice, the
Registrable Securities specified in the Request Notice (and in any notices
received from other Holders no later than the 10th Business Day after receipt of
the notice sent by the Company) (such other Holders and the Requesting Holder
are hereinafter referred to as the "Requesting Holders"). If such method of
disposition shall be an underwritten public offering, the Company may designate
the managing underwriter of such offering, subject to the approval of the
Requesting Holders holding a majority of the Registrable Securities to be
registered, which approval shall not be withheld unreasonably. The Company
shall be obligated to register Registrable Securities pursuant to this Section
2.01 on three occasions only. A request pursuant to this Section 2.01 shall be
counted only when (i) all the Registrable Securities requested to be included in
any such registration have been so included, (ii) the corresponding Registration
Statement has become effective under the Securities Act, and (iii) the public
offering has been consummated and the Registrable Securities have been sold on
the terms and conditions specified therein. Notwithstanding anything to the
contrary contained herein, the Company may delay the filing or effectiveness of
a Registration Statement after receipt of a Request Notice (i) for up to 90 days
if at the time of such request, the Company is engaged in a firm commitment
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<PAGE>
underwritten public offering of its securities in which Holders may include
Registrable Securities and for which the Company has delivered the notice to
Holders required by the first sentence of Section 2.02 or (ii) for up to 60 days
if at the time of such request, the Board of Directors of the Company determines
in its reasonable judgment and in good faith that the filing of such a
Registration Statement or the making of any required disclosure in connection
therewith would have a material adverse effect on the Company or substantially
interfere with a significant transaction in which the Company is then engaged;
provided that the Company may not delay the filing of a Registration Statement
in reliance on this clause (ii) more than once during any period of twelve
consecutive calendar months.
(c) The Company shall be entitled to include in any Registration
Statement filed pursuant to this Section 2.01, for sale in accordance with the
method of disposition specified by the Requesting Holders, Voting Securities to
be sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would materially jeopardize the
successful marketing of the Registrable Securities to be sold. Any Person other
than a Holder entitled to piggy-back registration rights with respect to a
Registration Statement filed pursuant to this Section 2.01 may include Voting
Securities of the Company with respect to which such rights apply in such
Registration Statement for sale in accordance with the method of disposition
specified by the Requesting Holder, except and to the extent that, in the
opinion of the managing underwriter (if such method of disposition shall be an
underwritten public offering) such inclusion would materially jeopardize the
successful marketing of the Registrable Securities to be sold. Except as
provided in this subsection (c), the Company will not effect any other
registration of its Voting Securities (except with respect to Registration
Statements on Form S-4 or S-8 for purposes permissible under such forms as of
the date hereof, or any successor forms for comparable purposes that may be
adopted by the Commission), whether for its own account or that of any other
security holder, from the date of receipt of a Request Notice requesting the
registration of an underwritten public offering until the completion of the
distribution by the underwriters of all securities thereunder.
(d) From and after the date of this Agreement and until no Registrable
Securities remain outstanding, the Company shall not issue any demand
registration rights to any Person without the prior written consent of the
Purchaser.
Section 2.02. Piggy-Back Registration. If the Company proposes to
register any equity securities under the Securities Act for sale to the public
for cash, whether for its own account or for the account of other security
holders or both (except with respect to Registration Statements on Forms S-4 or
S-8 for purposes permissible under such forms as of the date hereof, or any
successor forms for comparable purposes that may be adopted by the Commission)
each such time it will give written notice to all Holders of its intention to do
so no less than 15 Business Days prior to the anticipated filing date. Upon the
written request of any Holder, received by the Company no
5
<PAGE>
later than the 10th Business Day after receipt by such Holder of the notice sent
by the Company, to register, on the same terms and conditions as the securities
otherwise being sold pursuant to such registration, any of its Registrable
Securities (which request shall state the intended method of disposition
thereof), the Company will use its best efforts to cause the Registrable
Securities as to which registration shall have been so requested to be included
in the securities to be covered by the Registration Statement proposed to be
filed by the Company, on the same terms and conditions as any similar securities
included therein, all to the extent requisite to permit the sale or other
disposition by each Holder (in accordance with its written request) of such
Registrable Securities so registered; provided, however, that the Company may at
any time prior to the effectiveness of any such Registration Statement, in its
sole discretion and without the consent of any Holder, abandon the proposed
offering in which any Holder had requested to participate. The number of
Registrable Securities to be included in such a registration may be reduced or
eliminated if and to the extent, in the case of an underwritten offering, the
managing underwriter shall render to the Company its opinion that such inclusion
would materially jeopardize the successful marketing of the securities
(including the Registrable Securities) proposed to be sold therein; provided,
however, that such number of shares of Registrable Securities shall not be
reduced (i) if any securities included in such registration are included other
than for the account of (x) the Company or (y) persons exercising registration
rights granted pursuant to the agreements listed on Schedule I hereto (as in
effect as of the date hereof) (the "Schedule I Agreements") and (ii) unless the
shares included in the registration pursuant to piggy-back registration rights
granted pursuant to the Schedule I Agreements are also reduced on a pro rata
basis. From and after the date of this Agreement and until no Registrable
Securities remain outstanding, the Company shall not grant any piggy-back
registration rights to any Person unless such rights are expressly made subject
to the prior right of Holders to include any or all of their Registrable Shares
before such other Person includes any shares in any registration relating to an
underwritten public offering with respect to which, in the opinion of the
managing underwriter, the inclusion in the offering of all shares requested to
be registered by all Persons holding registration rights would materially
jeopardize the successful marketing of the securities (including the Registrable
Securities) to be sold. In the event that the number of Registrable Securities
to be included in a registration is to be reduced as provided above, within 10
Business Days after receipt by each Holder proposing to sell Registrable
Securities pursuant to the registered offering of the opinion of such managing
underwriter, all such Selling Holders may allocate among themselves the number
of shares of such Registrable Securities which such opinion states may be
distributed without adversely affecting the distribution of the securities
covered by the Registration Statement, and if such Holders are unable to agree
among themselves with respect to such allocation, such allocation shall be made
in proportion to the respective numbers of shares specified in their respective
written requests. Notwithstanding anything to the contrary contained in this
Section 2.02, in the event that there is a firm underwriting commitment offer of
securities of the Company pursuant to a Registration Statement covering
Registrable Securities and a Person does not elect to sell its Registrable
Securities to the underwriters of the Company's securities in connection with
such
6
<PAGE>
offering, such Person shall not offer for sale, sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock, or any securities convertible into or exchangeable into or exercisable
for any shares of Common Stock during the period of distribution of the
Company's securities by such underwriters, which shall be specified in writing
by the underwriters, shall not exceed any period during which management of the
Company and others are similarly prohibited from disposing of shares of Common
Stock and shall not exceed 180 days following the date of effectiveness under
the Securities Act of the Registration Statement relating thereto if the net
proceeds to the Company from such offering will be $25,000,000 or greater and
shall not exceed 60 days following the date of effectiveness under the
Securities Act of the Registration Statement relating thereto if the net
proceeds to the Company from such offering will be less than $25,000,000.
Section 2.03. Registration Procedures. If and whenever the Company is
required pursuant to this Agreement to effect the registration of any of the
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file as promptly as possible with the Commission a
Registration Statement, on a form available to the Company, with respect to
such securities (which filing shall be made within 45 days after the
receipt by the Company of a Request Notice) and use its best efforts to
cause such Registration Statement to become and remain effective for the
period of the distribution contemplated thereby (determined pursuant to
subparagraph (g) below);
(b) 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 for the period specified in subsection (g) below and as
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement in accordance with the sellers' intended method of disposition
set forth in such Registration Statement for such period;
(c) furnish to each Selling Holder and to each underwriter such number
of copies of the Registration Statement and the prospectus included therein
(including each preliminary prospectus and each document incorporated by
reference therein to the extent then required by the rules and regulations
of the Commission) as such Persons may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities covered by such Registration Statement;
7
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(d) use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under the securities or
blue sky laws of such jurisdictions as the Selling Holders or, in the case
of an underwritten public offering, the managing underwriter, shall
reasonably request, provided, however, that the Company will not be
required to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(e) immediately notify each Selling Holder and each underwriter, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus contained 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 then
existing and as promptly as practicable amend the Registration Statement or
supplement the prospectus or take other appropriate action so that the
prospectus does 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
then existing; provided, however, that, in the case of a shelf
registration, the Company, on one occasion during each such registration,
may delay taking such action for a period of 45 days, during which time the
Selling Holders shall not sell any Registrable Securities, if the Board of
Directors determines in its reasonable judgment and in good faith that the
making of any required disclosure in connection therewith would have a
material adverse effect on the Company or substantially interfere with a
significant transaction in which the Company is then engaged;
(f) in the case of an underwritten public offering, furnish, (i) on
the date that Registrable Securities are delivered to the underwriters for
sale pursuant to such Registration Statement, an opinion of counsel for the
Company dated as of such date and addressed to the underwriters and to the
Selling Holders, stating that such Registration Statement has become
effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the Registration
Statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements
of the Securities Act and the applicable rules and regulations thereunder
of the Commission (except that such counsel need express no opinion as to
the financial statements or any engineering report contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters, and (ii) on the effective date
of the Registration Statement and on the date that Registrable Securities
are delivered to the underwriters for sale pursuant to such Registration
Statement, a letter dated such dates from the independent
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accountants retained by the Company, addressed to the underwriters and to
the Selling Holders, stating that they are independent public accountants
within the meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements of the Company and the schedules
thereto that are included or incorporated by reference in the Registration
Statement or the prospectus, or any amendment or supplement thereof, comply
as to form in all material respects with the applicable requirements of the
Securities Act and the published rules and regulations thereunder, and such
letter shall additionally address such other financial matters (including
information as to the period ending no more than five Business Days prior
to the date of such letter) included in the Registration Statement in
respect of which such letter is being given as the underwriters may
reasonably request;
(g) make available for inspection by one representative of the Selling
Holders designated by a majority thereof, any underwriter participating in
any distribution pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by such representative of the Selling
Holders or underwriter (the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with
such Registration Statement. For purposes of subsections (a) and (b) above
and of Section 2.01(c) of this Agreement, the period of distribution of
Registrable Securities in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of
distribution of Registrable Securities in any other registration shall be
deemed to extend until the earlier of the sale of all Registrable
Securities covered thereby or one year, excluding any period of time during
which Selling Holders are prohibited from selling Registrable Securities
pursuant to Section 2.02 or Section 2.03(e);
(h) use its best efforts to keep effective and maintain for the period
specified in subparagraph (g) a registration, qualification, approval or
listing obtained to cover the Registrable Securities as may be necessary
for the Selling Holders to dispose thereof and shall from time to time
amend or supplement any prospectus used in connection therewith to the
extent necessary in order to comply with applicable law;
(i) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders to consummate the disposition of
such Registrable Securities; and
(j) enter into customary agreements (including, if requested, an
underwriting agreement in customary form) and take such other actions as
are reasonably requested by the
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Selling Holders or the underwriters, if any, in order to expedite or
facilitate the disposition of such Registrable Securities.
In connection with each registration hereunder, each Selling Holder will
furnish promptly to the Company in writing such information with respect to
itself and the proposed distribution by it as shall be reasonably necessary in
order to ensure compliance with federal and applicable state securities laws.
In connection with each registration hereunder with respect to an
underwritten public offering, the Company and each Selling Holder agrees to
enter into a written agreement with the managing underwriter or underwriters
selected in the manner herein provided in such form and containing such
provisions as are customary in the securities business for such an arrangement
between underwriters and companies of the Company's size and investment stature,
provided that such agreement shall not contain any such provision applicable to
the Company or the Selling Holders that is inconsistent with the provisions
hereof; and further provided, that the time and place of the closing under said
agreement shall be as mutually agreed upon among the Company, the Selling
Holders and such managing underwriter.
Section 2.04. Expenses. (a) All expenses incident to the Company's
performance under or compliance with this Agreement, including without
limitation, all registration and filing fees, blue sky fees and expenses,
printing expenses, listing fees, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars and costs of insurance and reasonable out-of-pocket expenses
(including, without limitation, legal fees of one counsel for all Selling
Holders) of the Selling Holders, but excluding any Selling Expenses (as defined
below), are herein called "Registration Expenses." All underwriting fees,
discounts and selling commissions allocable to the sale of the Registrable
Securities are herein called "Selling Expenses."
(b) The Company will pay all Registration Expenses in connection with
each Registration Statement filed pursuant to this Agreement, whether or not the
Registration Statement becomes effective, and the Selling Holders shall pay
Selling Expenses in connection with any Registrable Securities registered
pursuant to this Agreement.
Section 2.05. Indemnification. (a) In the event of a registration
of any Registrable Securities under the Securities Act pursuant to this
Agreement, the Company will indemnify and hold harmless each Selling Holder
thereunder and each underwriter of Registrable Securities thereunder and each
Person, if any, who controls such Selling Holder or underwriter within the
meaning of the Securities Act and the Exchange Act, against any losses, claims,
damages or liabilities (including reasonable attorneys' fees) ("Losses"), joint
or several, to which such Selling
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Holder or underwriter or controlling Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Losses, (or
actions 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 Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such Selling Holder, each such
underwriter and each such controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Loss or actions; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Selling Holder, such underwriter or such controlling Person in
writing specifically for use in such Registration Statement or prospectus.
(b) Each Selling Holder agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with respect to information regarding such Selling
Holder furnished in writing by or on behalf of such Selling Holder expressly for
inclusion in any Registration Statement or prospectus relating to the
Registrable Securities, or any amendment or supplement thereto; provided,
however, that the liability of such Selling Holder shall not be greater in
amount than the dollar amount of the proceeds (net of any Selling Expenses)
received by such Selling Holder from the sale of the Registrable Securities
giving rise to such indemnification.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 2.05. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof 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 and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.05 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of
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investigation and of liaison with counsel so selected; provided, however, that,
(i) if the indemnifying party has failed to assume the defense and employ
counsel or (ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel to the indemnified
party shall have concluded that there may be reasonable defenses available to
the indemnified party that are different from or additional to those available
to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, then the indemnified party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred, provided that such fees and expenses shall be
reimbursed for only one counsel for all indemnified parties.
(d) If the indemnification provided for in this Section 2.05 is
available to the Company or the Selling Holders or is insufficient to hold them
harmless in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each such indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
expenses as between the Company on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and of each Selling Holder on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and each Selling Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statements of a material fact or the omission or
alleged omission to state a material fact has been made by, or relates to,
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
No person of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who is not guilty of such fraudulent misrepresentation.
ARTICLE III
Section 3.0. Communications. All notices and other communications
provided for or permitted hereunder shall be made in writing by telecopy,
courier service or personal delivery:
(i) if to a Holder of Registrable Securities, at the most current
address given by such Holder of the Company in accordance with the
provisions of this
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Section 3.01, which address initially is, with respect to the Purchaser,
the address set forth in the Purchase Agreement, and
(ii) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 3.01.
All such notices and communications shall be deemed to have been
received at the time delivered by hand, if personally delivered; when receipt
acknowledged, if telecopied; and on the next Business Day if timely delivered to
an air courier guaranteeing overnight delivery.
Section 3.02. Successor and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities.
Section 3.03, Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
but one and the same Agreement.
Section 3.04. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 3.05. Governing Law. The laws of the State of Texas shall
govern this Agreement without regard to principles of conflict of laws.
Section 3.06. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any
other jurisdiction.
Section 3.07. Entire Agreement. This Agreement, together with the
Purchase Agreement and the other Basic Documents 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
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement, the
Purchase Agreement and the other Basic
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Documents supersede all prior agreements and understandings between the parties
with respect to such subject matter.
Section 3.08. Attorneys' Fees. In any action or proceeding brought
to enforce any provision of this Agreement, the successful party shall be
entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
Section 3.09. Amendment. This Agreement may be amended only by means
of a written amendment signed by the Company and by the Holders of a majority of
the Registrable Securities.
Section 3.10. Registrable Securities Held by the Company or Its
Affiliates. In determining whether the Holders of the required amount of
Registrable Securities have concurred in any direction, amendment, supplement,
waiver or consent, Registrable Securities owned by the Company or one of its
Affiliates shall be disregarded.
Section 3.11. Assignment of Rights. (a) The rights of any Holder
under this Agreement may be assigned to any Person who acquires Convertible
Preferred Stock, Warrants or the Registrable Securities issuable on conversion
or exercise thereof. Any assignment of registration rights pursuant to this
Section 3.11(a) shall be effective only upon receipt by the Company of written
notice from such assigning Holder stating the name and address of any assignee.
(b) The rights of an assignee under Section 3.11(a) shall be the same
rights granted to the assigning Holder under this Agreement, except that the
assignee shall be entitled to initiate only one demand registration pursuant to
Section 2.01, unless demands for three registrations have been previously
counted in accordance with Section 2.01(b), in which case such assignee shall
not have any demand registration rights. In the event that an assignee Holder
is not entitled to initiate a demand registration, such Holder's Registrable
Securities shall not be counted as outstanding for purposes of calculating the
majority of Registrable Securities required to initiate a demand registration.
In connection with any such assignment, the term "Holder" as used herein shall,
where appropriate to assign the rights and obligations of the assigning Holder
hereunder to such assignee, be deemed to refer to the assignee.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
QUEEN SAND RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
----------------------------------
Edward J. Munden
President and Chief Executive Officer
and
By: /s/ ROBERT P. LINDSAY
----------------------------------
Robert P. Lindsay
Chief Operating Officer
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its General
Partner
By: /s/ STEVEN M. EMSHOFF
----------------------------------
Steven M. Emshoff
Agent and Attorney-in-Fact
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EXHIBIT 4
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CONVERTIBLE PREFERRED STOCK
OF
QUEEN SAND RESOURCES, INC.
Queen Sand Resources, Inc., a Delaware corporation (the "Corporation"),
does hereby certify that the following resolution was duly adopted by the Board
of Directors of the Corporation (the "Board of Directors") by unanimous written
consent effective as of May 5, 1997 pursuant to authority conferred upon the
Board of Directors by the provisions of the Certificate of Incorporation of the
Corporation that authorize the issuance of up to 50,000,000 shares of Preferred
Stock, par value $.01 per share:
BE IT RESOLVED, that the issuance of a series of Preferred Stock of Queen
Sand Resources, Inc. (the "Corporation") is hereby authorized, and the
designation, powers, preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions thereof, of the
shares of said series, in addition to those set forth in the Certificate of
Incorporation of the Corporation, are hereby fixed as follows:
SECTION 1. DESIGNATION. The distinctive serial designation of said
series shall be "Series A Participating Convertible Preferred Stock"
(hereinafter called "Series A Preferred Stock"). Each share of Series A
Preferred Stock shall be identical in all respects with all other shares of
Series A Preferred Stock.
SECTION 2. NUMBER OF SHARES. The number of shares of Series A Preferred
Stock shall be 9,600,000. Shares of Series A Preferred Stock that are redeemed,
purchased or otherwise acquired by the Corporation or converted into Common
Stock shall be canceled, and the Company shall take all such actions as are
necessary to cause such shares to revert to the status of authorized but
unissued shares of Preferred Stock undesignated as to series.
SECTION 3. DEFINITIONS. As used herein with respect to Series A Preferred
Stock, the following terms shall have the following meanings:
(a) The term "Junior Securities" shall mean the Common Stock, par
value $.0015 per share (the "Common Stock"), of the Corporation and any other
class or series of stock of the Corporation hereafter authorized over which the
Series A Preferred Stock has preference or priority in the payment of dividends,
when used with respect to the payment of dividends, or in the distribution of
assets on any liquidation, dissolution or winding up of the Corporation, when
used
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with respect to the distribution of assets on any liquidation, dissolution
or winding up of the Corporation.
(b) The term "Parity Securities" shall mean any other class or series
of stock of the Corporation hereafter authorized which ranks on a parity with
the Series A Preferred Stock in the payment of dividends, when used with respect
to the payment of dividends, or the distribution of assets on any liquidation,
dissolution or winding up of the Corporation, when used with respect to the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
(c) The term "Business Day" shall mean a day that is not a Saturday, a
Sunday or a day on which banking institutions in Houston, Texas are not required
to be open for business.
SECTION 4. DIVIDENDS. The holders of record, as of the record date
therefor or, if there is no such record date, as of the date of payment thereof,
of shares of Series A Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available therefor,
any dividends (other than a dividend or distribution paid in shares of, or
warrants, rights or options exercisable for or convertible into or exchangeable
for, Common Stock) payable on the Common Stock, as and when paid, in an amount
equal to the amount each such holder would have received if such holder's shares
of Series A Preferred Stock had been converted into Common Stock immediately
prior to the record date or, if there is no such record date, on the date of
payment thereof. Such right to receive dividends shall be in addition to the
right to receive any dividends payable pursuant to paragraph (b) of Section 9.
SECTION 5. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any of the assets of the
Corporation shall be distributed among or paid over to the holders of any Junior
Securities, the holders of shares of Series A Preferred Stock shall be entitled
to receive (i) an amount per share (the "Liquidation Preference") equal to the
lesser of (A) $1.50 and (B) the sum of (x) $0.521 and (y) the quotient obtained
by dividing (I) the aggregate amount of all payments made, as of the date of
such liquidation, dissolution or winding up, to the Corporation by Joint Energy
Development Investments Limited Partnership ("JEDI") or its assignee pursuant to
the Earn Up Agreement dated as of May 6, 1997 between the Corporation and JEDI
by (II) 9,600,000 and (ii) any and all accrued but unpaid dividends thereon, and
shall not be entitled to any other or additional distribution.
(b) If upon such liquidation, dissolution or winding up, whether
voluntary or involuntary, the assets available for distribution among the
holders of shares of Series A Preferred Stock and holders of Parity Securities
shall be insufficient to permit the payment to such holders of
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the full preferential amounts to which they are entitled, then the assets of the
Corporation available for distribution among the holders of Series A Preferred
Stock and holders of Parity Securities shall be distributed ratably among such
holders so that the amounts distributed in respect of the Series A Preferred
Stock and the Parity Securities shall bear to each other the same ratio that the
full amounts payable on liquidation, dissolution or winding up of the
Corporation to the holders of shares of Series A Preferred Stock and the Parity
Securities bear to each other.
(c) A consolidation or merger of the Corporation with or into any
other corporation or other entity, or a sale of all or substantially all of the
assets of the Corporation that does not involve a distribution by the
Corporation of cash or other property to the holders of shares of the Common
Stock, shall not be deemed to be a liquidation, dissolution or winding up within
the meaning of this Section 5.
SECTION 6. CONVERSION RIGHTS. Each holder of shares of Series A Preferred
Stock shall have the right, at such holder's option, to convert such shares into
shares of Common Stock of the Corporation at any time and from time to time on
and subject to the following terms and conditions:
(a) The shares of Series A Preferred Stock shall be convertible at the
principal office of the Corporation and at such other office or offices, if any,
as the Board of Directors may designate, into fully paid and non-assessable
shares (calculated as to each conversion to the nearest 1/100th of a share) of
Common Stock, at the Conversion Rate, as hereinafter defined, subject to
adjustment as provided herein. The "Conversion Rate," which represents the
number of shares of Common Stock into which each share of Series A Preferred
Stock is convertible, shall initially be one.
(b) In order to convert shares of Series A Preferred Stock into Common
Stock the holder thereof shall surrender at the office or offices hereinabove
mentioned the certificate or certificates therefor, duly endorsed or assigned to
the Corporation or in blank, and give written notice to the Corporation at said
office or offices that such holder elects to convert such shares. Shares of
Series A Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the day of the surrender of the certificates
for such shares for conversion in accordance with the foregoing provisions, and
the person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock at such time. As promptly as practicable on or after the
conversion date, the Corporation shall issue and shall deliver at such office a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with payment in lieu of any fraction of
a share, as hereinafter provided, to the person or persons entitled to receive
the same. Preferential dividends pursuant to Section 4(a) on converted shares of
Series A Preferred Stock shall cease to accrue on the date of conversion, and
all such dividends that have accrued as of the date of
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conversion but have not been paid shall be payable on the date such dividends
would have been payable if such conversion had not occurred.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock, but, instead of any fraction
of a share which would otherwise be issuable, the Corporation shall pay cash in
respect of such fraction in an amount equal to such fraction of the fair market
value (as determined by the Board of Directors of the Corporation) of a share of
Common Stock on the date on which the certificate or certificates for such
shares were duly surrendered for conversion.
(d) The number and kind of securities issuable upon the conversion of
the Series A Preferred Stock shall be subject to adjustment from time to time
upon the happening of certain events occurring on or after the Issuance Date of
the shares of the Series A Preferred Stock as follows:
(i) In case of any reclassification or change of outstanding
securities issuable upon exercise of the conversion rights (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Corporation with or into another
corporation or other entity (other than a merger with another corporation
or other entity in which the Corporation is the surviving corporation and
which does not result in any reclassification or change -- other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination -- of
outstanding securities issuable upon conversion of the Series A Preferred
Stock), the holders of the Series A Preferred Stock shall have, and the
Corporation, or such successor corporation or other entity, shall covenant
in the constituent documents effecting any of the foregoing transactions
that the holders of the Series A Preferred Stock do have, the right to
obtain upon conversion of the Series A Preferred Stock, in lieu of each
share of Common Stock theretofore issuable upon conversion of the Series A
Preferred Stock, the kind and amount of shares of stock, other securities,
money and property receivable upon such reclassification, change,
consolidation or merger by a holder of one share of Common Stock issuable
upon conversion of the Series A Preferred Stock as if the conversion had
occurred immediately prior to such reclassification, change, consolidation
or merger. The constituent documents effecting any reclassification,
change, consolidation or merger shall provide for any adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided in this subparagraph (d)(i). The provisions of this subparagraph
(d)(i) shall similarly apply to successive reclassifications, changes,
consolidations or mergers.
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(ii) If the Corporation at any time while any of the Series A
Preferred Stock is outstanding, shall subdivide or combine its Common
Stock, the Conversion Rate shall be proportionately adjusted at the
effective date of such subdivision or combination, or if the Corporation
shall take a record of its Common Stock for the purpose of so subdividing
or combining, at such record date, whichever is earlier.
(iii) If the Corporation at any time while any of the Series A
Preferred Stock is outstanding shall pay a dividend payable in, or make any
other distribution of, Common Stock, the Conversion Rate shall be adjusted,
at the date the Corporation shall take a record of the holders of its
Common Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, at the date of such payment or
other distribution), to that rate determined by multiplying the Conversion
Rate in effect immediately prior to such record date (or if no such record
is taken, then immediately prior to such payment or other distribution) by
a fraction (1) the numerator of which shall be the total number of shares
of Common Stock outstanding immediately after such dividend or distribution
plus, in the event that the Corporation paid cash for fractional shares,
the number of additional shares which would have been outstanding had the
Corporation issued fractional shares in connection with said dividend and
(2) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution. For
purposes hereof, the number of shares of Common Stock at any time
outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation or its
subsidiaries.
(e) Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall compute the adjusted Conversion Rate in accordance with this
Section 6 and shall cause to be prepared a certificate signed by the
Corporation's treasurer setting forth the adjusted Conversion Rate and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be mailed to the holders of record of outstanding
shares of the Series A Preferred Stock.
(f) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of issuance upon conversion of shares of Series A Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A Preferred Stock then outstanding.
(g) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock on conversion of
shares of Series A Preferred Stock pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of Common
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<PAGE>
Stock in a name other than that in which the shares of Series A Preferred Stock
so converted were registered, and no such issuance or delivery shall be made
unless and until the person requesting such issuance has paid to the Corporation
the amount of any such tax or has established to the satisfaction of the
Corporation that such tax has been paid.
(h) Concurrently with the transfer of any shares of Series A Preferred
Stock to any person (other than any direct or indirect affiliate of JEDI or any
other entity managed by Enron Corp. or any of its affiliates or for which Enron
Corp. or one of its affiliates acts as administrative agent) (each a "Designated
Holder"), the shares of Series A Preferred Stock so transferred shall
automatically be converted into a like number of shares of Series B
Participating Convertible Preferred Stock of the Corporation, $.01 par value per
share (the "Series B Preferred Stock"). Upon registration of any transfer of
shares of Series A Preferred Stock to any person other than a Designated Holder,
the Corporation or its transfer agent shall issue to the transferee a
certificate representing number of Series B Preferred Stock which is equal to
the number of shares of Series A Preferred Stock surrendered for transfer.
SECTION 7. VOTING RIGHTS.
(a) Except as provided in paragraph (b) of this Section 7, the holders
of Series A Preferred Stock shall vote together with the holders of Common Stock
(and of any other class or series which may similarly be entitled to vote with
the holders of Common Stock) as a single class on all matters on which holders
of Common Stock are entitled to vote, and the number of votes that each share of
Series A Preferred Stock shall entitle to the holder thereof to cast shall be
the number of shares of Common Stock into which such share of Series A Preferred
Stock is convertible as of the record date for such vote or, if there is no
record date for the vote, at the time of the vote.
(b) So long as at least 960,000 shares of Series A Preferred Stock are
outstanding, in addition to any other vote or consent of stockholders required
by law or by the certificate of incorporation, the approval of the holders of
the shares of Series A Preferred Stock, acting as a single class, shall be
necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the certificate of incorporation or the bylaws of the
Corporation;
(ii) The authorization, creation or issuance of, or the increase
in the authorized amount of, any Parity Securities or any shares of any
class or series or any security convertible into shares of any class or
series of any security ranking prior to the
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<PAGE>
shares of Series A Preferred Stock in the payment of dividends or in the
distribution of assets on any liquidation, dissolution, or winding up of
the Corporation;
(iii) The merger or consolidation of the Corporation with or
into any other corporation or other entity or the sale of all or
substantially all of the Corporation's assets; or
(iv) Any reorganization, restructuring, recapitalization or
other similar transaction that requires the approval of the stockholders of
the Corporation.
(c) With respect to any matter that requires the approval of holders
of Series A Preferred Stock acting separately as a class or any action that may
be taken by the holders of Series A Preferred Stock, such approval shall be
deemed to be given or such action taken by the affirmative vote of the holders
of a majority of the outstanding shares of Series A Preferred Stock, given in
person or by proxy, by written consent or at the annual meeting of the
Corporation's stockholders, or a special meeting in lieu thereof, or at a
special meeting of the holders of shares of Series A Preferred Stock called for
the purpose of voting on such matter or action. Upon receipt of the written
request of the holders of 25% or more of the outstanding shares of Series A
Preferred Stock, the Secretary of the Corporation shall call and give notice of
a special meeting of the holders of the Series A Preferred Stock for the purpose
specified in such request, which meeting shall be held within 30 days after
delivery of such request to the Corporation; provided that the Secretary shall
not be required to call such a special meeting in the case of any such request
received less than 30 days before the date fixed for an annual meeting of the
Company's stockholders.
SECTION 8. ELECTION OF DIRECTORS. The holders of shares of Series A
Preferred Stock shall have the right, exercisable at any time and acting
separately as a class, to elect a number of members of the board of directors
such that the quotient obtained by dividing such number by the maximum
authorized number of directors (as increased to include such additional
directors elected pursuant to this Section 8) is as close as possible to being
equal to the percentage of the outstanding voting power of the Corporation
entitled to vote generally in the election of directors that is represented by
the outstanding shares of Series A Preferred Stock at such time. Upon the
taking of any such action by the holders of Series A Preferred Stock to elect
directors of the Corporation, the maximum authorized number of members of the
Board of Directors shall automatically be increased by one or two, as
appropriate. A director elected by the holders of Series A Preferred Stock
pursuant to this Section 8 shall serve until his successor is duly elected and
qualified or until his removal. Such a director may be removed without cause at
any time by action, and only by such action, of the holders of shares of Series
A Preferred Stock. If the office of a director elected pursuant to this Section
8 becomes vacant by reason of death, resignation, retirement, disqualification,
removal from office or
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otherwise, such vacancy may be filled by the action, and only by such action, of
the holders of shares of Series A Preferred Stock.
SECTION 9. EVENT OF DEFAULT.
(a) For purposes hereof, an "Event of Default" shall be deemed to have
occurred if the Corporation shall fail to comply with any of the covenants
contained in Article VI of the Securities Purchase Agreement dated March 27,
1997 between the Corporation and JEDI (the "Securities Purchase Agreement"),
provided that, in the case of the covenants contained in Sections 6.02, 6.03,
6.04, 6.10. 6.11 or 6.13(b) of the Securities Purchase Agreement, failure to
comply shall not be considered an Event of Default if such failure is cured or
compliance is waived in writing by JEDI within 30 days after the date on which
the failure to comply first occurs.
Upon the failure of the Corporation to comply with any of the covenants
contained in Article VI of the Securities Purchase Agreement, the Corporation
shall provide written notice of such event, including the date on which such
event first occurred, to all of the holders of record of shares of Series A
Preferred Stock within 10 days after the occurrence of such event. Failure to
provide such notice shall be deemed an Event of Default. Any Event of Default
may be waived in writing by JEDI at any time, in which case paragraphs (b) - (d)
of this Section 9 shall not apply with respect to such Event of Default;
provided, however, that no such waiver of an Event of Default shall be deemed to
be a waiver of any other Event of Default.
(b) Upon the occurrence and during the continuance of an Event of
Default, the holders of outstanding shares of Series A Preferred Stock shall be
entitled to receive, in addition to all other dividends payable hereunder to
holders of shares of Series A Preferred Stock and when, as and if declared by
the Board of Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends accruing from the date of the
Event of Default (the "Default Date") in an amount per share per annum equal to
6% of the Liquidation Preference in effect at the time of accrual of such
dividends, payable quarterly in arrears on or before the 15th day (the "Dividend
Payment Date") after the last day of each calendar quarter during which such
dividends are payable (each a "Dividend Period"). If any Dividend Payment Date
occurs on a day that is not a Business Day, the dividend shall be payable on the
next succeeding Business Day. Each such dividend will be payable to holders of
record as they appear on the stock transfer records of the Corporation on such
record dates, not less than 10 nor more than 60 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors. Dividends on the Series A
Preferred Stock shall accrue (whether or not declared) on a daily basis and
shall be cumulative (whether or not in any Dividend Period there shall be funds
of the Corporation legally available for the payment of such dividends). The
first dividend shall accrue from the Default Date through the end of the first
calendar quarter to end after the Default Date, and subsequent dividends shall
accrue on a daily basis
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during the Dividend Period for which they are payable. Accrued and unpaid
dividends on the Series A Preferred Stock shall not bear interest. Unless full
cumulative dividends accrued on all outstanding shares of the Series A Preferred
Stock have been or contemporaneously are declared and paid for all Dividend
Periods ending on or prior to the date of payment thereof, no dividend shall be
declared or paid or set aside for payment or other distribution declared or made
on the Common Stock or on any other Junior Securities (other than a dividend or
distribution paid in shares of, or warrants, rights or options exercisable for
or convertible into or exchangeable for, Common Stock or any other Junior
Securities), nor shall any Common Stock nor any other Junior Securities be
redeemed, purchased or otherwise acquired for any consideration (other than by
conversion into or exchange or exercise for other Junior Securities), nor may
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such securities, by the Corporation or any of its
subsidiaries, except by conversion into or exchange for Junior Securities.
(c) Upon the occurrence and during the continuance of an Event of
Default resulting from the failure of the Corporation to comply with any of the
covenants contained in Sections 6.01, 6.06, 6.07, 6.08, 6.09, 6.10, 6.12, 6.13,
6.14, or 6.16 of the Securities Purchase Agreement, the holders of shares of
Series A Preferred Stock shall have the right, acting separately as a class, to
elect a number of persons to the Board of Directors of the Corporation that,
along with any members of the Board of Directors who are serving at the time of
such action and were elected pursuant to Section 8, will constitute a majority
of the Board of Directors. Upon the taking of such action, the maximum
authorized number of members of the Board of Directors shall automatically
increase by the number of directors so elected, and the vacancies so created
shall be filled by the persons elected pursuant to this subparagraph (ii). In
the event that upon the election of directors under this paragraph (c), the
Corporation is required under Rule 14f-1 under the Securities Exchange Act of
1934, as amended, to file with the Securities and Exchange Commission and
transmit to its stockholders certain information, the Corporation shall take
such action as promptly as practicable, and the term of office of the directors
so elected shall begin upon the termination of the 10 day period prescribed by
such Rule. A director elected by the holders of Series A Preferred Stock
pursuant to this Section 9(c) shall serve until his successor is duly elected
and qualified, until his removal or until his term terminates as provided below.
Such a director may be removed without cause at any time by action, and only by
such action, of the holders of shares of Series A Preferred Stock. If the
office of a director elected pursuant to this Section 9(c) becomes vacant by
reason of death, resignation, retirement, disqualification, removal from office
or otherwise, such vacancy may be filled by the action, and only by such action,
of the holders of shares of Series A Preferred Stock. At such time as the Event
of Default giving rise to this right to elect directors has been cured, such
right shall terminate, the terms of any directors elected pursuant to this
subparagraph (ii) shall terminate and the maximum number of authorized members
of the Board of Directors shall decrease automatically to the maximum number of
authorized members of the Board of Directors in effect immediately before any
action was taken pursuant hereto.
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<PAGE>
(d) Upon the occurrence of an Event of Default resulting from the
failure of the Company to comply with any of the covenants contained in Sections
6.01, 6.08, 6.09, 6.10, 6.13(b), 6.14, or 6.16 of the Securities Purchase
Agreement, each holder of shares of Series A Preferred Stock shall have the
right, by written notice to the Corporation (the "Repurchase Notice") within 90
days after the occurrence of the Event of Default, to require that the
Corporation repurchase, out of funds legally available therefor, such holder's
shares of Series A Preferred Stock for an amount in cash equal to the amount
such holder would receive in respect of the shares to be repurchased if the
Corporation were liquidated, dissolved or wound up on the date of the holder's
Repurchase Notice. Any Repurchase Notice shall be accompanied by duly endorsed
certificates representing the shares of Series A Preferred Stock to be
repurchased. Upon receipt of a Repurchase Notice, the Corporation shall make
payment in cash of the appropriate amount to the holder requiring repurchase
with five Business Days of the date such Repurchase Notice is received, unless
the Corporation receives within 90 days after the occurrence of the Event of
Default written notice from such holder prior to such payment that such holder
is withdrawing its requirement of the repurchase of its shares of Series A
Preferred Stock.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the
Corporation, has executed this Certificate of Designation on behalf of the
Corporation this 5th day of May, 1997.
QUEEN SAND RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
________________________________
Name: Edward J. Munden
______________________________
Title: President and Chief
Executive Officer
_____________________________
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EXHIBIT 5
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THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN RELIANCE ON AN OPINION,
REASONABLY SATISFACTORY TO QUEEN SAND RESOURCES, INC. IN FORM AND SUBSTANCE, OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT SUCH SALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON AN EXEMPTION FROM THE ACT AND ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
- --------------------------------------------------------------------------------
QUEEN SAND RESOURCES, INC.
Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Queen Sand Resources, Inc.
FOR VALUE RECEIVED, QUEEN SAND RESOURCES, INC., a Delaware corporation (the
"Company"), hereby certifies that Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at any time or from
time to time during the Exercise Period (as hereinafter defined), the Warrant
Shares (as hereinafter defined) at a price per share equal to the Exercise Price
(as defined below). This Warrant (together with such other warrants as may be
issued in exchange, transfer or replacement of this Warrant, the "Warrants") is
issued to the Holder (as hereinafter defined) pursuant to the Securities
Purchase Agreement (as defined below) and entitles the Holder to purchase the
Warrant Shares and to exercise the other rights, powers and privileges
hereinafter provided.
<PAGE>
Section 1. Definitions. The following terms, as used herein, have the
following respective meanings:
"Class A Warrants" has the meaning ascribed to such term in the Earn Up
Agreement.
"Class B Warrants" has the meaning ascribed to such terms in the Earn Up
Agreement.
"Common Stock" means the Company's common stock, $0.0015 par value.
"Company" is defined in the introductory paragraph of this Warrant.
"Date of Issuance" means May 6, 1997.
"Earn Up Agreement" means the Earn Up Agreement dated as of May 6, 1997
between the Company and Forseti Investments Ltd.
"Election Date" has the meaning specified therefor in the Earn Up
Agreement.
"Exercise Period" means the period of time between 12:01 a.m. (New York
City Time) on October 1, 1998 and 5:00 p.m. (New York City time) on December 31,
1998.
"Exercise Price" means an amount, per share, equal to $2.50. The Exercise
Price shall be subject to adjustment, as set forth in Section 4.
"Holder" means Joint Energy Development Investments Limited Partnership and
its permitted assignees.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint-stock company, trust, limited liability
company, unincorporated organization or government or any agency or political
subdivision thereof.
"Required Holders" means the Holders of more than 50% of all Warrant Shares
then outstanding (assuming the full exercise of all Warrants).
"Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of March 27, 1997, between the Company the Holder, as such agreement
shall be modified, amended and supplemented and in effect from time to time.
"Value" means $3.50 per share of Common Stock.
"Warrants" is defined in the introductory paragraph of this Warrant.
"Warrant Shares" means the number of shares of Common Stock (or amount of
other property) equal to the number of shares of Common Stock (or amount of
other property), as adjusted from time pursuant to the terms hereof, which would
have been received upon the exercise on the
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Election Date of all Class A Warrants and Class B Warrants, if any, that are
deliverable to the Company by Forseti Investments Ltd. pursuant to Section
2.0(b) of the Earn Up Agreement.
Section 2. Exercise of Warrant; Cancellations of Warrant. This Warrant
may be exercised in whole or in part, at any time or from time to time, during
the Exercise Period, by presentation and surrender hereof to the Company at its
principal office at the address set forth in Section 10 (or at such other
reasonable address as the Company may after the date hereof notify the Holder in
writing, coming into effect not before 14 days after receipt of such notice by
the Holder), with the Purchase Form annexed hereto as Exhibit A duly executed
and accompanied by either (at the option of the Holder) proper payment in cash
or certified or bank check equal to the Exercise Price for the Warrant Shares
for which this Warrant is being exercised; provided, that if this Warrant is
exercised in part, the Warrant must be exercised. Upon exercise of this Warrant
as aforesaid, the Company shall as promptly as practicable, and in any event
within 20 days thereafter, execute and deliver to the Holder a certificate or
certificates for the total number of Warrant Shares for which this Warrant is
being exercised, in such names and denominations as requested in writing by the
Holder. The Company shall pay any and all documentary stamp or similar issue
taxes payable in respect of the issue of the Warrant Shares. If this Warrant is
exercised in part only, the Company shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares issuable hereunder.
Section 3. Exchange, Transfer, Assignment or Loss of Warrant.
(a) This Warrant is exchangeable, without expense, at the option of
the Holder, upon presentation and surrender hereof to the Company for
other Warrants of different denominations, entitling the Holder to
purchase in the aggregate the same number of Warrant Shares. The
Holder of this Warrant shall be entitled, without obtaining the
consent of the Company, to transfer or assign its interest in (and
rights under) this Warrant in whole or in part to any Person or
Persons. Upon surrender of this Warrant to the Company, with the
Assignment Form annexed hereto as Exhibit B duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees named in such Assignment Form and, if the
Holder's entire interest is not being assigned, in the name of the
Holder, and this Warrant shall promptly be canceled. This Warrant may
be divided or combined with other Warrants that carry the same rights
upon presentation hereof at the office of the Company, together with a
written notice specifying the names and denominations in which new
Warrants are to be issued and signed by the Holder hereof. Upon
receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification
(including, if required in the reasonable judgment of the Company, a
statement of net worth of such Holder that is at a level reasonably
satisfactory to the Company), and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date.
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(b) At any time after the Election Date the Holder shall be entitled,
upon presentation and surrender of this Warrant to the Company, to
receive a new Warrant that is identical in all respects to this
Warrant except that (i) the definition of "Warrant Shares" in Section
1 of such new Warrant shall indicate that such term means a specified
number of shares of Common Stock (as adjusted from time to time
pursuant to the terms hereof), which number shall be the number of
shares of Common Stock receivable upon the exercise of this Warrant as
of the date of issuance of such new Warrant and (ii) such new Warrant
shall not contain this paragraph (b).
Section 4. Antidilution Provisions.
(a) Adjustment of Number of Warrant Shares and Exercise Price. The
number of Warrant Shares purchasable pursuant hereto and the Exercise
Price, each shall be subject to adjustment from time to time on and
after the Election Date as provided in this Section 4(a). In case the
Company shall at any time after the Election Date (i) pay a dividend
of shares of Common Stock or make a distribution of shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock
or (iv) issue any shares of its capital stock or other assets in a
reclassification or reorganization of the Common Stock (including any
such reclassification in connection with a consolidation or merger in
which the Company is the continuing entity), then (x) the securities
purchasable pursuant hereto shall be adjusted to the number of Warrant
Shares and amount of any other securities, cash or other property of
the Company which the Holder would have owned or have been entitled to
receive after the happening of any of the events described above, had
this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto, and (y) the Exercise
Price shall be adjusted to equal the Exercise Price immediately prior
to the adjustment multiplied by a fraction, (A) the numerator of which
is the number of Warrant Shares for which this Warrant is exercisable
immediately prior to the adjustment, and (B) the denominator of which
is the number of shares for which this Warrant is exercisable
immediately after such adjustment. The adjustments made pursuant to
this Section 4(a) shall become effective immediately after the
effective date of the event creating such right of adjustment,
retroactive to the record date, if any, for such event. Any Warrant
Shares purchasable as a result of such adjustment shall not be issued
prior to the effective date of such event.
For the purpose of this Section 4(a) and (b), the term "shares of
Common Stock" means (i) the classes of stock designated as the Common
Stock of the Company as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from par value to
no par value, or from no par value to par value. In the event that at
any time, as a result of an adjustment made pursuant to this Section
4(a), the Holder shall become entitled to receive any securities of
the Company other
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<PAGE>
than shares of Common Stock, thereafter the number of such other
securities so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 4.
(b) Reorganization, Merger, etc. If any capital reorganization,
reclassification or similar transaction involving the capital stock of
the Company (other than as specified in Section 4(a)), any
consolidation, merger or business combination of the Company with
another corporation or the sale or conveyance of all or any
substantial part of its assets to another corporation, shall be
effected in such a way that holders of the shares of Common Stock
shall be entitled to receive stock, securities or assets (including,
without limitation, cash) with respect to or in exchange for shares of
the Common Stock, then, prior to and as a condition of such
reorganization, reclassification, similar transaction, consolidation,
merger, business combination, sale or conveyance, lawful and adequate
provision shall be made whereby the Holder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the Warrant Shares
immediately theretofore purchasable and receivable upon the exercise
of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of
outstanding Warrant Shares equal to the number of Warrant Shares
immediately theretofore purchasable and receivable upon the exercise
of this Warrant had such reorganization, reclassification, similar
transaction, consolidation, merger, business combination, sale or
conveyance not taken place. The Company shall not effect any such
consolidation, merger, business combination, sale or conveyance unless
prior to or simultaneously with the consummation thereof the survivor
or successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing such assets
shall assume by written instrument executed and sent to the Holder,
the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
the Holder may be entitled to receive.
(c) Statement on Warrant Certificates. Irrespective of any
adjustments in the Exercise Price or the number or kind of Warrant
Shares, this Warrant may continue to express the same price and number
and kind of shares as are stated on the front page hereof.
(d) Exception to Adjustment. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any
adjustment of the number of Warrant Shares issuable hereunder or to
the Exercise Price in the case of the issuance of the Warrants or the
issuance of shares of the Common Stock (or other securities) upon
exercise of the Warrants.
(e) Treasury Shares. The number of shares of the Common Stock
outstanding at any time shall not include treasury shares or shares
owned or held by or for the account of the Company or any of its
subsidiaries, and the disposition of any such
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<PAGE>
shares shall be considered an issue or sale of the Common Stock for
the purposes of this Section 4.
(f) Adjustment Notices to Holder. Upon any increase or decrease in
the number of Warrant Shares purchasable upon the exercise of this
Warrant or the Exercise Price the Company shall, within 30 days
thereafter, deliver written notice thereof to all Holders, which
notice shall state the increased or decreased number of Warrant Shares
purchasable upon the exercise of this Warrant and the adjusted
Exercise Price, setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based.
Section 5. Notification by the Company. In case at any time while this
Warrant remains outstanding:
(a) the Company shall declare any dividend or make any distribution
upon its Common Stock or any other class of its capital stock; or
(b) the Company shall offer for subscription pro rata to the holders
of its Common Stock or any other class of its capital stock any
additional shares of stock of any class or any other securities
convertible into or exchangeable for shares of stock or any rights or
options to subscribe thereto; or
(c) the Board of Directors of the Company shall authorize any capital
reorganization, reclassification or similar transaction involving the
capital stock of the Company, or a sale or conveyance of all or a
substantial part of the assets of the Company, or a consolidation,
merger or business combination of the Company with another Person; or
(d) actions or proceedings shall be authorized or commenced for a
voluntary or involuntary dissolution, liquidation or winding-up of the
Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder, at the earliest time legally practicable (and not less than 20 days
before any record date or other date set for definitive action) of the date on
which (i) the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or options or (ii) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation or winding-up shall take place or be voted on by
shareholders of the Company, as the case may be. Such notice shall also specify
the date as of which the holders of the Common Stock of record shall participate
in said dividend, distribution, subscription rights or options or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, conveyance,
consolidation, merger, dissolution, liquidation or winding-up, as the case may
be. If the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of shareholders, the notice required by this Section 5 shall so
state.
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Section 6. No Voting Rights: Limitations of Liability. Prior to
exercise, this Warrant will not entitle the Holder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to exercise this Warrant, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of the Warrant Shares pursuant to
the exercise hereof.
Section 7. Amendment and Waiver.
(a) No failure or delay of the Holder in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right
or power. The rights and remedies of the Holder are cumulative and
not exclusive of any rights or remedies which it would otherwise have.
The provisions of this Warrant may be amended, modified or waived with
(and only with) the written consent of the Company and the Required
Holders.
(b) No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
Section 8. No Fractional Warrant Shares. The Company shall not be
required to issue stock certificates representing fractions of Warrant Shares,
but shall in respect of any fraction of a Warrant Share make a payment in cash
based on the Value of the Common Stock after giving effect to the full exercise
or conversion of the Warrants.
Section 9. Reservation of Warrant Shares. The Company shall
authorize, reserve and keep available at all times, free from preemptive rights,
a sufficient number of Warrant Shares to satisfy the requirements of this
Warrant.
Section 10. Notices. Unless otherwise specified, whenever this Warrant
requires or permits any consent, approval, notice, request, or demand from one
party to another, that com munication must be in writing (which may be by
telecopy) to be effective and is deemed to have been given (a) if by telecopy,
when transmitted to the appropriate telecopy number (and all communications sent
by telecopy must be confirmed promptly by telephone; but any requirement in this
parenthetical does not affect the date when the telecopy is deemed to have been
delivered), or (b) if by any other means, including by internationally
acceptable courier or hand delivery, when actually delivered. Until changed by
notice pursuant to this Warrant, the address (and telecopy number) for the
Holder and the Company are:
If to Holder: Joint Energy Development Investments Limited Partnership
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry - Director, 28th Floor
Facsimile: (713) 646-3602
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<PAGE>
If to Company: Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, L.B.#31
Dallas, Texas 75219-4398
Attn: Robert P. Lindsay
Facsimile: (214) 521-9960
With copies to: Queen Sand Resources, Inc.
60 Queen Street, Suite 1400
Ottawa, Canada K1P 5Y7
Attn: Edward J. Munden
Facsimile: (613) 230-6055
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: William L. Boeing, Esq.
Facsimile: (214) 651-5940
Section 11. Section and Other Headings. The headings contained in this
Warrant are for reference purposes only and will not affect in any way the
meaning or interpretation of this Warrant.
Section 12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE DELAWARE GENERAL CORPORATION LAW, TO THE
EXTENT APPLICABLE TO THE INTERNAL AFFAIRS OF THE COMPANY (INCLUDING THE GRANT OF
THIS WARRANT AND THE ISSUANCE OF THE WARRANT SHARES), AND OTHERWISE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 13. Binding Effect. The terms and provisions of this Warrant
shall inure to the benefit of the Holder and its successors and assigns and
shall be binding upon the Company and its successors and assigns, including,
without limitation, any Person succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
* * * * *
-8-
<PAGE>
IN WITNESS WHEREOF, the seal of the Company and the signature of its duly
authorized officer have been affixed hereto as of May 6, 1997.
[SEAL] QUEEN SAND RESOURCES, INC.
Attest: /s/ BRUCE BENN By: /s/ EDWARD J. MUNDEN
--------------- -----------------------------------
Edward J. Munden
President and Chief Executive Officer
and
Attest: /s/ BRUCE BENN By: /s/ ROBERT P. LINDSAY
--------------- -----------------------------------
Robert P. Lindsay
Chief Operating Officer
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<PAGE>
EXHIBIT A
TO
WARRANT
PURCHASE FORM
To Be Executed by the Holder
Desiring to Exercise a Warrant of
Queen Sand Resources, Inc.
The undersigned holder hereby exercises the right to purchase ____________
shares of Common Stock covered by the within Warrant, according to the
conditions thereof, and herewith makes payment in full of the Exercise Price of
such shares, in the amount of $____________.
Name of Holder:
___________________________________
Signature:_________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
Dated:____________, ____.
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<PAGE>
EXHIBIT B
TO
WARRANT
ASSIGNMENT FORM
To Be Executed by the Holder
Desiring to Transfer a Warrant of
Queen Sand Resources, Inc.
FOR VALUE RECEIVED, the undersigned holder hereby sells, assigns and
transfers unto _________ the right to purchase _______ shares of Common Stock
covered by the within Warrant, and does hereby irrevocably constitute and
appoint _________________ Attorney to transfer the said Warrant on the books of
the Company (as defined in such Warrant), with full power of substitution.
Name of Holder:
___________________________________
Signature:_________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
Dated:____________, ____.
In the presence of
____________________________
NOTICE:
The signature to the foregoing Assignment Form must correspond to the name as
written upon the face of the within Warrant in every detail, without alteration
or enlargement or any change whatsoever.
-11-
