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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MAY 6, 1997
QUEEN SAND RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
STATE OF DELAWARE 0-21179 75-2615565
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
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3500 OAK LAWN
SUITE 380, LB #31
DALLAS, TEXAS 75219-4398
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 521-9959
NO CHANGE
(FORMER NAME OR FORMER ADDRESS, IF CHANGE SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
THE TRANSACTIONS
General. On May 6, 1997, the transactions contemplated under (i) the
Securities Purchase Agreement, dated March 27, 1997 (the "JEDI Purchase
Agreement") between Queen Sand Resources, Inc., a Delaware corporation (the
"Company"), and Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI") and an affiliate of Enron Finance Corp.,
a Delaware corporation ("EFC"), and (ii) the Securities Purchase Agreement,
dated March 27, 1997 (the "Forseti Purchase Agreement") between the Company and
Forseti Investments Ltd., a company organized under the laws of Barbados
("Forseti") (the two transactions are herein referred to as the
"Transactions"), were consummated. The execution and delivery of the JEDI
Purchase Agreement and the Forseti Purchase Agreement were previously reported
in the Company's Current Report on Form 8-K, dated March 27, 1997.
Pursuant to the Transactions, (i) JEDI has become a significant
stockholder of the Company and (ii) the Company issued the Class A Warrants,
the Class B Warrants, and an option under the Forseti Earn Up Agreement (each,
as defined below) to Forseti in reliance upon Regulation S under the Securities
Act of 1933, as amended. See "JEDI Transaction Agreements" and "Forseti
Transaction Agreements."
To facilitate the consummation of the Transactions, on May 5, 1997,
the Company amended its Certificate of Incorporation to increase the number of
authorized shares of the Company's common stock, par value $0.0015 per share
(the "Common Stock"), from 40,000,000 to 100,000,000 shares and to authorize
the issuance of up to 50,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"), which shares of Preferred Stock may be issued in
one or more series at the discretion of the Board of Directors of the Company.
See "The Transactions -- The Charter Amendment." The amendment to the
Certificate of Incorporation of the Company (the "Charter Amendment") was
approved by Forseti and EIBOC Investments Ltd., a company organized under the
laws of Barbados ("EIBOC"), as the collective holders of approximately 54% of
the Company's Common Stock, by written consent in lieu of a meeting of
stockholders dated March 27, 1997 and effective May 5, 1997 and was approved
unanimously by the Board of Directors.
JEDI Transaction. JEDI has determined to make a substantial
investment in the Company, on the terms described herein, to provide the
Company with the capital to repurchase the Common Stock owned by Forseti.
Pursuant to the JEDI Purchase Agreement, on May 6, 1997, JEDI acquired
9,600,000 shares of Series A Participating Convertible Preferred Stock, par
value $0.01 per share, of the Company (the "Series A Preferred Stock"), certain
warrants to purchase Common Stock (the "JEDI Warrants") and warrants to
purchase 409,839 shares of Common Stock (the "Robertson Warrants"). The
Robertson Warrants were granted to JEDI as a form of maintenance right on the
part of JEDI to acquire Common Stock in the future and maintain JEDI's
proportionate ownership in the Company in relation to shares of Common Stock
issued in late February and late March 1997 to fund the Robertson acquisition.
See "JEDI Transaction Agreements -- Maintenance Rights" the Company's Current
Reports on Form 8-K dated February 20, 1997 and March 26, 1997 for a more
complete description of the
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Robertson acquisition. The aggregate consideration (excluding the exercise
price in respect of the JEDI Warrants and the Robertson Warrants) cannot exceed
$14,400,000 and consisted of (i) $5,000,000 ($0.521 per share) cash at closing
of the JEDI Purchase Agreement plus (ii) contingent cash payment obligations
(up to an aggregate of $9,400,000) to the Company under the JEDI Earn Up
Agreement, as defined and described below. All of the $5,000,000 cash
consideration was used, and all of the contingent consideration will be used,
by the Company to fund the Forseti transaction agreements. See "Forseti
Transaction Agreements." Based upon (i) a total of 20,625,502 shares of Common
Stock issued and outstanding immediately following the closing of the
Transactions on May 6, 1997, and (ii) 409,839 shares of Common Stock issuable
upon exercise of the Robertson Warrants, JEDI owns approximately 32.7% of the
voting capital stock of the Company.
In connection with the purchase by JEDI of the Series A Preferred
Stock, the JEDI Warrants and the Robertson Warrants, the Company has granted
JEDI certain maintenance rights and certain demand and piggyback registration
rights with respect to the shares of Common Stock issuable upon conversion of
the Series A Preferred Stock and the shares of Common Stock issuable upon
exercise of the JEDI Warrants and the Robertson Warrants. As a holder of
Series A Preferred Stock, JEDI may designate a number of directors to the
Company's Board of Directors, such that the percentage of the number of
directors that JEDI may designate approximates the percentage voting power JEDI
has with respect to the Company's Common Stock. In addition, upon certain
events of default (as defined in the Series A Certificate of Designation
described below), JEDI will have the right to elect a majority of the directors
of the Company and a put option to sell the Series A Preferred Stock to the
Company. See "JEDI Transaction Agreements."
Forseti Transaction. Pursuant to the Forseti Purchase Agreement, on
May 6, 1997, the Company repurchased 9,600,000 shares of Common Stock owned by
Forseti in exchange for (i) $5,000,000 ($0.521 per share) cash, (ii) the
issuance by the Company of Class A Common Stock Purchase Warrants to purchase
1,000,000 shares of Common Stock at an initial exercise price of $2.50 per
share (the "Class A Warrants") and Class B Common Stock Purchase Warrants to
purchase 2,000,000 shares of Common Stock at an initial exercise price of $2.50
per share (the "Class B Warrants," and together with the Class A Warrants, the
"Forseti Warrants"), and (iii) contingent obligations (up to an aggregate of
$9,400,000) to Forseti under the Forseti Earn Up Agreement, as described below.
However, pursuant to the terms of the Forseti Earn Up Agreement, Forseti can
not both sell or exercise the Forseti Warrants and receive full payment under
the Forseti Earn Up Agreement. Instead, Forseti has the option of either
selling or exercising the Forseti Warrants or receiving any payments due under
the Forseti Earn Up Agreement. The aggregate consideration paid or payable by
the Company to Forseti in respect of the repurchase of the Common Stock owned
by Forseti can not exceed $14,400,000. This consideration will be funded only
through the JEDI Purchase Agreement and the JEDI Earn Up Agreement. In
addition, Forseti reimbursed the Company $450,000 for fees and expenses
incurred by the Company in facilitating the Transactions. See "Forseti
Transaction Agreements."
The Charter Amendment. Effective May 5, 1997, the Certificate of
Incorporation of the Company was amended to authorize a class of preferred
stock and to authorize additional shares of Common Stock. The Charter
Amendment was approved by Forseti and EIBOC, as the collective holders of
approximately 54% of the Common Stock outstanding on March 27, 1997, by written
consent in lieu of a meeting of stockholders dated March 27, 1997 and effective
May 5, 1997, as described more particularly in an Information Statement dated
April 15, 1997 and previously disseminated to the stockholders of the Company.
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The Charter Amendment (i) authorizes the issuance of an aggregate of
50,000,000 shares of Preferred Stock, of which, following the closing of the
JEDI Purchase Agreement, 9,600,000 shares are issued and outstanding shares of
Series A Preferred Stock, 9,600,000 shares are authorized but unissued shares
of Series B Participating Convertible Preferred Stock, par value $0.01 per
share (the "Series B Preferred Stock"), and 30,800,000 shares are undesignated
preferred stock (the "Undesignated Preferred Stock") available for issuance by
the Company in the future and (ii) authorizes an additional 60,000,000 shares
of Common Stock (in addition to the 40,000,000 shares previously authorized
under the Certificate of Incorporation). See "JEDI Transaction Agreements --
Description of Series A Preferred Stock and Description of Series B Preferred
Stock." As of May 6, 1997, there were an aggregate of 9,600,000 shares held in
treasury and 69,774,498 shares of authorized and unissued shares of Common
Stock. Any authorized but unissued or unreserved Common Stock and Undesignated
Preferred Stock is available for issuance at any time, on such terms and for
such purposes as the Board of Directors may deem advisable in the future
without further action by stockholders of the Company, except as may be
required by law or the Series A Certificate of Designation. The Board of
Directors of the Company will have the authority to fix the rights, powers,
designations, and preferences of the Undesignated Preferred Stock and to
provide for one or more series of Undesignated Preferred Stock. The authority
will include, but not be limited to, determination of the number of shares to
be included in the series, dividend rates and rights, voting rights, if any,
conversion privileges and terms, redemption conditions, redemption values,
sinking funds and rights upon involuntary or voluntary liquidation. Except as
described herein, the Company currently has no plans to issue shares of
Undesignated Preferred Stock.
Effective May 5, 1997, the Company has filed with the Secretary of
State of the State of Delaware a Certificate of Designation to establish the
rights, powers, designations and preferences of the Series A Preferred Stock
(the "Series A Certificate of Designation"). In addition, effective May 5,
1997, the Company has filed a Certificate of Designation to establish the
rights, powers, designations and preferences of the Series B Preferred Stock
(the "Series B Certificate of Designation").
JEDI TRANSACTION AGREEMENTS
Description of the JEDI Purchase Agreement. The following summary of
the material provisions of the JEDI Purchase Agreement is not intended to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of such agreement, a copy of which is filed as an exhibit to
the Company's Current Report on Form 8-K dated March 27, 1997.
Purchase of Series A Preferred Stock, JEDI Warrants and
Robertson Warrants. Pursuant to the JEDI Purchase Agreement, JEDI purchased
9,600,000 shares of Series A Preferred Stock, the JEDI Warrants and the
Robertson Warrants in exchange for (i) the payment by JEDI to the Company of
$5,000,000 cash; and (ii) the execution and delivery by JEDI of the JEDI Earn
Up Agreement. See "JEDI Transaction Agreements -- Description of the Series A
Preferred Stock, Description of the JEDI Warrants, Description of the Robertson
Warrants and Description of the JEDI Earn Up Agreement."
Certain Representations and Warranties. Under the JEDI
Purchase Agreement, the Company has made certain representations and warranties
to JEDI regarding the Company and its business, including (i) due corporate
organization of the Company and its subsidiaries; (ii) the due authorization
and issuance of the Series A Preferred Stock, the JEDI
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Warrants and the Robertson Warrants and the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock and the exercise of the JEDI
Warrants and the Robertson Warrants; (iii) the due authorization, execution,
delivery and performance by the Company of the JEDI Purchase Agreement and
related agreements and their enforceability; (iv) no conflict with or violation
of the Company's Certificate of Incorporation or bylaws, any of the Company's
agreements and applicable law; (v) required consents from governmental
authorities or other third parties; (vi) the capital structure of the Company
and its subsidiaries; (vii) employee benefit matters; (viii) the accuracy of
reports and other documents filed by the Company with the Securities and
Exchange Commission ("SEC"); (ix) the absence of certain changes to the
Company's or its subsidiaries' business, financial condition, properties,
liabilities, assets, results of operations or future business prospects; (x)
compliance with laws; (xi) disclosure of pending and threatened litigation;
(xii) payment of taxes; (xiii) environmental matters; (xiv) adequacy of
insurance; (xv) title to assets; (xvi) accuracy of books and records; (xvii)
certain regulatory matters; (xviii) accuracy of financial statements and
certain reserve reports; (xix) adequacy of permits and licenses; (xx) title to
intellectual property; (xxi) title to properties; (xxii) no undisclosed
interested director transaction; (xxiii) no payments owed to brokers and
finders; and (xxiv) no material misstatements in any disclosures to JEDI.
Under the JEDI Purchase Agreement, JEDI has made certain
representations and warranties to the Company, including (i) due organization;
(ii) the due authorization, execution, delivery and performance by JEDI of the
JEDI Purchase Agreement and related agreements and their enforceability; (v) no
conflict with or violation of the JEDI's organizational documents, any of
JEDI's agreements and applicable law; (vi) required consents from governmental
authorities or other third parties; (vii) pending and threatened litigation;
and (viii) certain investment representations.
Covenants. Pursuant to the JEDI Purchase Agreement, the
Company has covenanted to: (i) use the entire cash proceeds received under the
JEDI Purchase Agreement to repurchase the Common Stock owned by Forseti under
the Forseti Purchase Agreement; (ii) maintain its corporate existence and cause
its subsidiaries to maintain their corporate existence; (iii) comply with
applicable laws and cause its subsidiaries to do the same; (iv) maintain its
properties and cause its subsidiaries to maintain their properties; (v) not
materially change its accounting methods or permit its subsidiaries to change
their accounting methods; (vi) allow JEDI the right to have notice of, and
attendees at, the Company's Board of Directors' meetings; (vii) furnish to JEDI
certain reports and accounts furnished to the Company's Board of Directors;
(viii) effect the placement of Common Stock with net proceeds to the Company of
at least $5,400,000 commencing March 15, 1997 through December 31, 1997; (ix)
deliver an officer's certificate to JEDI annually regarding compliance with the
covenants; (x) provide JEDI with certain financial statements and reserve
reports; (xi) use its best efforts to cause the Common Stock to be listed on
THE NASDAQ Small Cap Market; (xii) use reasonable commercial efforts to cause
the Common Stock, including the Common Stock issuable upon conversion of the
Series A Preferred Stock and upon exercise of the JEDI Warrants and the
Robertson Warrants, to be listed on THE NASDAQ National Market no later than
March 15, 2003; (xiii) approve customary stock option and other benefit plans;
(xiv) no later than June 30, 1997, enter into an employment agreement with V.
Ed Butler or a person with comparable qualifications reasonably acceptable to
JEDI; (xv) not to amend the Forseti Purchase Agreement or related documents
without the prior written consent of JEDI; and (xvi) use its best efforts to
obtain the consent of Comerica Bank-Texas to the transactions contemplated by
the agreement.
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In addition, the Company has covenanted not, and not permit any of its
subsidiaries, to engage in asset sales not in the ordinary course of business
unless the asset sale is for not less than the fair market value of the assets
sold and the consideration received by the Company or its subsidiary is at
least 85% cash; provided, that the following are deemed to be cash for purposes
of the covenant: (i) the amount of liabilities of the Company or a subsidiary
assumed by the transferee; (ii) the amount of any notes or other obligations
received by the Company or a subsidiary from such transferee converted into
cash within 90 days of the closing of the sale and (iii) the fair market value
of certain oil and gas properties and permitted business investments received
by the Company or its subsidiaries from such transferee. Further, if the
Company engages in an asset sale that is not in the ordinary course of
business, then the Company shall repay indebtedness, if required, and if not so
required, then within 60 days after the receipt of proceeds from such sale, the
Company may apply the proceeds to reduce indebtedness, acquire a controlling
interest in another oil and gas business or permitted business investment, make
certain capital expenditures, purchase assets useful to the oil and gas
business or retain cash for working capital.
The Company has covenanted not, and not permit any of its
subsidiaries, to directly or indirectly enter into any transaction or series of
related transactions involving aggregate consideration equal to or greater than
$60,000 with any affiliate of the Company unless (i) the terms of the
transaction are no less favorable to the Company than those that could have
been obtained in a transaction with an unaffiliated party or an arms-length
basis and (ii) the transaction is approved by a majority of disinterested
directors of the Company; provided, that this covenant will not apply to
customary compensation to officers, directors, and employees in the ordinary
course of business, intercompany transactions, dividend payments, or the
transactions contemplated by the Letter Agreement. See "JEDI Transaction
Agreements -- Description of the Letter Agreement."
The Company has also covenanted to comply with substantially all of
the provisions of Rule 4460 of the National Association of Securities Dealers,
Inc.'s Bylaws. Pursuant to this covenant, the Company is required to (i)
distribute to its stockholders annual reports containing audited financial
statements and quarterly reports containing statements of operating results,
(ii) maintain a minimum of two independent directors of the Company's Board of
Directors, (iii) maintain an audit committee, a majority of the members of
which are independent directors, (iv) hold an annual meeting of stockholders,
(v) solicit proxies and provide proxy statements for all meetings of
stockholders, (vi) conduct an appropriate review of related party transactions
on an ongoing basis, (vii) require stockholder approval prior to the adoption
of certain stock option plans and prior to the issuance of designated
securities that will result in a change of control of the Company or certain
other issuances in connection with the acquisition of the stock or assets of
another company or in connection with a transaction other than a public
offering involving a significant amount of the Company's securities and (viii)
not take any action that will have the effect of nullifying, restricting or
disparately reducing the voting rights of the holders of the Company's Common
Stock; provided, that the Company is not required to appoint two outside
directors to the Company's Board of Directors until June 30, 1997 and is not
required to establish an Audit Committee until June 30, 1997.
Maintenance Rights. Pursuant to the JEDI Purchase Agreement,
the Company has granted JEDI the right to purchase its proportionate share of
capital stock of the Company at the same price and on the same terms as the
capital stock to be sold by the Company. From the date of the JEDI Purchase
Agreement until December 31, 1998, if JEDI is entitled to exercise its
maintenance rights, the Company shall issue to JEDI a warrant for
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the purchase of the capital stock that JEDI is entitled, but does not elect, to
purchase (a "Maintenance Warrant"). The exercise price of the Maintenance
Warrant will be the value of the capital stock as of the date of the issuance
of the Maintenance Warrant, and any Maintenance Warrant will be exercisable for
a period of one year. JEDI will not have maintenance rights with respect to
capital stock issued by the Company (i) pursuant to certain employee and
director stock plans; (ii) in connection with a stock split or dividend on the
Common Stock to all holders of Common Stock or (iii) pursuant to an offering
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission (the "SEC"). Subject to certain exceptions,
JEDI will not have maintenance rights with respect to the issuance of any
rights, warrants or options to purchase shares of the Company's capital stock
or other securities convertible into or exercisable or exchangeable for shares
of the Company's capital stock but will have maintenance rights if and when
capital stock is issued upon the conversion, exercise or exchange of such
securities. JEDI's maintenance rights will terminate upon the earlier to occur
of: (i) the date on which JEDI and its affiliates beneficially own less than
10 percent of the voting power of the outstanding voting capital stock of the
Company; (ii) the date on which the Company completes an underwritten public
offering of Common Stock that generates net proceeds to the Company of at least
$25,000,000; and (iii) the date on which all shares of Series A Preferred Stock
have been converted to Common Stock or otherwise are no longer outstanding.
Indemnification. The JEDI Purchase Agreement provides that
the Company will indemnify, defend and hold harmless JEDI to the fullest extent
lawful from and against all losses, expenses, damages, deficiencies,
liabilities, payments, penalties, litigation, demands, defenses, judgments,
proceedings, costs, obligations, settlement costs, and attorneys', accountants'
and other professional advisors' fees (including costs of investigation or
preparation) ("Losses") arising out of or resulting from the breach of any
representation, warranty, convent or agreement of the Company contained in the
JEDI Purchase Agreement.
The JEDI Purchase Agreement provides that JEDI will indemnify,
defend and hold harmless the Company to the fullest extent lawful from and
against all Losses arising out of or resulting from the breach of any
representation, warranty, covenant, obligation or agreement of JEDI contained
in the JEDI Purchase Agreement.
Dispute Resolution. The JEDI Purchase Agreement provides that
all disputes shall be submitted to non-binding mediation upon the request of
the Company or JEDI. If the non-binding mediation does not resolve the
disputes in question within 30 days after appointment of a mediator, the
dispute shall be resolved by arbitration governed by the Commercial Arbitration
Rules of the American Arbitration Association.
Expenses. The Company paid its own expenses of approximately
$317,662 and the out-of-pocket third party expenses reasonably incurred by
JEDI of approximately $156,512 in connection with the transactions
contemplated by the JEDI Purchase Agreement. The Company was reimbursed by
Forseti for $450,000 expenses paid by the Company in connection with the
Transaction.
Description of Series A Preferred Stock. The Series A Certificate of
Designation authorizes the issuance of up to 9,600,000 shares of Series A
Preferred Stock. The following description of the rights, preferences and
limitations of the Series A Preferred Stock is a summary only and is qualified
in its entirety by reference to the entire text of the Series A Certificate of
Designation which is an exhibit to the JEDI Purchase Agreement.
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Voting. The holders of shares of Series A Preferred Stock are
generally entitled to vote (on an as-converted basis) as a single class with
the holders of the Common Stock, together with all other classes and series of
stock of the Company that are entitled to vote as a single class with the
Common Stock, on all matters coming before the Company's stockholders. In any
vote with respect to which the Series A Preferred Stock shall vote with the
holders of Common Stock as a single class, each share of Series A Preferred
Stock shall entitle the holder thereof to cast the number of votes equal to the
number which could be cast in such vote by a holder of the number of shares of
Common Stock into which such shares of Series A Preferred Stock is convertible
on the date of such vote.
With respect to any matter for which class voting is required by law
or the Company's Certificate of Incorporation, except as otherwise described
herein, the holders of the Series A Preferred Stock will vote as a class and
each holder shall be entitled to one vote for each share held.
For so long as 960,000 shares of Series A Preferred Stock are
outstanding, the following matters will require the approval of the holders of
shares of Series A Preferred Stock, voting together as a separate class:
(i) the amendment of any provision of the Company's
Certificate of Incorporation or the bylaws;
(ii) the creation, authorization or issuance, or the
increase in the authorized amount of, any class or series of shares
ranking on a parity with or prior to the Series A Preferred Stock
either as to dividends or upon liquidation, dissolution or winding up;
(iii) the merger or consolidation of the Company with or
into any other corporation or other entity or the sale of all or
substantially all of the Company's assets; or
(iv) the reorganization, recapitalization, or
restructuring or similar transaction that requires the approval of the
stockholders of the Company.
Election of Directors. The holders of shares of Series A
Preferred Stock have the right, acting separately as a class, to elect a number
of members to the Company's Board of Directors. The number shall be a number
such that the quotient obtained by dividing such number by the maximum
authorized number of directors is as close as possible to being equal to the
percentage of the outstanding voting power of the Company entitled to vote
generally in the election of directors represented by the outstanding shares of
Series A Preferred Stock at the relevant time. As of the date hereof, JEDI has
not elected to exercise its right to elect directors to the Company's Board of
Directors.
Conversion. A holder of shares of Series A Preferred Stock
has the right, at the holder's option, to convert all or a portion of its
shares into shares of Common Stock at any time at an initial rate of one share
of Series A Preferred Stock for one share of Common Stock.
The Series A Certificate of Designation provides for customary
adjustments to the number of shares issuable upon conversion in the event of
certain dividends and distributions
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to holders of Common Stock, certain reclassifications of the Common Stock,
stock splits, and combinations and mergers and similar transactions.
Immediately following such conversion, the rights of the holders of
Series A Preferred Stock shall cease and the persons entitled to receive Common
Stock upon the conversion of Series A Preferred Stock shall be treated as the
owners of such Common Stock. The Company is required to maintain a reserve of
authorized but unissued shares of Common Stock to permit the conversion of the
Series A Preferred Stock in full.
Concurrently with the transfer of any shares of Series A Preferred
Stock to any person (other than a direct or indirect affiliate of JEDI or other
entity managed by Enron Corp. or any of its affiliates), the shares of Series A
Preferred Stock so transferred will automatically convert into a like number of
shares of Series B Preferred Stock. See "JEDI Transaction Agreements --
Description of Series B Preferred Stock."
Dividends. The holders of the shares of Series A Preferred
Stock are entitled to receive dividends, when, and as if declared by the Board
of Directors, out of funds legally available therefor, any dividend (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 record date, the date of payment thereof. The holders
of Series A Preferred Stock will also have the right to certain dividends upon
and during the continuance of an event of default. See "JEDI Transaction
Agreements -- Description of Series A Preferred Stock -- Events of Default;
Remedies."
Liquidation. Upon the liquidation, dissolution or winding up
of the Company, the holders of the shares of Series A Preferred Stock, before
any distribution to the holders of Common Stock, will be entitled to receive
(i) an amount per share equal to the lesser of (A) $1.50 and (B) the sum of (x)
$0.521 and (v) the quotient obtained by dividing (1) the aggregate amount of
all payments made, as of the date of the liquidation, dissolution or winding
up, to the Company by JEDI pursuant to the JEDI Earn Up Agreement by (2)
9,600,000, plus (ii) all accrued and unpaid dividends thereon ("Liquidation
Preference"). The holders of the shares of Series A Preferred Stock will not
be entitled to participate further in the distribution of the assets of the
Company.
Events of Default; Remedies. The Series A Certificate of
Designation provides that an Event of Default will be deemed to have occurred
if the Company fails to comply with any of its covenants in the JEDI Purchase
Agreement; provided, that the Company will have a 30-day cure period with
respect to the non-compliance with certain covenants. See "JEDI Transaction
Agreements -- Description of JEDI Purchase Agreement -- Covenants." JEDI may
waive any Event of Default.
Upon the occurrence but only during the continuance of an Event of
Default, the holders of Series A Preferred Stock will be entitled to receive,
in addition to other dividends payable to holders of Series A Preferred Stock,
when, as, and if declared by the Board of Directors, out of funds legally
available therefor, cumulative preferential cash dividends accruing from the
date of the Event of Default 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 after the last day of
each calendar quarter
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during which such dividends are payable. Unless full cumulative dividends
accrued on shares of Series A Preferred Stock have been or contemporaneously
are declared and paid, no dividend may be declared or paid or set aside for
payment on the Common Stock or 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
nor may any monies be paid to or made available for a sinking fund for the
redemption of any shares of any such securities.
Upon the occurrence and during the continuance of an Event of Default
resulting from the failure to comply with certain covenants, the holders of
shares of Series A Preferred Stock will have the right, acting separately as a
class, to elect a number of persons to the Board of Directors of the Company,
that along with any members of the Board of Directors who are serving at the
time of such action, will constitute a majority of the Board of Directors.
Upon the occurrence of an Event of Default resulting from the failure
to comply with certain covenants, each holder of shares of Series A Preferred
Stock will have the right, by written notice to the Company, to require the
Company to repurchase, out of funds legally available therefor, such holder's
shares of Series A Preferred Stock for an amount in cash equal to the
Liquidation Preference in effect at the time of the Event of Default.
Description of Series B Preferred Stock. The Series B Certificate
of Designation authorizes the issuance of up to 9,600,000 shares of Series B
Preferred Stock. The following description of the rights, preferences and
limitations of the Series B Preferred Stock is a summary only and is qualified
in its entirety by reference to the entire text of the Series B Certificate of
Designation which is an exhibit to the JEDI Purchase Agreement. The terms of
the Series B Preferred Stock are substantially similar to those of the Series A
Preferred Stock except that the holders of Series B Preferred Stock will not
(i) have class voting rights except as required under Delaware corporate law,
(ii) be entitled to any remedies upon an event of default or (iii) be entitled
to elect any directors of the Company, voting separately as a class.
Description of the JEDI Warrants. Pursuant to the JEDI Purchase
Agreement, on May 6, 1997, the Company issued the JEDI Warrants for the
purchase of Common Stock of the Company. The JEDI Warrants are exercisable
commencing on October 1, 1998 and ending on December 31, 1998. At the time of
exercisability, the JEDI Warrants will be exercisable for 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 to time
pursuant to the JEDI Warrants, which would have been received upon the exercise
on the Election Date (as defined in the Forseti Earn Up Agreement) of the
Forseti Warrants that are deliverable by Forseti to the Company pursuant to the
Forseti Earn Up Agreement. The JEDI Warrants may be exercised in full or in
part by means of payment of the exercise price (initially $2.50 per share of
Common Stock in cash). The JEDI Warrants provide for customary adjustments to
the exercise price and number of shares to be issued in the event of certain
dividends and distributions to holders of Common Stock, stock splits,
combinations and mergers. The JEDI Warrants also include customary provisions
with respect to, among other things, reservation of shares of Common Stock for
issuance upon exercise of the JEDI Warrants, mutilated or lost warrant
certificates, and notices to holder(s) of the JEDI Warrants.
10
<PAGE> 11
Description of the Robertson Warrants. Pursuant to the JEDI Purchase
Agreement, on May 6, 1997, the Company issued the Robertson Warrants for the
purchase of 409,839 shares of Common Stock. The Robertson Warrants are
exercisable for a period of one year, commencing on the date of issuance. The
Robertson Warrants may be exercised in full or in part by means of payment of
the exercise price (initially $1.85 per share of Common Stock in cash). The
Robertson Warrants provide for customary adjustments to the exercise price and
number of shares to be issued in the event of certain dividends and
distributions to holders of Common Stock, stock splits, combinations and
mergers. The Robertson Warrants also include customary provisions with respect
to, among other things, reservation of shares of Common Stock for issuance upon
exercise of the Robertson Warrants, mutilated or lost warrant certificates, and
notices to holder(s) of the Robertson Warrants.
Description of the Stockholders Agreement. Pursuant to the JEDI
Purchase Agreement, on May 6, 1997, EIBOC, Bruce I. Benn, Ronald I. Benn,
Edward J. Munden, Robert P. Lindsay and JEDI entered into the Stockholders
Agreement. Bruce I. Benn and Edward J. Munden are directors and officers of
the Company and have a material beneficial interest in the shares of EIBOC.
Robert P. Lindsay is a director and officer of the Company. Ronald I. Benn is
an officer of the Company and has a material beneficial interest in the shares
of EIBOC. Pursuant to the Stockholders Agreement, each of EIBOC, Bruce I.
Benn, Ronald I. Benn, Edward J. Munden and Robert P. Lindsay agreed to certain
restrictions on the transfer of shares of the 6,600,000 shares of Common Stock
held by EIBOC, and JEDI agreed to certain restrictions on the transfer of
shares of Common Stock or securities convertible into or exercisable or
exchangeable for shares of Common Stock (including the Series A Preferred
Stock, the JEDI Warrants and the Robertson Warrants) held by JEDI.
Pursuant to the Stockholders Agreement, each of EIBOC and Bruce I.
Benn, Ronald I. Benn, Edward J. Munden and Robert P. Lindsay (collectively, the
"Management Stockholders") covenanted not to transfer, nor to authorize
transfer of, any of the 6,600,000 shares of Common Stock in which they have or
may acquire a beneficial interest except by will or the laws of descent and
distribution or otherwise by operation of law or judicial decree or as
permitted by the Stockholders Agreement.
The Stockholders Agreement permits EIBOC and the Management
Stockholders to make the following transfers of shares of Common Stock after
October 1, 1997: (i) EIBOC and the Management Stockholders in the aggregate
may transfer shares of Common Stock provided that the number of shares of
Common Stock to be transferred together with all shares of Common Stock
transferred by EIBOC and the Management Stockholders during the preceding 12
months does not exceed the lesser of (x) four percent of the outstanding shares
of Common Stock, (y) four times the average weekly reported volume of trading,
excluding any trades made by EIBOC or a Management Stockholder 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 or (z) four times the average weekly volume of trading,
excluding any trades made by EIBOC or a Management Stockholder, in Common Stock
reported through the consolidated transaction reporting system, contemplated by
Rule 11Aa3-1 under the Securities Exchange Act of 1934, as amended, during the
four week period specified in clause (y); and (ii) EIBOC and the Management
Stockholders may transfer shares of Common Stock in a registered underwritten
public offering of Common Stock; provided, that neither EIBOC nor any
Management Stockholder may transfer shares of Common Stock if after the
transfer EIBOC and the Management Stockholders would beneficially own less than
4,950,000 shares of Common Stock in the aggregate, subject to certain
adjustments for stock splits, combinations,
11
<PAGE> 12
and stock dividends. In addition, the Stockholders Agreement permits EIBOC and
the Management Stockholders to transfer Common Stock to certain family members
and related entities and to make certain transfers of Common Stock upon the
death or disability of a Management Stockholder.
Pursuant to the Stockholders Agreement, JEDI agreed that until the
second anniversary of the date of the Stockholders Agreement, and except
pursuant to its registration rights under the Registration Rights Agreement,
JEDI will not transfer any shares of Common Stock or securities convertible
into or exercisable or exchangeable for shares of Common Stock (a "Common Stock
Equivalent") 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.
Pursuant to the Stockholders Agreement, JEDI agreed that until the
second anniversary of the date of the Stockholders Agreement and except
pursuant to its registration rights under the Registration Rights Agreement,
JEDI will not transfer any shares of Common Stock or Common Stock Equivalents
to a person that is not an affiliate of JEDI without first giving the Company
and the Management Stockholders a right of first refusal to purchase the shares
of Common Stock or Common Stock Equivalents at the proposed sale price.
Pursuant to the right of first refusal, the Company will have the first right,
which must be exercised within 30 days after receipt of notice of the proposed
transfer, to purchase the shares of Common Stock or Common Stock Equivalents to
be transferred. If the Company does not elect to acquire the shares of Common
Stock or Common Stock Equivalents to be transferred, the Management
Stockholders (if the Management Stockholders own in the aggregate more than 10%
of the voting power of the Company's capital stock) will have the right to
purchase such securities if the Management Stockholders notify JEDI of such
election within 30 days after the Company's receipt of notice of the proposed
transfer.
Pursuant to the Stockholders Agreement, EIBOC and the Management
Stockholders made certain representations and warranties to JEDI, and EIBOC
covenanted not to issue any capital stock, permit its capital stock to be
transferred or enter into any agreement relating to the issuance of its capital
stock or engage in any business or activity other than the ownership of
6,600,000 shares of Common Stock.
Pursuant to the Stockholders Agreement, the 6,600,000 shares of Common
Stock owned by EIBOC and all of the outstanding shares of capital stock of
EIBOC (i) were deposited in escrow pursuant to escrow agreements mutually
acceptable to EIBOC, the Management Stockholders and JEDI, and (ii) will be
held in escrow until the earlier of the transfer of the 6,600,000 shares of
Common Stock owned by EIBOC in accordance with the Stockholders Agreement to a
person other than a Management Stockholder or related party and the termination
of the Stockholders Agreement.
Pursuant to the Stockholders Agreement, EIBOC granted to the
Management Stockholders an irrevocable proxy to vote the 6,600,000 shares of
Common Stock owned by EIBOC.
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<PAGE> 13
The Stockholders Agreement will terminate on the earlier of (i) the
fifth anniversary of the date of the Stockholders Agreement or (ii) the date on
which JEDI and its affiliates beneficially own in the aggregate less than 10%
of the voting power of the Company's capital stock.
Description of the Registration Rights Agreement. The Common Stock
issuable upon conversion of the Series A Preferred Stock or upon exercise of
the JEDI Warrants or the Robertson Warrants will not be registered with the SEC
and therefore, will be, when issued, restricted securities. Pursuant to the
JEDI Purchase Agreement, on May 6, 1997, the Company entered into a
Registration Rights Agreement with JEDI pursuant to which JEDI will be entitled
to certain rights with respect to the registration under the Securities Act of
1933, as amended (the "Securities Act"), of shares of Common Stock issuable
upon conversion of Series A Preferred Stock or upon exercise of the JEDI
Warrants, the Robertson Warrants or the Maintenance Warrants (the "Registrable
Securities").
The Registration Rights Agreement provides for demand and piggyback
registration rights. A holder of Registrable Securities (a "Holder") or
Holders who hold at least a majority of the Registrable Securities may demand
registration up to 3 times; provided that the proposed aggregate offering
proceeds from the sale of such Holder or Holders portion of Registrable
Securities is at least $1,000,000. Generally, the Company bears the expense of
the demand registration statements, while the selling Holders bear selling
expenses such as underwriting fees and discounts. The Registration Rights
Agreement also provides for unlimited priority piggyback registration rights.
That is, in the event that the Company proposes to register the sale for cash
of any of its securities under the Securities Act for its own account, or for
the account of any other person, the holders will be entitled to include
Registrable Securities in any such registration, subject to the limited right
of the managing underwriter of any such offering under certain circumstances to
exclude some or all of such Registrable Securities from such registration. The
Company generally bears the expense of any piggyback registration statement,
while selling holders generally bear selling expenses such as underwriting fees
and discounts. The Registration Rights Agreement also includes customary
indemnification and contribution provisions, and with regard to demand
registration rights, a provision allowing the Company to postpone filing or the
declaration of effectiveness of an applicable registration statement for up to
an aggregate of 90 days if at the relevant time the Company is engaged in a
firm commitment underwritten public offering in which Registrable Securities
may be included or for up to an aggregate of 60 days if there exists
information the disclosure of which would be materially harmful to the Company.
The Company will no longer be obligated to register the Registrable Securities
upon disposition pursuant to Rule 144 under the Securities Act, the
eligibility of disposal under Rule 144(k) under the Securities Act or a
registration statement covering such Registrable Security has been declared
effective by the SEC and such Registrable Security has been issued, sold or
disposed of pursuant to such effective registration statement. JEDI may
transfer its registration rights (including demand registration rights that
JEDI has not exercised) to a third party but may not transfer more than one
demand registration right.
Description of the JEDI Earn Up Agreement. Pursuant to the JEDI
Purchase Agreement, on May 6, 1997, the Company and JEDI entered into an Earn
Up Agreement (the "JEDI Earn Up Agreement"). On or prior to October 15, 1998,
subject to the limitations in the JEDI Earn Up Agreement and against delivery
by Forseti to the Company of the Forseti Warrants and a statutory declaration
as to certain matters, JEDI shall pay the Company the Earn Up Amount. The Earn
Up Amount cannot exceed the amount defined as the "Earn Up Amount" under the
Forseti Earn Up Agreement.
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<PAGE> 14
The "Earn Up Amount" is a dollar amount equal to the amount, if any,
by which (i) the sum of the Class A Amount and the Class B Amount exceeds (ii)
the Warrant Transfer Amount; provided, that in no event shall the Earn Up
Amount exceed $9,400,000.
The "Class A Amount" is a dollar amount equal to the product of (i)
the Value (not to exceed $1.50) less $1.25, multiplied by (ii) 9,600,000;
provided, that in no event shall the Class A Amount be greater than $2,400,000;
and if the Class A Amount is zero or a negative number, the Class A Amount
shall be deemed to be zero.
The "Class B Amount" is a dollar amount equal to the product of (i)
the Value (not to exceed $1.25) less $0.521, multiplied by (ii) 9,600,000;
provided, that in no event shall the Class B Amount be greater than $7,000,000;
and if the Class B Amount is zero or a negative number, the Class B Amount
shall be deemed to be zero.
The "Warrant Transfer Amount" is a dollar amount equal to the greatest
of (i) the product of (x) $3.50 multiplied by (y) the aggregate number of
Forseti Warrants transferred by Forseti before October 15, 1998; (ii) the
aggregate gross proceeds that Forseti has received or is entitled to receive
from the transfer of all of the Forseti Warrants transferred by Forseti before
October 15, 1998; and (iii) the difference between the average bid price of the
Company's shares of Common Stock for the 21-day period ending on September 30,
1998 less $2.50, multiplied by the number of Forseti Warrants transferred by
Forseti before October 15, 1998.
"Value" means the product of the Price, multiplied by 0.60; provided,
that if (i) the Common Stock is quoted on The Nasdaq National Market at the
Election Date and (ii) the average daily trading volume of the Common Stock for
the 21-day period ending on September 30, 1998 is at least 50,000 shares per
day (excluding trading of shares in any accounts controlled by the Company or
Forseti or their respective affiliates, and provided, that if on any of the 21
days the trading volume is greater than 300,000 shares, then only 300,000
shares on such days may be used in calculating the average), then Value means
the product of the Price, multiplied by 0.75.
<TABLE>
<S> <C>
"Price" means, if:
-----
|Price(1) - Price(2)|
---------------------- less than or equal to 0.1, then (Price(1) + Price(2))/2;
Greater of Price(1) or Price(2)
provided, that if: |Price(1) - Price(2)|
---------------------- greater than 0.1, then the Company and JEDI
Greater of Price(1) or Price(2)
</TABLE>
shall negotiate the Price; provided, further, that if the Price has not been
negotiated within 5 business days after the determination of Price(1) and
Price(2, ) then the determination of the Price shall be submitted to nonbinding
mediation and arbitration in accordance with the JEDI Earn Up Agreement.
Notwithstanding anything to the contrary in the JEDI Earn Up Agreement, under
no circumstances can the Price be higher than the higher of Price(1) and
Price(2) or be less than the lower of Price(1) and Price(2).
14
<PAGE> 15
<TABLE>
<S> <C>
"Price(1)" = (1.1 * SEC PV(10)) - Indebtedness + Consolidated Working Capital
------ ----------------------------------------------------------------
Outstanding Shares
"Price(2)" = (6.0 * EBITDA) - Indebtedness + Consolidated Working Capital
------ ----------------------------------------------------------------
Outstanding Shares
</TABLE>
Terms used but not defined in the above definitions of Price(1) and
Price(2) are defined in the JEDI Earn Up Agreement.
The parties must first attempt to resolve disputes under the JEDI Earn
Up Agreement pursuant to non-binding mediation. Disputes that are not resolved
pursuant to non-binding mediation shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The JEDI Earn Up Agreement will terminate upon the earlier of (i) in
the event the "Election Date" under the Forseti Earn Up Agreement is after
September 30, 1998 or the "Payment Date" under the Forseti Earn Up Agreement is
after October 15, 1998, (ii) a transfer of any Forseti Warrants in violation of
the restrictions on transfer in the Forseti Purchase Agreement, (iii) the
election by Forseti to retain the Forseti Warrants pursuant to the Forseti Earn
Up Agreement, (iv) the transfer of all of the Forseti Warrants, (v) upon the
transfer of any ownership interest in Forseti or any entity controlling Forseti
where the purpose of the transfer is to realize or receive cash, securities or
any other property as consideration for the Forseti Warrants without
transferring the Forseti Warrants or (vi) as of September 30, 1998 or October
15, 1998, the individual, who as of the date of the Forseti Earn Up Agreement
owned directly or indirectly all of the ownership interests of Forseti and each
entity controlling Forseti does not own, directly or indirectly, all of the
ownership interests of Forseti and each entity controlling Forseti.
Description of the Letter Agreement. Pursuant to the JEDI Purchase
Agreement, on May 6, 1997, the Company and ECT Securities Corp., a Delaware
corporation and an affiliate of the general partner of JEDI ("ECT Securities
Corp."), entered into a letter agreement (the "Letter Agreement"). Pursuant to
the Letter Agreement, the Company retained ECT Securities Corp. to act as the
Company's advisor and provide consultation, assistance and advice to the
Company with respect to certain of its operations and properties. In
consideration for such services, the Company paid ECT Securities Corp. $100,000
at the closing of the transactions under the JEDI Purchase Agreement and will
pay an annual fee, payable quarterly in arrears, of $100,000 during the term of
the Letter Agreement. The term of the Letter Agreement is five years, subject
to earlier termination if JEDI's ownership of voting capital stock of the
Company should decrease to less than 10% of the Company's voting capital stock.
ECT Securities Corp. may terminate the Letter Agreement effective as of the end
of any calendar quarter of the Company upon written notice not less than 30
days before the date on which such termination is to be effective. The Letter
Agreement includes customary provisions for indemnification of ECT Securities
Corp.
Employment Agreements. Pursuant to the JEDI Purchase Agreement, on
May 6, 1997, the Company entered into an employment agreement (the "Employment
Agreement") with each of Bruce I. Benn, Ronald I. Benn and Edward J. Munden as
a condition to the closing under the JEDI Purchase Agreement. The term of each
Employment Agreement is six months. Pursuant to the Employment Agreement, each
of Messrs. Benn, Benn and
15
<PAGE> 16
Munden will be employed in his current position with the Company and will be
entitled to a base salary equal to $10,000 per month plus such other
compensation and employee benefit plans and programs implemented by the
Company after the date of the Employment Agreement. The Company has the right
to terminate employment under the Employment Agreement for cause (as defined)
or upon the death or disability of the employee. Each of Messrs. Benn, Benn
and Munden is entitled to terminate the Employment Agreement at any time for
any reason; provided, that none of Messrs. Benn, Benn or Munden will be
entitled to any compensation or benefits following such termination. The
Employment Agreement includes customary confidentiality and noncompetition
provisions.
FORSETI TRANSACTION AGREEMENTS
Description of the Forseti Purchase Agreement. The following summary
of the material provisions of the Forseti Purchase Agreement is not intended to
be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of such agreement, a copy of which is filed as an exhibit
to the Company's Current Report on Form 8-K dated March 27, 1997.
Repurchase of Common Stock; Issuance of Forseti Warrants.
Pursuant to the Forseti Purchase Agreement, on May 6, 1997, the Company
repurchased from Forseti 9,600,000 shares of the Company's Common Stock owned
by Forseti in exchange for (i) the payment by the Company to Forseti of
$5,000,000 cash; (ii) the issuance by the Company to Forseti of the Forseti
Warrants; and (iii) the execution and delivery by the Company of the Forseti
Earn Up Agreement. See "Forseti Transaction Agreements -- Description of the
Forseti Warrants and Description of the Forseti Earn Up Agreement."
Certain Representations and Warranties. Under the Forseti
Purchase Agreement, the Company made certain representations and warranties to
Forseti, including (i) due corporate organization; (ii) the due authorization,
issuance and enforceability of the Forseti Warrants and the shares of Common
Stock issuable upon exercise of the Forseti Warrants; (iii) the due
authorization, execution, delivery and performance by the Company of the
Forseti Purchase Agreement and related agreements and their enforceability;
(iv) no conflict with or violation of the Company's Certificate of
Incorporation or bylaws, any of the Company's agreements or applicable law; and
(v) required consents from governmental authorities or other third parties.
Under the Forseti Purchase Agreement, Forseti made certain
representations and warranties to the Company, including (i) due corporate
organization; (ii) title to the 9,600,000 shares of Common Stock; (iii) the due
authorization, execution, delivery and performance by Forseti of the Forseti
Purchase Agreement and related agreements and their enforceability; (iv) no
conflict with or violation of Forseti's organizational documents, any of
Forseti's agreements or applicable law or alternative dispute resolution; (v)
required consents from governmental authorities or other third parties; (vi) no
litigation; (vii) absence of brokers or finders; (viii) no interested director
transactions; and (ix) certain investment representations, including that
Forseti is not a U.S. person within the meaning of Regulation S, promulgated
under the Securities Act.
Restrictions on Transfer of the Forseti Warrants and Warrant
Shares. The Forseti Purchase Agreement provides that the holder of the Forseti
Warrants or the shares of Common Stock issuable upon the exercise of the
Forseti Warrants (the "Warrant
16
<PAGE> 17
Shares") may not transfer or exercise the Forseti Warrants or Warrant Shares
except in accordance with the Forseti Purchase Agreement and the Forseti
Warrants.
The agreement permits a transfer of the Forseti Warrants or
Warrant Shares (i) with the Company's prior written consent or (ii) the
transfer occurs after the first anniversary of the closing under the Forseti
Purchase Agreement, provided, that, in either case certain conditions are met,
including, without limitation, that (a) the transfer is in compliance with
Regulation S promulgated under the Securities Act, (b) Forseti delivers certain
notices to the Company, and (c) any transfer of the Forseti Warrants must
involve at least 100,000 warrants. To ensure compliance with the transfer
restrictions, at the closing under the Forseti Purchase Agreement, the Forseti
Warrants will be deposited in escrow pursuant to the Escrow Agreement among the
Company, Forseti, and an escrow agent acceptable to the Company and Forseti
(the "Escrow Agreement"). See "Forseti Transaction Agreements -- Description
of the Escrow Agreement." The Company and Forseti shall send a notice to the
escrow agent to release the Forseti Warrants if the Company and Forseti
determine that the proposed transfer is in compliance with the Forseti Purchase
Agreement.
If at any time on or before September 30, 1998 the Company
identifies a proposed transferee of the Forseti Warrants who is willing to
purchase for cash at least 100,000 of the Forseti Warrants at a price of at
least $2.40 per Class A Warrant and $3.50 per Class B Warrant and the Company
determines that the proposed transfer would be in compliance with the transfer
restrictions in the Forseti Purchase Agreement, then Forseti will be required
to transfer the Forseti Warrants to the transferee identified by the Company
upon notice by the Company.
Indemnification. The Forseti Purchase Agreement provides that
the Company will indemnify, defend and hold harmless Forseti and certain
related parties to the fullest extent lawful from and against all Losses
arising out of or resulting from the breach of any representation, warranty,
covenant or agreement of the Company contained in the Forseti Purchase
Agreement or related documents.
The Forseti Purchase Agreement provides that Forseti will
indemnify, defend and hold harmless the Company and certain related parties to
the fullest extent lawful from and against all Losses arising out of or
resulting from the breach of any representation, warranty, covenant or
agreement of Forseti contained in the Forseti Purchase Agreement or related
documents.
Dispute Resolution. The Forseti Purchase Agreement provides
that all disputes shall first be subject to non-binding mediation, and if such
disputes are not resolved by non-binding mediation, such disputes shall be
governed by arbitration governed by the Commercial Arbitration Rules of the
American Arbitration Association.
Expenses. Forseti will pay its own expenses and the
reasonable expenses of the Company in connection with the transactions
contemplated by the Forseti Purchase Agreement.
Description of the Forseti Warrants. Pursuant to the Forseti Purchase
Agreement, on May 6, 1997, the Company issued the Forseti Warrants to Forseti.
The Class A Warrants are exercisable for an aggregate of 1,000,000 shares of
Common Stock. The Class A Warrants are exercisable from their date of issuance
(subject to Regulation S and the Forseti Purchase Agreement) and will expire
December 31, 1998; provided, that any of the Class A Warrants
17
<PAGE> 18
held by Forseti on the Election Date will expire on the Election Date (as
defined in the Forseti Earn Up Agreement) unless Forseti elects to retain the
Class A Warrants under the Forseti Earn Up Agreement. The Class A Warrants may
be exercised in full or in part by means of payment of the exercise price
(initially $2.50 per share of Common Stock) in cash (the "Class A Warrant
Shares"). If the Class A Warrants are exercised only in part, they must be
exercised for the purchase of at least 100,000 shares of Common Stock. The
Class A Warrants provide for customary adjustments to the exercise price and/or
number of shares to be issued in the event of certain dividends and
distributions to holders of Common Stock, stock splits or combinations and
reclassifications. The Class A Warrants also make provision for warrant
holders to receive certain items in exchange for the Class A Warrants in the
event of certain combinations, mergers, consolidations, substantial asset sales
and similar transactions. The Class A Warrants also include customary
provisions with respect to, among other things, reservation of Class A Warrant
Shares, mutilated or lost warrant certificates, and notices to holder(s) of the
Class A Warrants. The Class A Warrants will be subject to transfer
restrictions as described above under "Forseti Transaction Agreements --
Forseti Purchase Agreement -- Restrictions on Transfer."
The Class B Warrants are exercisable for an aggregate of 2,000,000
shares of Common Stock. The Class B Warrants are exercisable from their date
of issuance (subject to Regulation S and the Forseti Purchase Agreement) and
shall expire on December 31, 1998; provided, that any Class B Warrants held by
Forseti on the Election Date (as defined in the Forseti Earn Up Agreement) will
expire on the Election Date unless Forseti elects to retain the Class B
Warrants under the Forseti Earn Up Agreement. The Class B Warrants may be
exercised in full or in part by means of payment of the exercise price
(initially $2.50 per share of Common Stock) in cash (the "Class B Warrant
Shares"). If the Class B Warrants are exercised only in part, they must be
exercised for the purchase of at least 100,000 shares of Common Stock. The
Class B Warrants provide for customary adjustments to the exercise price and/or
number of shares to be issued in the event of certain dividends and
distributions to holders of Common Stock, stock splits or combinations and
reclassifications. The Class B Warrants also make provision for warrant
holders to receive certain items in exchange for their Class B Warrants in the
event of certain combinations, mergers, consolidations, substantial asset sales
and similar transactions. The Class B Warrants also includes customary
provisions with respect to, among other things, reservation of Class B Warrant
Shares, mutilated or lost warrant certificates, and notices to holder(s) of the
Class B Warrants. The Class B Warrants will be subject to transfer
restrictions as described above under "Forseti Transaction Agreements --
Forseti Purchase Agreement -- Restrictions on Transfer."
Description of the Forseti Earn Up Agreement. Pursuant to the Forseti
Purchase Agreement, on May 6, 1997, the Company and Forseti entered into the
Forseti Earn Up Agreement. Pursuant to the Forseti Earn Up Agreement, on the
later of September 30, 1998 or the date that is 14 days after the date that the
Company notifies Forseti to request his election (the "Election Date"), Forseti
will elect whether to (i) accept payment of the Earn Up Amount (in which event
Forseti may not exercise or transfer the Forseti Warrants that have not been
previously exercised or transferred) or (ii) retain the Forseti Warrants that
have not been previously exercised or transferred (in which event the Company
is not obligated to pay Forseti the Earn Up Amount and the Company's
obligations under the Forseti Earn Up Agreement terminate). If Forseti elects
to accept payment of the Earn Up Amount, then subject to limitations in the
Forseti Earn Up Agreement and against delivery by Forseti of the Forseti
Warrants and a statutory declaration as to certain matters, the Company shall
18
<PAGE> 19
pay Forseti the Earn Up Amount on or before the later of October 15, 1998 or
the date that is 15 days after the date Forseti makes its election (the
"Payment Date").
The Company is obligated to pay Forseti under the Forseti Earn Up
Agreement only to the extent that the Company has received a like amount in
cash from JEDI under the JEDI Earn Up Agreement.
If the sum of (i) $5,000,000 and (ii) the aggregate amount received by
Forseti from the transfer of Warrants, exceeds the sum of (x) $14,400,000 plus
(y) a dollar amount equal to the sum of the expenses of the Company paid by
Forseti pursuant to the Forseti Purchase Agreement, the reasonable
out-of-pocket expenses up to a maximum of $50,000 incurred by Forseti in
connection with the Forseti Purchase Agreement, and the escrow agent fees
incurred by Forseti under the Escrow Agreement (the sum of subclauses (x) and
(y) being referred to as the "Net Proceeds"), then within 10 days of the date
(the "Excess Determination Date") the aggregate amount received by Forseti
exceeds the Net Proceeds, (x) Forseti shall deliver to the Company an amount in
cash or by wire transfer of immediately available funds equal to 75% of such
amount received by Forseti in excess of the Net Proceeds, and (y) Forseti shall
spend the remaining 25% of such excess amount to purchase from the Company,
subject to applicable securities laws, Common Stock at a price equal to the
average of the Nasdaq bid price over 21 trading days ending on the Excess
Determination Date.
Pursuant to the Forseti Earn Up Agreement, the Company granted to
Forseti an option to purchase from the Company a number of shares of Common
Stock equal to the quotient of (x) the amount by which the Earn Up Amount
exceeds $7,000,000 and (y) $2.50, at a price equal to $2.50. The option will
be exercisable in full or in part only from the date that the Earn Up Amount is
paid by the Company to Forseti through the fifth business day after the date of
payment of the Earn Up Amount. The Forseti Earn Up Agreement will provide for
customary adjustments to the exercise price and the number of shares to be
issued in the event of certain dividends and distributions to holders of Common
Stock, stock splits or combinations or reclassifications.
The parties must first attempt to resolve disputes under the Forseti
Earn Up Agreement pursuant to non-binding mediation. Disputes that are not
resolved pursuant to non-binding mediation shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.
The Forseti Earn Up Agreement will terminate upon the earlier of (i) a
transfer of any Forseti Warrants in violation of the restrictions on transfer
in the Forseti Purchase Agreement, (ii) the election by Forseti to retain the
Forseti Warrants pursuant to the Forseti Earn Up Agreement, (iii) the transfer
of all of the Forseti Warrants, (iv) upon the transfer of any ownership
interest in Forseti or any entity controlling Forseti where the purpose of the
transfer is to realize or receive cash, securities or any other property as
consideration for the Forseti Warrants without transferring the Forseti
Warrants and (v) as of the Election Date or the Payment Date, the individual,
who as of the date of the Forseti Earn Up Agreement owned, directly or
indirectly, all of the ownership interests of Forseti and each entity
controlling Forseti does not own, directly or indirectly, all of the ownership
interests of Forseti and each entity controlling Forseti.
19
<PAGE> 20
Description of the Escrow Agreement. Pursuant to the Forseti Purchase
Agreement, on May 6, 1997, the Company, Forseti and Comerica Bank-Texas, as
escrow agent, entered into the Escrow Agreement. The Escrow Agreement governs
the deposit into escrow of the Forseti Warrants and the consideration for the
transfer of Warrants. The escrow agent may deliver the Forseti Warrants and
the consideration for the transfer of the Forseti Warrants to Forseti only upon
receipt of notice from the Company and Forseti to release the Forseti Warrants
and the consideration for the transfer of the Forseti Warrants. The Escrow
Agreement contains customary provisions regarding indemnification of the escrow
agent. Forseti will pay the fees of the escrow agent for its services under
the Escrow Agreement.
ITEM 7. EXHIBITS.
1.1 Certificate of Amendment of Certificate of Incorporation of
Queen Sand Resources, Inc., a Delaware corporation.
1.2 Amended and Restated Bylaws of Queen Sand Resources, Inc., a
Delaware corporation.
1.3 Certificate of Designation of Series A Participating
Convertible Preferred Stock of Queen Sand Resources, Inc., a
Delaware corporation.
1.4 Certificate of Designation of Series B Participating
Convertible Preferred Stock of Queen Sand Resources, Inc., a
Delaware corporation.
1.5 Securities Purchase Agreement dated as of March 27, 1997
between Joint Energy Investments Limited Partnership, a
Delaware limited partnership, and Queen Sand Resources, Inc.,
a Delaware corporation (incorporated by reference to Exhibit
1.1 to Current Report on Form 8-K dated March 27, 1997).
1.6 Securities Purchase Agreement dated as of March 27, 1997
between Forseti Investments Ltd, a Barbados corporation, and
Queen Sand Resources, Inc., a Delaware corporation
(incorporated by reference to Exhibit 1.2 to Current Report on
Form 8-K dated March 27, 1997).
1.7 Earn Up Agreement by and between Joint Energy Investments
Limited Partnership, a Delaware limited partnership, and Queen
Sand Resources, Inc., a Delaware corporation, dated May 6,
1997.
1.8 Common Stock Purchase Warrant Representing Right to Purchase
Shares of Common Stock of Queen Sand Resources, Inc., a
Delaware corporation, issued to Joint Energy Investments
Limited Partnership, a Delaware limited partnership, on May 6,
1997.
1.9 Common Stock Purchase Warrant Representing Right To Purchase
409,839 Shares of Common Stock of Queen Sand Resources, Inc.,
a Delaware corporation, issued to Joint Energy Investments
Limited Partnership, a Delaware limited partnership, on May 6,
1997.
1.10 Registration Rights Agreement by and between Queen Sand
Resources, Inc., a Delaware corporation, and Joint Energy
Investments Limited Partnership, a Delaware limited
partnership, dated May 6, 1997.
20
<PAGE> 21
1.11 Letter Agreement by and between Queen Sand Resources, Inc., a
Delaware corporation, and ECT Securities Corp., a Delaware
corporation, dated May 6, 1997
1.12 Earn Up Agreement between Queen Sand Resources, Inc., a
Delaware corporation, and Forseti Investments Ltd., a Barbados
corporation, dated May 6, 1997.
1.13 Class A Common Stock Purchase Warrant Representing Right To
Purchase Shares of Common Stock of Queen Sand Resources, Inc.,
a Delaware corporation, issued to Forseti Investments Ltd., a
Barbados corporation, on May 6, 1997.
1.14 Class B Common Stock Purchase Warrant Representing Right To
Purchase Shares of Common Stock of Queen Sand Resources, Inc.,
a Delaware corporation, issued to Forseti Investments Ltd., a
Barbados corporation, on May 6, 1997.
1.15 Termination of Management Services Agreement between Capital
House A Finance and Investment Corporation, a Canadian
corporation, and Queen Sand Resources, Inc., a Delaware
corporation, dated May 5, 1997.
1.16 Stockholders Agreement by and among Edward J. Munden, Ronald
I. Benn, Bruce I. Benn, Robert P. Lindsay, EIBOC Investments
Ltd., a Barbados corporation, Queen Sand Resources, Inc., a
Delaware corporation, and Joint Energy Developments
Investments Limited Partnership, a Delaware limited
partnership, dated May 6, 1997.
1.17 Executive Employment Agreement between Queen Sand Resources,
Inc., a Delaware corporation, and Ronald I. Benn, dated May 6,
1997.
1.18 Executive Employment Agreement between Queen Sand Resources,
Inc., a Delaware corporation, and Bruce I. Benn, dated May 6,
1997.
1.19 Executive Employment Agreement between Queen Sand Resources,
Inc., a Delaware corporation, and Edward J. Munden, dated May
6, 1997.
1.20 Consent and Amendment to Credit Agreement among Queen Sand
Resources, Inc., a Nevada corporation, Queen Sand Resources,
Inc., a Delaware corporation, and Comerica Bank-Texas, dated
May 2, 1997.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUEEN SAND RESOURCES, INC.
Date: May 21, 1997 By: /s/ Edward J. Munden
--------------------------------------------
Name: Edward J. Munden
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
1.1 Certificate of Amendment of Certificate of Incorporation of Queen Sand Resources, Inc., a Delaware
corporation.
1.2 Amended and Restated Bylaws of Queen Sand Resources, Inc., a Delaware corporation.
1.3 Certificate of Designation of Series A Participating Convertible Preferred Stock of Queen Sand Resources,
Inc., a Delaware corporation.
1.4 Certificate of Designation of Series B Participating Convertible Preferred Stock of Queen Sand Resources,
Inc., a Delaware corporation.
1.5 Securities Purchase Agreement dated as of March 27, 1997 between Joint Energy Investments Limited
Partnership, a Delaware limited partnership, and Queen Sand Resources, Inc., a Delaware corporation
(incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K dated March 27, 1997).
1.6 Securities Purchase Agreement dated as of March 27, 1997 between Forseti Investments Ltd, a Barbados
corporation, and Queen Sand Resources, Inc., a Delaware corporation (incorporated by reference to Exhibit
1.2 to Current Report on Form 8-K dated March 27, 1997).
1.7 Earn Up Agreement by and between Joint Energy Investments Limited Partnership, a Delaware limited
partnership, and Queen Sand Resources, Inc., a Delaware corporation, dated May 6, 1997.
1.8 Common Stock Purchase Warrant Representing Right to Purchase Shares of Common Stock of Queen Sand
Resources, Inc., a Delaware corporation, issued to Joint Energy Investments Limited Partnership, a
Delaware limited partnership, on May 6, 1997.
1.9 Common Stock Purchase Warrant Representing Right To Purchase 409,839 Shares of Common Stock of Queen Sand
Resources, Inc., a Delaware corporation, issued to Joint Energy Investments Limited Partnership, a
Delaware limited partnership, on May 6, 1997.
1.10 Registration Rights Agreement by and between Queen Sand Resources, Inc., a Delaware corporation, and
Joint Energy Investments Limited Partnership, a Delaware limited partnership, dated May 6, 1997.
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C>
1.11 Letter Agreement by and between Queen Sand Resources, Inc., a Delaware corporation, and ECT Securities
Corp., a Delaware corporation, dated May 6, 1997
1.12 Earn Up Agreement between Queen Sand Resources, Inc., a Delaware corporation, and Forseti Investments
Ltd., a Barbados corporation, dated May 6, 1997.
1.13 Class A Common Stock Purchase Warrant Representing Right To Purchase Shares of Common Stock of Queen
Sand Resources, Inc., a Delaware corporation, issued to Forseti Investments Ltd., a Barbados
corporation, on May 6, 1997.
1.14 Class B Common Stock Purchase Warrant Representing Right To Purchase Shares of Common Stock of Queen
Sand Resources, Inc., a Delaware corporation, issued to Forseti Investments Ltd., a Barbados
corporation, on May 6, 1997.
1.15 Termination of Management Services Agreement between Capital House A Finance and Investment
Corporation, a Canadian corporation, and Queen Sand Resources, Inc., a Delaware corporation, dated May
5, 1997.
1.16 Stockholders Agreement by and among Edward J. Munden, Ronald I. Benn, Bruce I. Benn, Robert P. Lindsay,
EIBOC Investments Ltd., a Barbados corporation, Queen Sand Resources, Inc., a Delaware corporation, and
Joint Energy Developments Investments Limited Partnership, a Delaware limited partnership, dated May 6,
1997.
1.17 Executive Employment Agreement between Queen Sand Resources, Inc., a Delaware corporation, and Ronald
I. Benn, dated May 6, 1997.
1.18 Executive Employment Agreement between Queen Sand Resources, Inc., a Delaware corporation, and Bruce I.
Benn, dated May 6, 1997.
1.19 Executive Employment Agreement between Queen Sand Resources, Inc., a Delaware corporation, and Edward
J. Munden, dated May 6, 1997.
1.20 Consent and Amendment to Credit Agreement among Queen Sand Resources, Inc., a Nevada corporation, Queen
Sand Resources, Inc., a Delaware corporation, and Comerica Bank-Texas, dated May 2, 1997.
</TABLE>
24
<PAGE> 1
EXHIBIT 1.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
QUEEN SAND RESOURCES, INC.
Queen Sand Resources, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the amendment set forth below to the Corporation's
Certificate of Incorporation was duly adopted in accordance with Section 242 of
the Delaware General Corporation Law:
Article Fifth of the Certificate of Incorporation of the Corporation is
hereby amended to read in its entirety as follows:
"FIFTH. Description and Authorization of Stock.
(a) Stock Authorization. The total number of shares of capital stock
that the Corporation shall have the authority to issue is one hundred fifty
million (150,000,000) shares, which shall consist of (i) one hundred million
(100,000,000) shares of Common Stock, par value ($0.0015) per share (the
"Common Stock") and (ii) fifty million (50,000,000) shares of Preferred Stock,
par value ($0.01) per share (the "Preferred Stock").
(b) Common Stock.
(i) Voting Rights. The holders of Common Stock will be
entitled to one vote per share on all matters to be voted on by the
stockholders of the Corporation, including the election of directors. The
holders of Common Stock shall not have cumulative voting rights.
(ii) Dividends. Subject to the prior rights of any
Preferred Stock issued by the Corporation, as and if dividends are declared
thereon by the Board of Directors of the Corporation out of funds legally
available therefor, whether payable in cash, property or securities of the
Corporation, the holders of Common Stock will be entitled to share equally, on
a share-for-share basis, in all such dividends.
(iii) Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, after all amounts due and owing to the holders
of any Preferred Stock of the Corporation have been paid or the payment has
been fully provided for, the holders of Common Stock shall be entitled to
receive all of the remaining assets of the Corporation available for
distribution to holders of Common Stock and will be entitled to share equally,
on a share-for-share basis, in such distribution. Neither the merger or
consolidation of the Corporation with or into another corporation or
corporations, nor the sale or transfer by the Corporation of all or part of its
assets, nor the reduction of its capital stock, will be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph.
<PAGE> 2
(c) Preferred Stock.
(i) Issuance. The Preferred Stock may be issued from
time to time in one or more series, the shares of each series to have such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional, dividend or other special
rights, and qualifications, limitations, restrictions or other characteristics
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors of
the Corporation as hereafter prescribed. The shares of each series of the
Preferred Stock may vary from the shares of any other class or series in any
respect.
The resolution or resolutions providing for the issuance of any such
series may provide, without limitation:
(A) whether or not shares of a series shall have
voting rights, full, special or limited, or shall have no voting rights, and
whether or not the holders of such shares are to be entitled to vote as a
separate class or series either alone or together with the holders of one or
more other classes or series of stock; provided, however, that if the
resolutions authorize the holders of Preferred Stock to elect Directors upon
certain events, [those Directors elected by the holders of Preferred Stock
shall be in addition to those directors authorized from time to time pursuant
to the Bylaws of the Corporation];
(B) the number of shares to constitute the
series and the designations thereof;
(C) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations
or restrictions thereof, if any, with respect to any series;
(D) whether or not the shares of any series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(E) whether or not the shares of a series shall
be subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
(F) the dividend rate, if any, whether dividend
rates are payable in cash, stock of the Corporation, or other property, the
conditions upon which and the times when such dividends are payable, the
preference to or the relation to the payment of dividends payable on any other
class or classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and the date or dates from which such dividends
shall accumulate;
2
<PAGE> 3
(G) the preferences, if any, and the amounts
thereof which the holders of shares of any series shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(H) whether or not the shares of any series
shall be entitled to the benefit of conditions and restrictions upon the
creation of indebtedness of the Corporation or any subsidiary of the
Corporation, upon the issue of any additional stock (including, without
limitation, additional shares of such series or of any other class or series)
and upon the payment of dividends or the making of other distributions on, and
the purchase, redemption or other acquisition by the Corporation or any
subsidiary of the Corporation of, any outstanding stock of the Corporation;
(I) whether or not the shares of any series, at
the option of the Corporation or the holders thereof or upon the happening of
any specified event, shall be convertible into or exchangeable for the shares
of any other class or classes or of any other series of the same or any other
class or classes of stock, securities, or other property of the Corporation and
the conversion price or prices or ratio or ratios or the rate or rates at which
such exchange may be made, with such adjustments, if any, as shall be stated
and expressed or provided for in such resolution or resolutions; and
(J) such other voting powers, designations,
preferences, rights, qualifications, limitations or restrictions with respect
to any series as the Board of Directors of the Corporation may deem advisable.
(ii) Increases and Decreases in Series. The Board of
Directors of the Corporation may increase the number of shares (but not above
the total number of authorized shares of the class) of the Preferred Stock
designated for any existing series by a resolution adding to such series
authorized and unissued shares of the Preferred Stock not designated for any
other series. The Board of Directors of the Corporation may decrease the
number of shares of the Preferred Stock (but not below the number of shares
thereof then outstanding) designated for any existing series by a resolution,
subtracting from such series unissued shares of the Preferred Stock designated
for such series, and the shares so subtracted shall become authorized,
unissued, and undesignated shares of the Preferred Stock."
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of
the Corporation does execute this Certificate of Amendment, hereby declaring
and certifying that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand 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
<PAGE> 1
EXHIBIT 1.2
AMENDED AND RESTATED BYLAWS OF
QUEEN SAND RESOURCES, INC.
A DELAWARE CORPORATION
<PAGE> 2
BYLAWS OF
QUEEN SAND RESOURCES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . 2
Section 4. Notice of Meetings and Adjourned Meetings . . . . . . . 2
Section 5. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Certain Rules of Procedure Relating to Stockholder
Meetings . . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Voting . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Action of Stockholders by Written Consent Without
Meetings . . . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Requests for Stockholder List and Corporation Records . 6
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Number of Directors; Term; Qualification . . . . . . . 7
Section 3. Election . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Place of Meetings . . . . . . . . . . . . . . . . . . . 8
Section 6. Regular Meetings . . . . . . . . . . . . . . . . . . . 8
Section 7. Special Meetings . . . . . . . . . . . . . . . . . . . 8
Section 8. Notice of Meetings . . . . . . . . . . . . . . . . . . 8
Section 9. Quorum and Manner of Acting . . . . . . . . . . . . . . 9
Section 10. Action by Consent; Participation by Telephone
or Similar Equipment . . . . . . . . . . . . . . . . . 9
Section 11. Resignation; Removal . . . . . . . . . . . . . . . . . 9
Section 12. Compensation of Directors . . . . . . . . . . . . . . . 10
ARTICLE IV COMMITTEES OF THE BOARD . . . . . . . . . . . . . . . . . . . 10
Section 1. Designation, Powers and Name . . . . . . . . . . . . . 10
Section 2. Meetings; Minutes . . . . . . . . . . . . . . . . . . . 11
Section 3. Compensation . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Action by Consent; Participation by Telephone
or Similar Equipment . . . . . . . . . . . . . . . . . 12
Section 5. Changes in Committees; Resignations; Removals . . . . . 12
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Election and Term of Office . . . . . . . . . . . . . . 13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 3. Removal and Resignation . . . . . . . . . . . . . . . . 14
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Salaries . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Chairman of the Board . . . . . . . . . . . . . . . . . 14
Section 7. President . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . 15
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. Treasurer . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11. Assistant Secretary or Treasurer . . . . . . . . . . . 17
ARTICLE VI CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC. . . . . . . . . . . . 18
Section 1. Contracts . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Checks, etc. . . . . . . . . . . . . . . . . . . . . . 18
Section 3. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4. Deposits . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1. Stock Certificates . . . . . . . . . . . . . . . . . . 19
Section 2. List of Stockholders Entitled to Vote . . . . . . . . . 20
Section 3. Stock Ledger . . . . . . . . . . . . . . . . . . . . . 21
Section 4. Transfers of Capital Stock . . . . . . . . . . . . . . 21
Section 5. Lost Certificates . . . . . . . . . . . . . . . . . . . 21
Section 6. Fixing of Record Date . . . . . . . . . . . . . . . . . 22
Section 7. Beneficial Owners . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 1. Declaration . . . . . . . . . . . . . . . . . . . . . . 22
Section 2. Reserve . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1. Indemnification . . . . . . . . . . . . . . . . . . . . 23
Section 2. Advancement of Expenses . . . . . . . . . . . . . . . . 23
Section 3. Non-Exclusivity . . . . . . . . . . . . . . . . . . . . 24
Section 4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5. Continuity . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE X SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XI WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
-ii-
<PAGE> 4
BYLAWS
OF
QUEEN SAND RESOURCES, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Queen Sand
Resources, Inc. (hereinafter called the "Corporation") within the State of
Delaware shall be located at the location specified in the Corporation's
Certificate of Incorporation, as amended.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices and keep the books and records of the Corporation, except as may
otherwise be required by law, in such other place or places, within or without
the State of Delaware, as the Board of Directors of the Corporation
(hereinafter sometimes called the "Board") may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders of the
Corporation shall be held at the office of the Corporation in the State of
Delaware or at such other place, within or without the State of Delaware, as
may from time to time be fixed by the Board or specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of
the Corporation for the election of Directors and for the transaction of such
other business as may properly come before the meeting shall be held annually
on such date and at such time as may be fixed by the Board.
<PAGE> 5
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
unless otherwise provided by law, may be called at any time only by the Board
pursuant to a resolution adopted by a majority of the then authorized number of
Directors (as determined in accordance with Section 2 of Article III of these
Bylaws), the Chairman of the Board or the President. Any such call must
specify the matter or matters to be acted upon at such meeting and only such
matter or matters shall be acted upon thereat.
SECTION 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as may
otherwise be required by law, notice of each meeting of stockholders, annual or
special, shall be in writing, shall state the purpose or purposes of the
meeting, the place, date and hour of the meeting and, unless it is the annual
meeting, shall indicate that the notice is being issued by or at the direction
of the person or persons calling the meeting, and a copy thereof shall be
given, not less than ten (10) or more than sixty (60) days before the date of
said meeting, to each stockholder entitled to vote at such meeting. If mailed,
such notice shall be directed to the stockholder at his address as it appears
on the stock record of the Corporation, unless he shall have filed with the
Secretary a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address.
Notice of any adjourned meeting need not be given if the time and place to
which the meeting shall be adjourned were announced at the meeting at which the
adjournment was taken unless (i) the adjournment is for more than thirty (30)
days, (ii) the Board shall fix a new record date for any adjourned meeting
after the adjournment or (iii) these Bylaws otherwise require.
SECTION 5. QUORUM. At each meeting of stockholders of the
Corporation, the holders of a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote shall be present or
represented by proxy to constitute a quorum for the transaction of business,
except as may otherwise be provided by law or the Certificate of Incorporation.
2
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If a quorum is present at a meeting of stockholders, the stockholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is finally adjourned, and
the subsequent withdrawal from the meeting of any stockholder or the refusal of
any stockholder represented in person or by proxy to vote shall not affect the
presence of a quorum at the meeting, except as may otherwise be provided by law
or the Certificate of Incorporation.
If, however, a quorum shall not be present or represented at any meeting
of the stockholders, the chairman of the meeting or holders of a majority of
the shares represented in person or by proxy shall have the power to adjourn
the meeting to another time, or to another time and place, without notice
(subject, however, to the requirements of Section 4 of Article II of these
Bylaws) other than announcement of adjournment at the meeting, and there may be
successive adjournments for like cause and in like manner until the requisite
amount of shares entitled to vote at such meeting shall be represented. At
such adjourned meeting at which the requisite amount of shares entitled to vote
thereat shall be represented, any business may be transacted that might have
been transacted at the original meeting so adjourned.
SECTION 6. CERTAIN RULES OF PROCEDURE RELATING TO STOCKHOLDER
MEETINGS. All stockholder meetings, annual or special, shall be governed in
accordance with the following rules:
(i) Only stockholders of record will be permitted to present
motions from the floor at any meeting of stockholders.
(ii) The chairman of the meeting shall preside over and conduct
the meeting in a fair and reasonable manner, and all
questions of procedure or conduct of the meeting shall be
decided solely by the chairman of the meeting. The
chairman of the meeting shall have all power and
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authority vested in a presiding officer by law or practice
to conduct an orderly meeting. Among other things, the
chairman of the meeting shall have the power to adjourn or
recess the meeting, to silence or expel persons to insure
the orderly conduct of the meeting, to declare motions or
persons out of order, to prescribe rules of conduct and an
agenda for the meeting, to impose reasonable time limits
on questions and remarks by any stockholder, to limit the
number of questions a stockholder may ask, to limit the
nature of questions and comments to one subject matter at
a time as dictated by any agenda for the meeting, to limit
the number of speakers or persons addressing the chairman
of the meeting or the meeting, to determine and announce
when the polls shall be closed, to limit the attendance at
the meeting to stockholders of record, beneficial owners
of stock who present letters from the record holders
confirming their status as beneficial owners, and the
proxies of such record and beneficial holders, and to
limit the number of proxies a stockholder may name.
SECTION 7. VOTING. Except as otherwise provided in the Certificate
of Incorporation, at each meeting of stockholders, every stockholder of the
Corporation shall be entitled to one (1) vote for every share of capital stock
standing in his name on the stock records of the Corporation (i) at the time
fixed pursuant to Section 6 of Article VII of these Bylaws as the record date
for the determination of stockholders entitled to vote at such meeting, or (ii)
if no such record date shall have been fixed, then at the close of business on
the date next preceding the day on which notice thereof shall be given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. At each such meeting, every stockholder shall be
entitled to vote in person, or by proxy
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appointed by an instrument in writing executed by such stockholder or by his
duly authorized agent and bearing a date not more than three (3) years prior to
the meeting in question, unless said instrument provides for a longer period
during which it is to remain in force.
At all meetings of stockholders at which a quorum is present, all
matters (except as otherwise provided in Section 3 of Article III of these
Bylaws and except in cases where a larger vote is required by law, the
Certificate of Incorporation or these Bylaws or where a class vote is required
by law or the Certificate of Incorporation) shall be decided by a majority of
the votes cast at such meeting by the holders of shares present or represented
by proxy and entitled to vote thereon.
SECTION 8. ACTION OF STOCKHOLDERS BY WRITTEN CONSENT WITHOUT
MEETINGS. Unless otherwise provided in the Certificate of Incorporation, any
action required or permitted to be taken by stockholders for or in connection
with any corporate action may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing setting forth the
action so taken shall be (i) signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and (ii) delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear the date of signature of
each stockholder who signs the consent.
If action is taken by less than unanimous consent of stockholders and in
accordance with the foregoing, there shall be filed with the records of the
meetings of stockholders the writing or writings comprising such less than
unanimous consent. Prompt notice of the
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taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those who have not consented in writing, and a
certificate signed and attested to by the Secretary that such notice was given
shall be filed with the records of the meetings of the stockholders.
If action is taken by unanimous consent of stockholders, the writing or
writings comprising such unanimous consent shall be filed with the records of
the meetings of stockholders.
SECTION 9. REQUESTS FOR STOCKHOLDER LIST AND CORPORATION RECORDS.
Stockholders shall have those rights afforded under the DGCL to inspect for any
proper purpose the Corporation's stock ledger, list of stockholders and other
books and records, and make copies or extracts therefrom. Such request shall
be in writing in compliance with Section 220 of the DGCL. Information so
requested shall be made available for inspecting, copying or extracting during
usual business hours at the principal executive offices of the Corporation.
Each stockholder desiring photostatic or other duplicate copies of any of such
information requested shall make arrangements to provide the duplicating or
other equipment necessary in the city where the Corporation's principal
executive offices are located. Alternative arrangements with respect to this
Section 12 may be permitted in the discretion of the President of the
Corporation or by vote of the Board of Directors.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. The business of the Corporation shall be managed
by or under the direction of the Board. The Board may exercise all such
authority and powers of the Corporation and do all such lawful acts and things
as are not by law or otherwise directed or required to be exercised or done by
the stockholders.
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SECTION 2. NUMBER OF DIRECTORS; TERM; QUALIFICATION. Except as
required in the Certificate of Incorporation, the number of Directors which
shall constitute the whole Board of Directors shall from time to time be fixed
and determined by resolution of the Board of Directors. Except as required in
the Certificate of Incorporation, no decrease in the number of Directors
constituting the Board shall shorten the term of any incumbent Director.
Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, each Director shall hold office until the next annual meeting and
until his successor is elected and qualified, or until his earlier death,
resignation, disqualification or removal. Directors need not be residents of
the State of Delaware or stockholders of the Corporation.
SECTION 3. ELECTION. Except as required in the Certificate of
Incorporation, at each meeting of stockholders for the election of Directors at
which a quorum is present, the persons receiving a plurality of the votes of
the shares represented in person or by proxy and entitled to vote on the
election of Directors shall be elected Directors. All elections of Directors
shall be by written ballot, unless otherwise provided in the Certificate of
Incorporation.
SECTION 4. VACANCIES. Except as required in the Certificate of
Incorporation, in the case of any increase in the number of Directors or any
vacancy in the Board of Directors, such newly created directorship or vacancy
may be filled by vote of the stockholders at a meeting called for such purpose
or, unless the Certificate of Incorporation or these Bylaws provide otherwise,
by the affirmative vote of the majority of the remaining Directors then in
office, although less than a quorum, or by a sole remaining Director. Unless
the Certificate of Incorporation or these Bylaws provide otherwise, when one or
more Directors shall resign from the Board of Directors, effective at a future
date, the majority of Directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective.
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Any Director elected or chosen as provided herein shall serve for the remaining
term of the directorship to which appointed or until his successor is elected
and qualified or until his earlier death, resignation or removal.
SECTION 5. PLACE OF MEETINGS. Meetings of the Board shall be held at
the Corporation's office in the State of Delaware or at such other place,
within or without such State, as the Board may from time to time determine or
as shall be specified or fixed in the notice or waiver of notice of any such
meeting.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board shall be
held on such days and at such times as the Board may from time to time
determine and is publicized among the directors. Notice of regular meetings of
the Board need not be given except as otherwise required by law or these
Bylaws.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman of the Board or the President and shall be called by the
Secretary at the request of any two of the other Directors.
SECTION 8. NOTICE OF MEETINGS. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required), stating
the time, place and purposes thereof, shall be mailed to each Director,
addressed to him at his residence or usual place of business, or shall be sent
to him by facsimile or overnight courier so addressed, or shall be given
personally or by telephone, on twenty-four (24) hours notice, or such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances. Notice of any such meeting need not be given
to any Director, however, if waived by him in writing or by facsimile, or if he
shall be present at the meeting, except when he is present for the express
purpose of objecting at the beginning of such meeting to the transaction of any
business because the meeting is not lawfully called or convened.
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SECTION 9. QUORUM AND MANNER OF ACTING. The presence of a majority
of the authorized number of Directors shall be necessary and sufficient to
constitute a quorum for the transaction of business at any meeting of the
Board. If a quorum shall not be present at any meeting of the Board, a
majority of the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. Except where a different vote is required by law, the act of
a majority of the Directors present at any meeting at which a quorum shall be
present shall be the act of the Board.
SECTION 10. ACTION BY CONSENT; PARTICIPATION BY TELEPHONE OR SIMILAR
EQUIPMENT. Any action required or permitted to be taken by the Board may be
taken without a meeting if all the Directors consent in writing to the adoption
of a resolution authorizing the action, unless otherwise restricted by the
Certificate of Incorporation or these Bylaws. The resolution and the written
consents thereto by the Directors shall be filed with the minutes of the
proceedings of the Board. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any one or more Directors may participate in any
meeting of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting of the Board.
SECTION 11. RESIGNATION; REMOVAL. Any Director may resign at any time
by giving written notice to the Corporation, provided, however, that written
notice to the Board, the Chairman of the Board, the President or the Secretary
shall be deemed to constitute notice to the Corporation. Such resignation
shall take effect upon receipt of such notice or at any later time specified
therein, and, unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective.
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Any Director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of Directors; provided, however, that when the holders of any
class or series are entitled by the Certificate of Incorporation to elect one
(1) or more Directors, then, in respect to the removal without cause of a
Director or Directors so elected, the required majority vote shall be of the
holders of the outstanding shares of such class or series and not of the
outstanding shares as a whole.
SECTION 12. COMPENSATION OF DIRECTORS. [The Board may, unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
provide for the payment to any of the Directors, other than officers or
employees of the Corporation, of a specified amount for services as a Director
and/or member of a committee of the Board, or of a specified amount for
attendance at each regular or special Board meeting or committee meeting, or of
both, and all Directors shall be reimbursed for expenses of attendance at any
such meeting; provided, however, that nothing herein contained shall be
construed to preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.]
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 1. DESIGNATION, POWERS AND NAME. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
committees, including, if they shall so determine, an Executive Committee, each
such committee to consist of one or more of the Directors of the Corporation.
Each committee designated by the Board of Directors shall have and may
exercise such of the powers of the Board in the management of the business and
affairs of the Corporation as may be provided in such resolution or in these
Bylaws; provided, however, that no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation (except
that a committee may, to the extent authorized in the
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resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors pursuant to authority, if any, expressly vested in
the Board by the provisions of the Certificate of Incorporation, (i) fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other
class or classes of stock of the Corporation, or (ii) fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
the Bylaws of the Corporation; and, provided further, that, unless the
resolution establishing the committee, the Certificate of Incorporation or
these Bylaws expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to Section 253 of the DGCL. The
committee may authorize the seal of the Corporation, if any, to be affixed to
all papers which may require it. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board to act
at the meeting in the place of any such absent or disqualified member.
SECTION 2. MEETINGS; MINUTES. Unless the Board of Directors shall
otherwise provide, upon designation of any committee by the Board, such
committee shall elect one of its members as chairman and may elect one of its
members as vice chairman and shall adopt
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rules of proceeding providing for, among other things, the manner of calling
committee meetings, giving notices thereof, quorum requirements for such
meetings, and the methods of conducting the same. Each committee of Directors
shall keep regular minutes of its proceedings and report the same to the Board
of Directors when required.
SECTION 3. COMPENSATION. Members of special or standing committees
may be allowed compensation if the Board of Directors shall so determine
pursuant to Section 12 of Article III of these Bylaws.
SECTION 4. ACTION BY CONSENT; PARTICIPATION BY TELEPHONE OR SIMILAR
EQUIPMENT. Unless the Board of Directors, the Certificate of Incorporation or
these Bylaws shall otherwise provide, any action required or permitted to be
taken by any committee may be taken without a meeting if all members of the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
committee shall be filed with the minutes of the proceedings of the committee.
Unless the Board of Directors, the Certificate of Incorporation or these Bylaws
shall otherwise provide, any one or more members of any such committee may
participate in any meeting of the committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation by such means shall constitute
presence in person at a meeting of the committee.
SECTION 5. CHANGES IN COMMITTEES; RESIGNATIONS; REMOVALS. The Board
shall have power, by the affirmative vote of a majority of the authorized
number of Directors, at any time to change the members of, to fill vacancies
in, and to discharge any committee of the Board. Any member of any such
committee may resign at any time by giving notice to the Corporation; provided,
however, that notice to the Board, the Chairman of the Board, the President,
the chairman of such committee or the Secretary shall be deemed to constitute
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notice to the Corporation. Such resignation shall take effect upon receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to
make it effective. Any member of any such committee may be removed at any
time, with or without cause, by the affirmative vote of a majority of the
authorized number of Directors at any meeting of the Board called for that
purpose.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents (any one or
more of whom may be designated Executive Vice President or Senior Vice
President), a Secretary and a Treasurer. The Board of Directors may appoint
such other officers and agents, including Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers, as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined by the Board. Any two or more offices,
other than the offices of President and Secretary, may be held by the same
person. No officer shall execute, acknowledge, verify or countersign any
instrument on behalf of the Corporation in more than one capacity, if such
instrument is required by law, by these Bylaws or by any act of the Corporation
to be executed, acknowledged, verified or countersigned by two or more
officers. The Chairman of the Board shall be elected from among the Directors.
With the foregoing exception, none of the other officers need be a Director,
and none of the officers need be a stockholder of the Corporation unless
otherwise required by the Certificate of Incorporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently practicable. Each officer shall hold office until
his successor shall have been elected or appointed and shall have been
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qualified or until his death or the effective date of his resignation or
removal, or until he shall cease to be a Director in the case of the Chairman
of the Board.
SECTION 3. REMOVAL AND RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed, with or without cause, by
the affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the Corporation shall be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed. Any officer may resign at any time by giving written
notice to the Corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
SECTION 4. VACANCIES. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled by the
Board of Directors and, in the case of any vacancy in an office other than the
office of Chairman of the Board (if any) or President, by the President for the
unexpired portion of the term.
SECTION 5. SALARIES. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors or pursuant to its
direction; and no officer shall be prevented from receiving such salary by
reason of his also being a Director.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
have such duties as the Board of Directors may prescribe. In the Chairman's
absence, such duties shall be attended to by the President.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the Corporation, and, subject to the provisions of these Bylaws,
shall have general and active control of all of its business and affairs. The
President shall preside at all meetings of the Board of Directors and at all
meetings of the stockholders. The President shall have the
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power to (i) appoint and remove subordinate officers, agents and employees,
including Assistant Secretaries and Assistant Treasurers, except that the
President may not remove those elected or appointed by the Board of Directors,
and (ii) delegate and determine their duties. The President shall keep the
Board of Directors and the Executive Committee (if any) fully informed and
shall consult them concerning the business of the Corporation. The President
may sign, with the Secretary or another officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation and any deeds, bonds, mortgages, contracts, checks, notes, drafts
or other instruments the issue or execution of which shall have been authorized
by resolution of the Board of Directors, except in cases where the signing and
execution thereof has been expressly delegated by these Bylaws or by the Board
of Directors to some other officer or agent of the Corporation, or shall be
required by law to be otherwise executed. The President shall vote, or
authorize any other officer of the Corporation to vote, all shares of stock of
any other corporation standing in the name of the Corporation either in person
or by proxy. The President shall, in general, perform all other duties
normally incident to or as usually appertain to the office of President and
such other duties as may be prescribed by these Bylaws, the stockholders, the
Board of Directors or the Executive Committee (if any) from time to time.
SECTION 8. VICE PRESIDENTS. In the absence of the President, or in
the event of his inability or refusal to act, the Executive Vice President (or
in the event there shall be no Vice President designated Executive Vice
President, any Vice President designated by the Board) shall perform the duties
and exercise the powers of the President. Any Vice President may sign, with
the Secretary or Assistant Secretary or with the Treasurer or Assistant
Treasurer, certificates for shares of the Corporation and any deeds, bonds,
mortgages, contracts, checks, notes, drafts or other instruments the issue or
execution of which shall have been authorized by resolution of the Board of
Directors, except in cases where the
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signing and execution thereof has been expressly delegated by these Bylaws or
by the Board of Directors to some other officer or agent of the Corporation, or
shall be required by law to be otherwise executed. Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
Chairman of the Board (if any), the President, the Board of Directors or the
Executive Committee (if any).
SECTION 9. SECRETARY. The Secretary shall (i) record the proceedings
of the meetings of the stockholders, the Board of Directors and committees of
Directors in the permanent minute books of the Corporation kept for that
purpose, (ii) see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law, (iii) be custodian of the
corporate books and records and of the seal of the Corporation, and see that
the seal of the Corporation or a facsimile thereof is affixed to all
certificates for shares of the Corporation prior to the issue thereof and to
all documents, the execution of which on behalf of the Corporation under its
seal is duly authorized in accordance with the provisions of these Bylaws, (iv)
keep or cause to be kept a register of the post office address of each
stockholder which shall be furnished by such stockholder, (v) sign with the
Chairman of the Board (if any), the President, or an Executive Vice President
or Vice President, certificates for shares of the Corporation and any deeds,
bonds, mortgages, contracts, checks, notes, drafts or other instruments the
issue or execution of which shall have been authorized by resolution of the
Board of Directors, except in cases where the signing and execution thereof has
been expressly delegated by these Bylaws or by the Board of Directors to some
other officer or agent of the Corporation, or shall be required by law to be
otherwise executed, (vi) have general charge of the stock transfer books of the
Corporation and (vii) in general, perform all duties normally incident to the
office of Secretary and such other duties as from time to time may be assigned
by the Chairman of the Board (if any), the President, the Board of Directors or
the Executive Committee (if any).
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SECTION 10. TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the Board of Directors shall
determine. The Treasurer shall (i) have charge and custody of and be
responsible for all funds and securities of the Corporation, receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Section 4 of Article VI of these Bylaws, (ii) prepare,
or cause to be prepared, for submission at each regular meeting of the Board of
Directors, at each annual meeting of the stockholders and at such other times
as may be required by the Board of Directors, the Chairman of the Board (if
any), the President or the Executive Committee (if any), a statement of
financial condition of the Corporation in such detail as may be required, (iii)
sign with the Chairman of the Board (if any), the President, or an Executive
Vice President or Vice President, certificates for shares of the Corporation
and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other
instruments the issue or execution of which shall have been authorized by
resolution of the Board of Directors, except in cases where the signing and
execution thereof has been expressly delegated by these Bylaws or by the Board
of Directors to some other officer or agent of the Corporation, or shall be
required by law to be otherwise executed and (iv) in general, perform all the
duties incident to the office of Treasurer and such other duties as from time
to time may be assigned by the Chairman of the Board (if any), the President,
the Board of Directors or the Executive Committee (if any).
SECTION 11. ASSISTANT SECRETARY OR TREASURER. The Assistant
Secretaries and Assistant Treasurers shall, in general, perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or
by the Chairman of the Board (if any), the President, the Board of Directors or
the Executive Committee (if any). The Assistant
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Secretaries and Assistant Treasurers shall, in the absence of the Secretary or
Treasurer, respectively, or in their respective inability or refusal to act,
perform all functions and duties which such absent officers may delegate, but
such delegation shall not relieve the absent officer from the responsibilities
and liabilities of their office. The Assistant Secretaries or the Assistant
Treasurers may sign, with the Chairman of the Board (if any), the President or
Executive Vice President or Vice President, certificates for shares of the
Corporation and any deeds, bonds, mortgages, contracts, checks, notes, drafts
or other instruments the issue or execution of which shall have been authorized
by a resolution of the Board of Directors, except in cases where the signing
and execution thereof has been expressly delegated by these Bylaws or by the
Board of Directors to some other officer or agent of the Corporation, or shall
be required by law to be otherwise executed. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine.
ARTICLE VI
CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.
SECTION 1. CONTRACTS. The Board may authorize any officer or
officers, agent or agents, in the name and on behalf of the Corporation, to
enter into any contract or to execute and deliver any instrument, which
authorization may be general or confined to specific instances; and, unless so
authorized by the Board, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable pecuniarily for any purpose or for any
amount.
SECTION 2. CHECKS, ETC. All checks, drafts, bills of exchange or
other orders for the payment of money out of the funds of the Corporation, and
all notes or other evidences of indebtedness of the Corporation, shall be
signed in the name and on behalf of the Corporation
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in such manner as shall from time to time be authorized by the Board, which
authorization may be general or confined to specific instances.
SECTION 3. LOANS. No loan shall be contracted on behalf of the
Corporation, and no negotiable paper shall be issued in its name, unless
authorized by the Board, which authorization may be general or confined to
specific instances. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation issued for such loans shall be
made, executed and delivered as the Board shall authorize.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as may be selected by or
in the manner designated by the Board. The Board or its designees may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as may be deemed expedient.
ARTICLE VII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. Each stockholder of the Corporation
shall be entitled to have, in such form as shall be approved by the Board, a
certificate or certificates signed by the Chairman of the Board or the
President and by either the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary (except that, when any such certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or any employee, the signatures of any such officers may be
facsimiles, engraved or printed), which may be sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or printed), certifying
the number of shares of capital stock of the Corporation owned by such
stockholder. In case any officer who has signed or whose facsimile signature
has been placed upon any such certificate shall have ceased to be such
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officer before such certificate is issued, such certificate may be issued by
the Corporation with the same effect as if he were such officer at the date of
its issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof, and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise stated in Section 202 of the DGCL, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 2. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make or cause to have prepared or made, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the
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<PAGE> 24
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
SECTION 3. STOCK LEDGER. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 2 of this Article VII or the books
and records of the Corporation, or to vote in person or by proxy at any meeting
of stockholders.
SECTION 4. TRANSFERS OF CAPITAL STOCK. Transfers of shares of
capital stock of the Corporation shall be made only on the stock record of the
Corporation by the holder of record thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation or the transfer agent thereof, and only on surrender of the
certificate or certificates representing such shares, properly endorsed or
accompanied by a duly executed stock transfer power. The Board may make such
additional rules and regulations as it may deem expedient concerning the issue
and transfer of certificates representing shares or uncertificated shares of
the capital stock of the Corporation.
SECTION 5. LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
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SECTION 6. FIXING OF RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividends or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which record date shall (i) not precede the date upon which the
resolution fixing the record date is adopted by the Board and (ii) not be more
than sixty days nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall (i) not precede the
date upon which the resolution fixing the record date is adopted by the Board
and (ii) not be more than ten days after the date upon which the resolution
fixing the record date is adopted by the Board.
SECTION 7. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
ARTICLE VIII
DIVIDENDS
SECTION 1. DECLARATION. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the
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Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of capital stock,
subject to the provisions of the Certificate of Incorporation.
SECTION 2. RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE IX
INDEMNIFICATION
SECTION 1. INDEMNIFICATION. The Corporation shall indemnify to the
full extent authorized or permitted by Section 145 of the DGCL any person (his
heirs, executors and administrators) made, or threatened to be made, a party to
any action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he is or was a Director or officer of
the Corporation or by reason of the fact that as such Director or officer, at
the request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
in any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees and agents of the Corporation other than
Directors and officers may be entitled by law.
SECTION 2. ADVANCEMENT OF EXPENSES. Expenses (including attorneys'
fees) incurred by an officer or Director of the Corporation in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board
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<PAGE> 27
of Directors upon receipt of an undertaking by or on behalf of such Director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this Article
IX. Such expenses incurred by employees and agents of the Corporation other
than Directors and officers may be paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
SECTION 3. NON-EXCLUSIVITY. The indemnification and advancement of
expenses provided for hereby shall not be deemed exclusive of any other rights
to which a person seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
Directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
SECTION 4. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article IX.
SECTION 5. CONTINUITY. The indemnification and advancement of
expenses provided for in this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent of the Corporation and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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ARTICLE X
SEAL
The Corporation's seal, if any, shall be circular in form and shall
include the name of the Corporation, the state and year of its incorporation,
and the word "Seal." The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required by law, the Certificate of Incorporation
or these Bylaws to be given to any Director, member of a committee or
stockholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, Directors, or members of a
committee of Directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Bylaws.
ARTICLE XII
AMENDMENTS
These Bylaws or any of them may be amended or supplemented in any
respect at any time, either (a) at any meeting of stockholders, provided that
any amendment or supplement proposed to be acted upon at any such meeting shall
have been described or
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referred to in the notice of such meeting, or (b) at any meeting of the Board,
provided that any amendment or supplement proposed to be acted upon at any such
meeting shall have been described or referred to in the notice of such meeting
or an announcement with respect thereto shall have been made at the last
previous Board meeting, and provided further that no amendment or supplement
adopted by the Board shall vary or conflict with any amendment or supplement
adopted by the stockholders.
I, the undersigned, being the Secretary of the Corporation DO HEREBY
CERTIFY THAT the foregoing are the bylaws of said Corporation, as adopted by
the sole director of said Corporation as of the 5th day of May, 1997.
/s/ Bruce I. Benn
-------------------------------------
Bruce I. Benn, Secretary
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EXHIBIT 1.3
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 with respect to the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
<PAGE> 2
(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 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.
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<PAGE> 3
(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 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:
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<PAGE> 4
(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.
(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.
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<PAGE> 5
(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 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:
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<PAGE> 6
(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 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 otherwise, such vacancy may be filled
by the action, and only by such action, of the holders of shares of Series A
Preferred Stock.
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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 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
7
<PAGE> 8
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.
(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.
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<PAGE> 9
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
<PAGE> 1
EXHIBIT 1.4
CERTIFICATE OF DESIGNATION
OF
SERIES B 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 B Participating Convertible Preferred Stock"
(hereinafter called "Series B Preferred Stock"). Each share of Series B
Preferred Stock shall be identical in all respects with all other shares of
Series B Preferred Stock. Shares of Series B Preferred Stock shall not be
issuable except upon the conversion of shares of the Corporation's Series A
Participating Convertible Preferred Stock in accordance with the terms of the
Certificate of Designation relating to such stock.
SECTION 2. NUMBER OF SHARES. The number of shares of Series B
Preferred Stock shall be 9,600,000. Shares of Series B Preferred Stock that
are redeemed, purchased or otherwise acquired by the Corporation or converted
into Common Stock shall be canceled, and the Corporation 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 B
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 B 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 with respect to the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
<PAGE> 2
(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 B 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 B 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 B 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.
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 B Preferred Stock shall
be entitled to receive (i) an amount per share 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 B Preferred Stock and holders of Parity
Securities shall be insufficient to permit the payment to such holders of the
full preferential amounts to which they are entitled, then the assets of the
Corporation available for distribution among the holders of Series B Preferred
Stock and holders of Parity Securities shall be distributed ratably among such
holders so that the amounts distributed in respect of the Series B 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 B 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.
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<PAGE> 3
SECTION 6. CONVERSION RIGHTS. Each holder of shares of Series B
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 B 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 B Preferred Stock is convertible, shall initially be one.
(b) In order to convert shares of Series B 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 B 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 B Preferred Stock shall cease to
accrue on the date of conversion, and all such dividends that have accrued as
of the date of 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 B 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 B 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 B 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
3
<PAGE> 4
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 B Preferred Stock), the holders
of the Series B 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 B Preferred Stock do have, the right to obtain upon
conversion of the Series B Preferred Stock, in lieu of each share of
Common Stock theretofore issuable upon conversion of the Series B
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 B 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.
(ii) If the Corporation at any time while any of the
Series B 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 B 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 B
Preferred Stock.
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<PAGE> 5
(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 B
Preferred Stock, the full number of shares of Common Stock then deliverable
upon the conversion of all shares of Series B 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 B 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 Stock in a name other than that in which the shares of Series B
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.
SECTION 7. VOTING RIGHTS.
In addition to any other voting rights required by applicable
law, the holders of Series B 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 B 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 B 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.
5
<PAGE> 6
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
<PAGE> 1
EXHIBIT 1.7
EARN UP AGREEMENT
THIS EARN UP AGREEMENT (this "Agreement") is executed as of the 6th
day of May, 1997 between Queen Sand Resources, Inc., a Delaware corporation
(the "Company"), and Joint Energy Development Investments Limited Partnership,
a Delaware limited partnership ("JEDI").
WHEREAS, the Company has entered into the Purchase Agreement (defined
below) with JEDI pursuant to which JEDI is purchasing shares of the Company's
Series A Participating Convertible Preferred Stock, par value $0.01 per share
(the "Convertible Preferred Stock"), and certain warrants to purchase Common
Stock of the Company, in exchange for (i) $5,000,000 cash; and (ii) this
Agreement; and
WHEREAS, the Company is repurchasing 9,600,000 shares of Common Stock
(defined below) from Forseti Investments, ltd., a Barbados corporation
("Forseti"), pursuant to the terms of the Forseti Purchase Agreement (defined
below);
NOW, THEREFORE, in consideration of these premises, the agreements
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, JEDI and the Company agree as follows:
1.0 DEFINITIONS
"AAA" means the American Arbitration Association, or any successor
organization.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of, or rights,
warrants or options to purchase, corporate stock or any other equity interest
(however designated) of or in such Person.
"Capitalized Lease Obligation" means the amount of the liability under
any capital lease that, in accordance with GAAP, is required to be capitalized
and reflected as a liability on the consolidated balance sheet of the Company
and its Subsidiaries.
"Class A Amount" is defined in Section 2(b).
"Class B Amount" is defined in Section 2(c).
<PAGE> 2
"Class A Warrants" means the Class A Common Stock Purchase Warrants to
purchase 1,000,000 shares of Common Stock issued to Forseti pursuant to the
Forseti Purchase Agreement.
"Class B Warrants" means the Class B Common Stock Purchase Warrants to
purchase 2,000,000 shares of Common Stock issued to Forseti pursuant to the
Forseti Purchase Agreement.
"Common Stock" means the common stock, par value $.0015 per share, of
the Company.
"Consolidated Adjusted Net Income" means the consolidated net income
(or loss) of the Company and its Subsidiaries for the fiscal year ending June
30, 1998 as determined in accordance with GAAP, adjusted by excluding, to the
extent included in consolidated net income, (a) net after-tax extraordinary
gains or losses (less all fees and expenses relating thereto), (b) net
after-tax gains or losses (less all fees and expenses relating thereto)
attributable to asset dispositions, (c) the net income (or net loss) of any
Person (other than the Company or any of its Subsidiaries) in which the Company
or any of its Subsidiaries has an ownership interest, except to the extent of
the amount of dividends or other distributions actually paid to the Company or
its Subsidiaries in cash by such other Person during such period, and (d) net
income (or net loss) of any Person combined with the Company or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination.
"Consolidated Interest Expense" means the amount which, in conformity
with GAAP, is set forth opposite the caption "interest expense" (or any like
caption) on the audited consolidated statement of operations of the Company and
its Subsidiaries for the fiscal year ended June 30, 1998.
"Consolidated Net Working Capital" means (i) the amount which, in
conformity with GAAP, is set forth opposite the caption "total current assets"
(or any like caption) on the audited consolidated balance sheet of the Company
and its Subsidiaries as of June 30, 1998 less (ii) the amount which, in
conformity with GAAP, is set forth opposite the caption "total current
liabilities" (or any like caption) on the audited consolidated balance sheet of
the Company and its Subsidiaries as of June 30, 1998.
"Consolidated Non-cash Charges" means the amount which, in conformity
with GAAP, is set forth opposite the caption "depreciation, depletion and
amortization" (or any like caption) on the audited consolidated statement of
operations of the Company and its Subsidiaries for the fiscal year ended June
30, 1998.
"Consolidated Tax Expense" means the amount which, in conformity with
GAAP, is set forth opposite the caption "income tax expense" (or any like
caption) on the audited consolidated statement of operations of the Company and
its Subsidiaries for the fiscal year ended June 30, 1998.
"Dispute" is defined in Section 4.
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<PAGE> 3
"EBITDA" means, without duplication, for the fiscal year ended June
30, 1998, the sum of (i) Consolidated Adjusted Net Income and (ii) to the
extent deducted in computing Consolidated Adjusted Net Income, Consolidated
Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges.
"Earn Up Amount" is defined in Section 2(a).
"Election Date" means September 30, 1998.
"Exercise Price" means $2.50.
"Forseti Earn Up Agreement" means the Earn Up Agreement entered into
between the Company and Forseti substantially in the form of Exhibit A to this
Agreement.
"Forseti Interests" means all of the outstanding ownership interests
in Forseti and each entity that controls or owns an ownership interests in
Forseti.
"Forseti Purchase Agreement" means the Securities Purchase Agreement
dated March 27, 1997 between the Company and Forseti.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, in effect from time to
time.
"Guaranteed Debt" means, without duplication, all Indebtedness of any
other Person guaranteed directly or indirectly in any manner by the Company or
any of its Subsidiaries, or in effect guaranteed directly or indirectly by the
Company or any of its Subsidiaries through an agreement (i) to pay or purchase
such Indebtedness or to advance or supply funds for the payment or purchase of
such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss, (iii) to supply funds to, or in any
other manner invest in, the debtor (including any agreement to pay for property
or services to be acquired by such debtor irrespective of whether such property
is received or such services are rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a
creditor against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit.
"Indebtedness" means, as of June 30, 1998, without duplication, (i)
all indebtedness of the Company or any of its Subsidiaries for borrowed money
or for the deferred purchase price of property or services, excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business, (ii) all obligations of the Company or any of its
Subsidiaries evidenced by bonds, notes, debentures or other similar
instruments, (iii) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
the Company or any of its Subsidiaries (even if the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
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<PAGE> 4
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (iv) all Capitalized Lease
Obligations, (v) all indebtedness referred to in (but not excluded from) clause
(i), (ii), (iii) or (iv) above of other Persons, the payment of which is
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by the
Company or any of its Subsidiaries, even though such Person has not assumed or
become liable for the payment of such indebtedness, (vi) all Guaranteed Debt,
(vii) all Redeemable Capital Stock valued at its maximum fixed repurchase price
plus accrued and unpaid dividends, and (viii) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (i) through (vii) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock that does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Agreement, and if such price is based upon, or measured by,
the fair market value of such Redeemable Capital Stock, such fair market value
to be determined in good faith by the Board of Directors of the issuer of such
Redeemable Capital Stock.
"Mediator" is defined in Section 6.
"Outstanding Shares" means, as of June 30, 1998, the issued and
outstanding shares of Common Stock, assuming the conversion of all shares of
preferred stock of the Company that are convertible into shares of Common
Stock, and excluding any shares of Common Stock held in treasury by the Company
or held by any wholly-owned Subsidiary of the Company.
"Payment Date" means October 15, 1998.
"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.
<TABLE>
<S> <C> <C>
"Price" means, if:
-----
|Price(1) - Price(2)|
---------------------- Less than or equal to 0.1,
Greater of Price(1) or then (Price(1) + Price(2))/2;
Price(2)
provided, that if: |Price(1) - Price(2)| Greater than 0.1, then the
---------------------- Company and JEDI
Greater of Price(1) or
Price(2)
</TABLE>
shall negotiate the Price; provided, further, that if the Price has not been
agreed upon within 5 business days after the determination of Price(1) and
Price(2), then the determination of the Price shall be submitted to nonbinding
mediation and arbitration in accordance with this Agreement. Notwithstanding
anything to the contrary in this Agreement, under no circumstances shall the
Price exceed the higher of Price(1) and Price(2) or be less than the lower of
Price(1) and Price(2).
-4-
<PAGE> 5
<TABLE>
<S> <C> <C>
(1.1 * SEC PV10)) - Indebtedness + Consolidated Net Working Capital
"Price(1)" = ------------------------------------------------------------------------------
Outstanding Shares
(6.0 * EBITDA) - Indebtedness + Consolidated Net Working Capital
"Price(2)" = ------------------------------------------------------------------------------
Outstanding Shares
</TABLE>
"Purchase Agreement" means the Securities Purchase Agreement dated
March 27, 1997 between the Company and JEDI.
"Redeemable Capital Stock" means any Capital Stock of the Company or
any of its Subsidiaries that, either by its terms, by the terms of any security
into which it is convertible or exchangeable or otherwise, (i) is, or upon the
happening of an event or passage of time would be, required to be redeemed, or
(ii) is, or upon the happening of an event or passage of time would be,
redeemable at the option of the holder thereof, or (iii) is, or upon the
happening of an event or passage of time would be, convertible into or
exchangeable for debt securities.
"SEC PV(10)" means the pre tax future net cash flows from proved oil
and gas reserves of the Company and its Subsidiaries at June 30, 1998, computed
using a discount factor of ten percent, as determined in accordance with the
rules, regulations and guidelines of the United States Securities and Exchange
Commission and reported in the reserve report dated as of such date prepared in
accordance with Section 6.11 of the Purchase Agreement.
"Statutory Declaration" means a statutory declaration by Forseti that
as of the Election Date and the Payment Date (i) the individual who, as of the
date hereof, owned all of the Forseti Interests owns all of the Forseti
Interests (ii) there are no encumbrances, pledges or other liens on any equity
interests in Forseti, and (iii) no other event under Section 6(h) has occurred.
"Subsidiary" of a Person means any corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company or business trust of which at the time of determination
such Person, directly and/or indirectly through one or more other Persons, owns
more than 50% of the voting interests.
"Transfer" of any property means any exercise, or any direct or
indirect sale, transfer, encumbrance, gift, donation, assignment, grant of any
interest, pledge, hypothecation or other disposition of such property or any
interest therein, whether voluntary or involuntary, including, but not limited
to, any transfer by operation of law, by court order, by judicial process, or
by foreclosure, levy, or attachment.
"Value" is defined in Section 2(e).
"Warrant Transfer Amount" is defined in Section 2(d).
"Warrants" means, collectively, the Class A Warrants and the Class B
Warrants.
-5-
<PAGE> 6
2.0 PAYMENT OF EARN UP AMOUNT
(a) On the Payment Date, subject to the limitations in Section 3,
and only against delivery by the Company to JEDI of evidence
satisfactory to JEDI that Forseti has delivered to the Company (x) the
Warrants and (y) the Statutory Declaration, JEDI shall pay the Company
an amount (the "Earn Up Amount") equal to the amount, if any, by which
(i) the sum of the Class A Amount and the Class B Amount exceeds (ii)
the Warrant Transfer Amount; provided, that in no event shall the Earn
Up Amount exceed $9,400,000.
(b) The "Class A Amount" means a dollar amount equal to the
product of (i) the Value (not to exceed $1.50) less $1.25, multiplied
by (ii) 9,600,000; provided, that in no event shall the Class A Amount
be greater than $2,400,000; and if the Class A Amount is zero or a
negative number, the Class A Amount shall be deemed to be zero.
(c) The "Class B Amount" means a dollar amount equal to the
product of (i) the Value (not to exceed $1.25) less $0.521, multiplied
by (ii) 9,600,000; provided, that in no event shall the Class B Amount
be greater than $7,000,000; and if the Class B Amount is zero or a
negative number, the Class B Amount shall be deemed to be zero.
(d) The "Warrant Transfer Amount" means a dollar amount equal to
the greatest of (i) the product of (x) $3.50 multiplied by (y) the
aggregate number of Class A Warrants and Class B Warrants Transferred
by Forseti before the Payment Date; (ii) the aggregate gross proceeds
that Forseti has received or is entitled to receive from the Transfer
of all of the Class A Warrants and Class B Warrants Transferred by
Forseti before the Payment Date; and (iii) the difference between the
average daily bid price of the Company's Common Stock for the 21-day
period ending on the Election Date less the Exercise Price, multiplied
by the number of Class A Warrants and the Class B Warrants Transferred
by Forseti before the Payment Date.
(e) The "Value" means the product of the Price, multiplied by
0.60; provided, that if (i) the Common Stock is quoted on The Nasdaq
National Market at the Election Date and (ii) the average daily
trading volume of the Company's shares of Common Stock for the 21-day
period ending on the Election Date is at least 50,000 shares per day
(excluding trading of shares in any accounts controlled by the Company
or Forseti or their respective Affiliates, and provided, that if on
any of the 21 days the trading volume is greater than 300,000 shares,
then only 300,000 shares on such days may be used in calculating the
average), then Value means the product of the Price, multiplied by
0.75.
(f) The Company represents and warrants to JEDI that the
definitions of the terms "Price" and "Value" in the Forseti Earn Up
Agreement are identical to the definitions of such terms in this
Agreement.
-6-
<PAGE> 7
3.0 LIMITATION ON EARN UP AMOUNT
The Earn Up Amount shall in no event exceed the amount defined in the
Forseti Purchase Agreement as the "Earn Up Amount."
4.0 MEDIATION.
Any controversy, dispute or claim arising out of or relating to this
Agreement (a "Dispute") shall be submitted to non-binding mediation upon the
request of the Company or Forseti on the following terms. Upon the request of
either party, a neutral mediator acceptable to both parties (the "Mediator")
shall be appointed within 15 days. The Mediator shall attempt through
negotiations in any manner deemed reasonably appropriate by the Mediator, in
which the parties shall participate, to resolve the Dispute. The Mediator
shall be compensated at a rate agreeable to the Company, Forseti and the
Mediator, and each of the Company and Forseti shall pay its pro rata share of
such compensation and other expenses of the mediation.
5.0 ARBITRATION.
In the event that mediation of a Dispute has not commenced within 15
days after a request for mediation is submitted or is terminated without
resolution under Section 5.0, any controversy or claim arising out of or
relating to this Agreement, including the right to or amount of indemnity,
shall be settled by arbitration in accordance with the Commercial Arbitration
Rules of the AAA by three (3) arbitrators. Each of Forseti and the Company
shall appoint one arbitrator, who shall be an impartial person. If a party
fails to appoint an arbitrator within thirty (30) days from the date a Demand
to Arbitrate was made under Rule 6, the AAA shall make the appointment of the
arbitrator. The two (2) arbitrators thus appointed shall appoint the third
arbitrator, who shall be an impartial person. If said two (2) arbitrators fail
to appoint the third arbitrator within sixty (60) days from the date a Demand
to Arbitrate was made under Rule 6, the AAA shall make the appointment of the
third arbitrator, who shall be an impartial person. Should any of the
arbitrators appointed die, resign, refuse or become unable to act before a
decision is given, the vacancy shall be filled by the method set forth in this
clause for the original appointment. The arbitration shall be held in Dallas,
Texas and shall be conducted in the English language. A decision by the
arbitrators shall be final and binding on all the parties. The arbitrators
shall execute and deliver to the respective parties the arbitration panel's
decision in writing. Judgment upon the award, if any, rendered by the
arbitrators (which must be expressed in United States Dollars) may be entered
in any court having jurisdiction thereof. In any award, the arbitrators shall
assess the arbitration costs and expenses, including, without limitation,
attorneys fees of the parties, in a manner deemed equitable by the arbitrators,
taking into account the arbitration decision. Notwithstanding anything to the
contrary in this Agreement, if a Dispute involves the determination of Price,
the Price, as determined by arbitration under this Section 5, shall not (i) (a)
exceed the higher or Price(1) and Price(2), or (b) be lower than the lower of
Price(1) and Price(2), or (ii) exceed the Price as determined under the Forseti
Earn Up Agreement, including a Price as determined by arbitration under the
provisions of the Forseti Earn Up Agreement.
-7-
<PAGE> 8
6.0 MISCELLANEOUS
(a) Governing Law. This Agreement shall be governed by the
substantive laws of the State of Texas.
(b) Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable, such provision shall be
fully severable.
(c) Entirety and Amendments. This Agreement embodies the entire
agreement and understanding relating to the subject matter hereof,
supersedes all prior understandings between the parties relating to
the subject matter hereof, and may be amended only by an instrument in
writing executed by the Company and JEDI.
(d) Parties Bound. This Agreement shall be binding upon and inure
to the benefit of the Company and JEDI, and their respective
successors and permitted assigns. Neither the Company nor JEDI may
assign its rights or delegate its obligations hereunder (whether
voluntarily, involuntarily, or by operation of law) without the prior
written consent of the other party.
(e) Notices. Unless otherwise specified, whenever this Agreement
requires or permits any consent, approval, notice, request, or demand
from one party to another, that communication 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 Agreement, the address (and
telecopy number) for the Company and JEDI are:
If to JEDI: Joint Energy Development Investments
Limited Partnership
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Donna Lowry - Director, 28th Floor
Telecopier: (713) 646-3602
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
-8-
<PAGE> 9
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
Facsimile: (214) 651-5940
(f) Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and will not affect in any
way the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
(h) Termination. This Agreement shall terminate automatically,
and JEDI shall have no obligation to pay any Earn Up Amount, (a) in
the event the "Election Date" under the Forseti Earn Up Agreement is
after September 30, 1998 or the "Payment Date" under the Forseti Earn
Up Agreement is after October 15, 1998, (b) upon the Transfer of any
Warrants in violation of the restrictions on Transfer of Warrants
under the Forseti Purchase Agreement, (c) upon the election by Forseti
to retain the Warrants under Section 2(a)(ii) of the Forseti Earn Up
Agreement, (d) upon the Transfer by Forseti of all of the Warrants,
(e) upon the Transfer of any ownership interest in Forseti or any
entity controlling Forseti where the purpose of the transfer is to
realize or receive cash, securities or any other property as
consideration for the Warrants without transferring the Warrants, (f)
in the event that, on the Election Date or the Payment Date, the
individual who, as of the date hereof owned, directly or indirectly,
all of the Forseti Interests does not own, directly or indirectly, all
of the Forseti Interests, or (g) the termination of the Forseti Earn
Up Agreement for any reason.
(i) Currency. All dollar amounts in this Agreement shall mean
United States dollars.
-9-
<PAGE> 10
IN WITNESS WHEREOF, JEDI and the Company have executed this Agreement
as of the day and year first stated above.
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its General
Partner
By: /s/ Steven M. Emshoff
----------------------------------------------
Steven M. Emshoff
Agent and Attorney-in-Fact
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
-10-
<PAGE> 11
EXHIBIT A
FORSETI EARN UP AGREEMENT
[See Exhibit 1.12 to
this Current
Report on Form 8-K]
-11-
<PAGE> 1
EXHIBIT 1.8
- --------------------------------------------------------------------------------
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> 2
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
-2-
<PAGE> 3
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.
-3-
<PAGE> 4
(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
-4-
<PAGE> 5
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 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.
-5-
<PAGE> 6
(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 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
-6-
<PAGE> 7
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.
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 communication 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.
-7-
<PAGE> 8
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry - Director, 28th Floor
Facsimile: (713) 646-3602
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> 9
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: By: /s/ Edward J. Munden
-------------------- ---------------------------------
Edward J. Munden
President and Chief Executive
Officer
and
Attest: By: /s/ Robert P. Lindsay
-------------------- ----------------------------------
Robert P. Lindsay
Chief Operating Officer
-9-
<PAGE> 10
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: , .
-------------------- -----
-10-
<PAGE> 11
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-
<PAGE> 1
EXHIBIT 1.9
================================================================================
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 (the "Holder"), 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), a total of 409,839 shares (as such number of shares may
be adjusted pursuant to the terms hereof, the "Warrant Shares") of Common
Stock, par value $.0015 per share, of the Company, at a price per share equal
to the Exercise Price (as defined below). This Warrant is issued to the Holder
(together with such other warrants as may be issued in exchange, transfer or
replacement of this Warrant, the "Warrants") pursuant to the Securities
Purchase Agreement (as
<PAGE> 2
defined below) and entitles the Holder to purchase the Warrant Shares and to
exercise the other rights, powers and privileges hereinafter provided.
Section 1. Definitions. The following terms, as used herein, have
the following respective meanings:
"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.
"Exercise Period" means the period of time between the Date of Issuance
and 5:00 p.m. (New York City time) on the Expiration Date.
"Exercise Price" means an amount, per share, equal to $ $1.85. The
Exercise Price shall be subject to adjustment, as set forth in Section 4.
"Expiration Date" means May 6, 1998.
"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 and the Holder, as such
agreement shall be modified, amended and supplemented and in effect from time
to time.
"Value" means, as of any date of determination, with respect to the
Common Stock, $3.50 per share of Common Stock.
"Warrants" is defined in the introductory paragraph of this Warrant.
"Warrant Shares" is defined in the introductory paragraph of this
Warrant.
- 2 -
<PAGE> 3
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. 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. 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.
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 Date of
Issuance as provided in this Section 4(a). In case the
Company shall at any time after the Date of Issuance (i)
pay a dividend of shares of Common Stock
- 3 -
<PAGE> 4
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 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
- 4 -
<PAGE> 5
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 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
- 5 -
<PAGE> 6
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.
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.
- 6 -
<PAGE> 7
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 communication 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
- 7 -
<PAGE> 8
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> 9
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 I. Benn By: /s/ Edward J. Munden
-------------------- ---------------------------------
Edward J. Munden
President and Chief Executive
Officer
and
Attest: /s/ Bruce I. Benn By: /s/ Robert P. Lindsay
-------------------- ----------------------------------
Robert P. Lindsay
Chief Operating Officer
- 9 -
<PAGE> 10
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: , .
-------------------- -----
- 10 -
<PAGE> 11
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 -
<PAGE> 1
EXHIBIT 1.10
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 6, 1997
BY AND BETWEEN
QUEEN SAND RESOURCES, INC.
AND
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED
PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<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> 3
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 1.1. 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).
Section 1.2. Registrable Securities. Any
Registrable Security will cease to be a Registrable Security when (i) a
Registration Statement covering such Registrable Security has been
<PAGE> 4
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 2.1. 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 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
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<PAGE> 5
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 2.2. 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 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
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<PAGE> 6
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 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
-4-
<PAGE> 7
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 2.3. 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;
(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
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<PAGE> 8
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 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;
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<PAGE> 9
(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 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
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<PAGE> 10
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 2.4. 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 2.5. 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 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
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<PAGE> 11
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 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
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<PAGE> 12
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 3.1. 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 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 3.2. 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 3.3. Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts,
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<PAGE> 13
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 3.4. Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 3.5. Governing Law. The laws of the State of
Texas shall govern this Agreement without regard to principles of conflict of
laws.
Section 3.6. 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 3.7. 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 Documents supersede
all prior agreements and understandings between the parties with respect to
such subject matter.
Section 3.8. 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 3.9. 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
-11-
<PAGE> 14
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.
-12-
<PAGE> 15
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
-13-
<PAGE> 1
EXHIBIT 1.11
May 6, 1997
Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, L.B. #31
Dallas, Texas 75219-4398
Attention: Edward J. Munden
Gentlemen:
This letter agreement (the "Agreement") sets forth the terms and conditions
pursuant to which Queen Sand Resources, Inc., a Delaware corporation (the
"Company"), will retain ECT Securities Corp., a Delaware corporation ("ECT"),
to act as the Company's advisor.
The Company and ECT agree as follows:
1. Retention of Advisor; Scope of Services.
a. Subject to the terms and conditions set forth herein, the
Company hereby retains ECT to act as an advisor to the Company during
the Agreement Period (as defined in paragraph 3 below).
b. As advisor to the Company, ECT will, from time to time, as
requested by the Company, provide consultation, assistance and advice
to the Company with respect to its operations and properties.
c. The parties hereto acknowledge that (i) ECT is not regularly
engaged in the business of providing advisory services and personnel
and that the services to be performed by ECT hereunder are provided as
an incident to ECT's relationship with Enron Capital Management
Limited Partnership, the General Partner of Joint Energy Development
Investments Limited Partnership ("JEDI") and JEDI's activities as an
owner of equity securities of the Company, (ii) the fees to be paid to
ECT hereunder were established at an amount which is believed to be
approximately equal to the amount of indirect costs and expenses ECT
will incur in providing such services, (iii) ECT is not an "investment
adviser," within the meaning of the Investment Advisers Act of 1940,
as amended, or applicable state laws, or a ''broker" or "dealer" under
the Securities Exchange Act of 1934, as amended, or subject to
regulation
<PAGE> 2
Queen Sand Resources, Inc.
May 6, 1997
Page 2
under the Commodity Futures Trading Act or comparable state laws, (iv)
the nature of the services to be provided by ECT under this Agreement
do not include those of an "investment advisor" (i.e. providing advice
as to the value of securities or the advisability of investing in,
purchasing or selling securities), or those of a "broker" or "dealer"
(i.e. effecting transactions in securities for the account of the
Company or others), and (v) it is specifically intended by the parties
hereto that ECT's activities hereunder not subject ECT to any
regulation or registration under federal or state laws.
d. The parties hereto acknowledge and agree that upon reasonable
request by the Company, ECT will, subject to the availability of such
personnel, make available such of its employees, as ECT may determine
may reasonably be necessary for ECT's performance of its services
hereunder. The parties further acknowledge that unless and until ECT
provides notice to the contrary, all decisions with respect to
staffing, scheduling and allocating ECT's resources for purposes of
this Agreement will be coordinated on behalf of ECT by and any request
by the Company for the performance of services hereunder shall be
directed to W. Craig Childers.
2. Agreement Period and Termination.
a. Unless earlier terminated under subparagraph (b), ECT shall
act as the Company's advisor under this Agreement, effective as of the
date hereof (the "Effective Date") and continuing until the earlier of
(a) the fifth anniversary of the date hereof and (b) such time as JEDI
or its affiliates own less than 10% of the capital stock of the
Company entitled to vote generally in the election of directors. This
Agreement may be terminated effective as of the end of any calendar
quarter of the Company if ECT provides written notice of its election
to terminate the Agreement to the Company not less than 30 days before
the date on which such termination is to be effective.
b. Upon termination of this Agreement, neither party will have
any further obligation under this Agreement, except for (i) the
Company's obligation to pay to ECT the fees then due pursuant to
Paragraph 3, which shall continue after such termination until such
amounts are paid in full, and (ii) the Company's or ECT's obligation
to provide the indemnities contained in Paragraph 4.
3. Advisement Fee. The Company shall pay to ECT a fee of
$100,000 concurrently with the execution of this Agreement. In addition, ECT
shall be entitled to receive quarterly fees for its services provided during
the period from the Effective Date of this Agreement until the date of its
termination pursuant to Section 2 (the "Agreement
<PAGE> 3
Queen Sand Resources, Inc.
May 6, 1997
Page 3
Period"), payable as follows: $25,000 on each March 31, June 30, September 30
and December 31 of each year during the term of this Agreement in arrears,
beginning on September 30, 1997.
4. Indemnification. In consideration of the services performed
and to be performed by ECT for the Company, and for other good and valuable
consideration, the Company and ECT hereby agree as follows:
a. The Company shall indemnify and hold harmless ECT, its
affiliates and affiliated entities, each of its partners, officers,
employees, and agents and each person, if any, who "controls" ECT
(within the meaning of the federal securities laws) (collectively the
"Indemnified Parties" and individually, an "Indemnified Party") from
and against any and all actions or claims and any and all losses,
claims, damages, liabilities, costs or expenses (including, without
limitation, reasonable attorneys' fees and any legal or other expenses
in giving testimony or furnishing documents in response to a subpoena
or otherwise or the costs of investigating, preparing or defending any
action or claim, whether or not in connection with any action or
litigation in which any Indemnified Party is a party), joint or
several, to which any Indemnified Party may become subject, including
but not limited to any liability under the Securities Act of 1933 or
any other federal or state securities law or otherwise as and when
incurred, directly or indirectly, caused by, relating to, based upon
or arising out of any matter related to this Agreement, including,
without limitation, any act or omission by ECT in connection with its
role as advisor and its acceptance of or the performance or
non-performance of its obligations under this Agreement.
b. The indemnity provided for in subparagraph (a) above shall
cover any loss, claim, damage, liability, cost or expense incurred by
an Indemnified Person REGARDLESS OF THE ORDINARY NEGLIGENCE OF SUCH
INDEMNIFIED PERSON, but shall not cover any loss, claim, damage,
liability, cost or expense to the extent it is found in a final
judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted from an Indemnified Party's gross negligence
or willful misconduct.
c. The indemnity provided for in subparagraph (a) shall be in
addition to any liability that the Company may otherwise have to the
Indemnified Parties and shall be subject to the following:
(i) Promptly after receipt by an Indemnified Party under
subparagraph (a) above of notice of the commencement of any
action, proceeding,
<PAGE> 4
Queen Sand Resources, Inc.
May 6, 1997
Page 4
investigation or other event with respect to which any
Indemnified Party demands indemnification hereunder, such
Indemnified Party shall, if a claim in respect thereof is to
be made against the Company, notify the Company in writing of
the commencement thereof, provided that the failure to so
notify the Company shall not relieve it from any liability
that it may have to any Indemnified Party, except to the
extent the Company is prejudiced by such failure.
(ii) Notwithstanding anything expressed or implied herein
to the contrary, the indemnity provided for herein shall cover
the amount of any settlements entered into in connection with
any claim for which an Indemnified Party may be indemnified
hereunder, if and only if such settlement is consented to by
the Company, which consent will not be unreasonably withheld.
(iii) No settlement binding on an Indemnified Party may be
made without the consent of such Indemnified Party (which
consent shall not be unreasonably withheld).
(iv) If the claim for indemnification arises out of a
claim for damages by a person other than an Indemnified Party,
the Company, after giving notice to the Indemnified Party, may
undertake to defend or settle such claim for damages and may
employ counsel for such purpose. The Indemnified Party, at
its own expense, shall have the right to employ separate
counsel with respect to such claim and to participate in, but
not control, such settlement or defense; provided that, if the
Company is also a defendant in respect of any such claim and a
potential conflict exists between the interests of the Company
and those of an Indemnified Party or if the Company does not
elect to undertake the settlement or defense of such claim,
the Indemnified Parties shall, at the expense of the Company,
have the right to employ not more than one counsel to
represent the Indemnified Parties with respect to such claim
and the Indemnified Parties may control any settlement or
defense applicable to the claims brought against such
Indemnified Parties.
(v) Expenses and other costs incurred by an Indemnified
Party in connection with any suit, action or other proceeding
relating to this Agreement shall be advanced by the Company to
such Indemnified Party prior to any final determination of
whether an Indemnified Party is entitled to be indemnified for
such costs and expenses hereunder, if the Indemnified Party
provides to the Company an undertaking to return any amounts
so
<PAGE> 5
Queen Sand Resources, Inc.
May 6, 1997
Page 5
received to the extent that it is ultimately determined that
he was not entitled to be indemnified for such costs and
expenses hereunder.
(vii) The Company agrees that the Indemnified Parties shall
not have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Company for or in
connection with any matter related to this Agreement, except
for liabilities or expenses that are found in a final judgment
by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from ECT or
such other Indemnified Party's gross negligence or willful
misconduct.
d. If it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) in a proceeding in which
a claim for indemnification has been made by an Indemnified Party,
that the Company has sustained any loss, claim, damage, liability,
cost or expense resulting directly and exclusively from ECT's gross
negligence or willful misconduct in connection with the performance or
non-performance by ECT of its obligations under this Agreement, then
ECT shall indemnify and hold harmless the Company for the amount of
any such loss, claim, damage, liability, costs or expense so
determined to have been sustained by the Company. Notwithstanding any
provision of this Agreement to the contrary, in no event will the
liability of ECT exceed the amount of fees paid to ECT by the Company
pursuant to the terms hereof.
4. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS
APPLICABLE TO CONTRACTS MADE AND TO BE FULLY PERFORMED THEREIN.
5. Successors and Assigns. The benefits of this Agreement shall
inure to the parties hereto, their respective successors and permitted assigns,
and to the indemnified parties hereunder and their successors and
representatives, and the obligations and liabilities assumed in this Agreement
by the parties hereto shall be binding upon their respective successors and
assigns. This Agreement may not be assigned by any party to an unaffiliated
party without the express written consent of the other party hereto.
6. Notices. All communications under this Agreement shall be in
writing and shall be delivered personally or sent by personal delivery,
overnight courier service or telecopy (confirmed by overnight courier service)
as follows:
<PAGE> 6
Queen Sand Resources, Inc.
May 6, 1997
Page 6
If to ECT:
ECT Securities Corp.
1400 Smith Street
Houston, Texas 77002
Telecopy Number: (713) 646-3750
Attention: W. Craig Childers
If to the Company:
Queen Sand Resources, Inc.
3500 Oak Lawn
Suite 380, L.B. #31
Dallas, Texas 75219-4398
Attention: Robert P. Lindsay
Telecopier: (214) 521-9960
and
Queen Sand Resources, Inc.
60 Queen Street
Suite 1400
Ottawa, Canada
K1P 5Y7
Attention: Edward J. Munden
Telecopier: (613) 230-6055
with a copy to:
Haynes and Boone, L.L.P.
901 Main Street
Suite 3100
Dallas, Texas 75202
Attention: William L. Boeing
Telecopier: (214) 651-5940
Either party may change its address or telecopy number set forth above
by giving the other party notice of such change in accordance with the
provisions of this Paragraph 6. A notice shall be deemed given, if by personal
delivery, on the date of such delivery to such
<PAGE> 7
Queen Sand Resources, Inc.
May 6, 1997
Page 7
address, if by overnight courier service, when delivered, or if by telecopy, on
the date of receipt of the transmission of such notice at such telecopy number.
7. Nature of Relationship. The parties hereto intend that ECT's
relationship to the Company and the relationship of each employee or agent of
ECT to the Company shall be that of an independent contractor. Nothing
contained in this Agreement shall constitute or be construed to be or create a
partnership or joint venture between ECT and the Company or their respective
successors or assigns. Neither ECT nor any partner, employee or agent of ECT
shall ever be considered to be an employee of the Company.
8. Captions. The Paragraph titles herein are for reference
purposes only and do not control or affect the meaning or interpretation of any
term or provision hereof.
9. Amendments. No alteration, amendment, change or addition
hereto shall be binding or effective unless the same is set forth in writing
signed by a duly authorized representative of each party.
10. Partial Invalidity. If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision hereof is invalid or unenforceable, (i) the remaining terms
and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision.
11. Survival. All representations, warranties and agreements
contained herein, or contained in certificates submitted pursuant to this
Agreement, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, and shall survive
the execution and delivery hereof.
12. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties and supersedes any and all prior
agreements, arrangements and understandings relating to matters provided for
herein.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall be considered one and the same agreement.
<PAGE> 8
Queen Sand Resources, Inc.
May 6, 1997
Page 8
If this Agreement accurately reflects our understanding, please sign
and return a counterpart to the undersigned.
Very truly yours,
ECT SECURITIES CORP.
By: /s/ Steven M. Emshoff
--------------------------------------
Name: Steven M. Emshoff
------------------------------------
Title:
-----------------------------------
ACCEPTED AND AGREED TO this 6th day of May, 1997:
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
<PAGE> 1
EXHIBIT 1.12
EARN UP AGREEMENT
THIS EARN UP AGREEMENT (this "Agreement") is executed as of the
6th day of May, 1997 between Queen Sand Resources, Inc., a Delaware
corporation (the "Company"), and Forseti Investments Ltd., a Barbados
corporation ("Forseti").
WHEREAS, the Company has entered into a Securities Purchase
Agreement (defined below) with Forseti pursuant to which the Company is
purchasing 9,600,000 shares of Common Stock (defined below) from Forseti
for (i) $5,000,000 cash; (ii) the Class A Warrants (defined below); (iii)
the Class B Warrants (defined below); and (iv) this Agreement;
WHEREAS, the Company has entered into the JEDI Purchase Agreement
(defined below) with JEDI (defined below) pursuant to which the Company
has issued shares of the Company's Series A Participating Convertible
Preferred Stock, par value $0.01 per share, for (i) $5 million cash; and
(ii) the JEDI Earn Up Agreement (defined below);
NOW, THEREFORE, in consideration of these premises, the agreements
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Forseti and the Company
agree as follows:
Section 1. DEFINITIONS
"AAA" means the American Arbitration Association, or any successor
organization.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control," when used with respect to any Person, means
the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of, or rights,
warrants or options to purchase, corporate stock or any other equity
interest (however designated) of or in such Person.
"Capitalized Lease Obligation" means the amount of the liability
under any capital lease that, in accordance with GAAP, is required to be
capitalized and reflected as a liability on the consolidated balance sheet
of the Company and its Subsidiaries.
1
<PAGE> 2
"Class A Amount" is defined in Section 2(c).
"Class B Amount" is defined in Section 2(d).
"Class A Warrants" means the Class A Common Stock Purchase
Warrants to purchase 1,000,000 shares of Common Stock, substantially in
the form of Exhibit A to this Agreement.
"Class B Warrants" means the Class B Common Stock Purchase
Warrants to purchase 2,000,000 shares of Common Stock, substantially in
the form of Exhibit B to this Agreement.
"Common Stock" means the common stock, par value $.0015 per share,
of the Company.
"Consolidated Adjusted Net Income" means the consolidated net
income (or loss) of the Company and its Subsidiaries for the fiscal year
ending June 30, 1998 as determined in accordance with GAAP, adjusted by
excluding, to the extent included in consolidated net income, (a) net
after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions, (c) the net
income (or net loss) of any Person (other than the Company or any of its
Subsidiaries) in which the Company or any of its Subsidiaries has an
ownership interest, except to the extent of the amount of dividends or
other distributions actually paid to the Company or its Subsidiaries in
cash by such other Person during such period, and (d) net income (or net
loss) of any Person combined with the Company or any of its Subsidiaries
on a "pooling of interests" basis attributable to any period prior to the
date of combination.
"Consolidated Interest Expense" means the amount which, in
conformity with GAAP, is set forth opposite the caption "interest expense"
(or any like caption) on the audited consolidated statement of operations
of the Company and its Subsidiaries for the fiscal year ended June 30,
1998.
"Consolidated Net Working Capital" means (i) the amount which, in
conformity with GAAP, is set forth opposite the caption "total current
assets" (or any like caption) on the audited consolidated balance sheet of
the Company and its Subsidiaries as of June 30, 1998 less (ii) the amount
which, in conformity with GAAP, is set forth opposite the caption "total
current liabilities" (or any like caption) on the audited consolidated
balance sheet of the Company and its Subsidiaries as of June 30, 1998.
"Consolidated Non-cash Charges" means the amount which, in
conformity with GAAP, is set forth opposite the caption "depreciation,
depletion and amortization" (or any like caption) on the audited
consolidated statement of operations of the Company and its Subsidiaries
for the fiscal year ended June 30, 1998.
2
<PAGE> 3
"Consolidated Tax Expense" means the amount which, in conformity
with GAAP, is set forth opposite the caption "income tax expense" (or any
like caption) on the audited consolidated statement of operations of the
Company and its Subsidiaries for the fiscal year ended June 30, 1998.
"Dispute" is defined in Section 6.
"EBITDA" means, without duplication, for the fiscal year ended
June 30, 1998, the sum of (i) Consolidated Adjusted Net Income and (ii) to
the extent deducted in computing Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Tax Expense and Consolidated
Non-cash Charges.
"Earn Up Amount" is defined in Section 2(b).
"Election Date" means the later of (i) September 30, 1998 and (ii)
the date that is 14 days after the date that the Company notifies Forseti
to request Forseti's election under Section 2.
"Exercise Price" means $2.50.
"Forseti Interests" means all of the outstanding ownership
interests in Forseti and each entity that controls or owns an ownership
interest in Forseti.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, in effect
from time to time.
"Guaranteed Debt" means, without duplication, all Indebtedness of
any other Person guaranteed directly or indirectly in any manner by the
Company or any of its Subsidiaries, or in effect guaranteed directly or
indirectly by the Company or any of its Subsidiaries through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds for
the payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services to be acquired by
such debtor irrespective of whether such property is received or such
services are rendered), (iv) to maintain working capital or equity capital
of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit.
"Indebtedness" means, as of June 30, 1998, without duplication,
(i) all indebtedness of the Company or any of its Subsidiaries for
borrowed money or for the deferred purchase price of property or services,
excluding any trade accounts payable and other accrued current liabilities
incurred in the ordinary course of business, (ii) all obligations of the
Company or any of its Subsidiaries evidenced by bonds,
3
<PAGE> 4
notes, debentures or other similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by the Company or any of its
Subsidiaries (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade accounts payable arising in
the ordinary course of business, (iv) all Capitalized Lease Obligations,
(v) all indebtedness referred to in (but not excluded from) clause (i),
(ii), (iii) or (iv) above of other Persons, the payment of which is
secured by (or for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract rights)
owned by the Company or any of its Subsidiaries, even though such Person
has not assumed or become liable for the payment of such indebtedness,
(vi) all Guaranteed Debt, (vii) all Redeemable Capital Stock valued at its
maximum fixed repurchase price plus accrued and unpaid dividends, and
(viii) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in
clauses (i) through (vii) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of
such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Agreement, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such
fair market value to be determined in good faith by the Board of Directors
of the issuer of such Redeemable Capital Stock.
"JEDI" means Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership.
"JEDI Earn Up Agreement" means the Earn Up Agreement entered into
between the Company and JEDI substantially in the form of Exhibit C to
this Agreement.
"JEDI Purchase Agreement" means the Securities Purchase Agreement
dated as of March 27, 1997 between the Company and JEDI.
"Mediator" is defined in Section 6.
"Outstanding Shares" means, as of June 30, 1998, the issued and
outstanding shares of Common Stock, assuming the conversion of all shares
of preferred stock of the Company, that are convertible into shares of
Common Stock, and excluding any shares of Common Stock held in treasury by
the Company or held by any wholly-owned Subsidiary of the Company.
"Payment Date" means the later of (i) October 15, 1998 or (ii) the
date that is 15 days after the Election Date.
4
<PAGE> 5
"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.
"Price" means, if:
-----
|Price1 - Price2|
Less Than or Equal to
0.1, then (Price1 + Price2)/2;
----------------------
Greater of Price1 or Price2
provided, that if: |Price1 - Price2|
Greater Than 0.1, then the
Company and Forseti
----------------------
Greater of Price1 or Price2
shall negotiate the Price; provided, further, that if the Price has not
been agreed upon within 5 business days after the determination of Price1
and Price2, then the determination of the Price shall be submitted to
nonbinding mediation and arbitration in accordance with this Agreement.
Notwithstanding anything to the contrary in this Agreement, under no
circumstances shall the Price exceed the higher of Price1 and Price2 or be
less than the lower of Price1 and Price2.
(1.1 * SEC PV10) - Indebtedness + Consolidated Net Working
Capital
"Price1" =
------ --------------------------------------------------------------
Outstanding Shares
(6.0 * EBITDA) - Indebtedness + Consolidated Net Working
Capital
"Price2" =
------ --------------------------------------------------------------
Outstanding Shares
"Redeemable Capital Stock" means any Capital Stock of the Company
or any of its Subsidiaries that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or otherwise, (i)
is, or upon the happening of an event or passage of time would be,
required to be redeemed, or (ii) is, or upon the happening of an event or
passage of time would be, redeemable at the option of the holder thereof,
or (iii) is, or upon the happening of an event or passage of time would
be, convertible into or exchangeable for debt securities.
"SEC PV10" means the pre tax future net cash flows from proved oil
and gas reserves of the Company and its Subsidiaries at June 30, 1998,
computed using a discount factor of ten percent, as determined in
accordance with the rules, regulations and guidelines of the United States
Securities and Exchange Commission and reported in the reserve report
dated as of such date prepared in accordance with Section 6.11 of the JEDI
Purchase Agreement.
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<PAGE> 6
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated March 27, 1997 between the Company and Forseti.
"Statutory Declaration" means a statutory declaration by Forseti
that as of the Election Date and the Payment Date (i) the individual who,
as of the date hereof, owned all the Forseti Interests owns all of the
Forseti Interests, (ii) there are no encumbrances, pledges or other liens
on any equity interests in Forseti, and (iii) no other event under Section
8(h) has occurred.
"Subsidiary" of a Person means any corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company or business trust of which at the time of
determination such Person, directly and/or indirectly through one or more
other Persons, owns more than 50% of the voting interests.
"Transfer" of any property means any exercise, or any direct or
indirect sale, transfer, encumbrance, gift, donation, assignment, grant of
any interest, pledge, hypothecation or other disposition of such property
or any interest therein, whether voluntary or involuntary, including, but
not limited to, any transfer by operation of law, by court order, by
judicial process, or by foreclosure, levy, or attachment.
"Value" is defined in Section 2(f).
"Warrant Transfer Amount" is defined in Section 2(e).
"Warrants" means, collectively, the Class A Warrants and the Class
B Warrants.
2.0 FORSETI ELECTION; PAYMENT OF EARN UP AMOUNT
(a) On or before the Election Date, Forseti shall deliver
notice to the Company of its election to either (i) accept the
payment of the Earn Up Amount in accordance with the terms and
conditions of this Agreement (in which event the Warrants that
have not been Transferred by Forseti shall be delivered to the
Company pursuant to Section 2(b)); or (ii) retain the Warrants
that have not been Transferred by Forseti (in which event the
Company shall have no obligation to pay Forseti the Earn Up Amount
and the Company's obligations under this Agreement shall terminate
immediately). If Forseti fails to deliver notice to the Company
on or before the Election Date specifying the election in (i) or
(ii), then Forseti shall be deemed to have elected (i) above.
(b) In the event that Forseti elects, or is deemed to elect,
(i) above, then on or before the Payment Date, subject to the
limitations in Section 3 and only against delivery by Forseti to
the Company of (x) the Warrants and (y) the Statutory Declaration,
the Company shall pay Forseti an amount (the "Earn Up Amount")
equal to the amount, if any, by which (i) the sum of the Class A
6
<PAGE> 7
Amount and the Class B Amount exceeds (ii) the Warrant Transfer
Amount; provided, that in no event shall the Earn Up Amount exceed
$9,400,000.
(c) The "Class A Amount" means a dollar amount equal to the
product of (i) the Value (not to exceed $1.50) less $1.25,
multiplied by (ii) 9,600,000; provided, that in no event shall the
Class A Amount be greater than $2,400,000; and if the Class A
Amount is zero or a negative number, the Class A Amount shall be
deemed to be zero.
(d) The "Class B Amount" means a dollar amount equal to the
product of (i) the Value (not to exceed $1.25) less $0.521,
multiplied by (ii) 9,600,000; provided, that in no event shall the
Class B Amount be greater than $7,000,000; and if the Class B
Amount is zero or a negative number, the Class B Amount shall be
deemed to be zero.
(e) The "Warrant Transfer Amount" means a dollar amount equal
to the greatest of (i) the product of (x) $3.50 multiplied by (y)
the aggregate number of Class A Warrants and Class B Warrants
Transferred by Forseti before the Payment Date; (ii) the aggregate
gross proceeds that Forseti has received or is entitled to receive
from the Transfer of all of the Class A Warrants and Class B
Warrants Transferred by Forseti before the Payment Date; and (iii)
the difference between the average daily bid price of the
Company's shares of Common Stock for the 21-day period ending on
the Election Date less the Exercise Price, multiplied by the
number of Class A Warrants and the Class B Warrants Transferred by
Forseti before the Payment Date.
(f) The "Value" means the product of the Price, multiplied by
0.60; provided, that if (i) the Common Stock is quoted on The
Nasdaq National Market at the Election Date and (ii) the average
daily trading volume of the Company's shares of Common Stock for
the 21-day period ending on the Election Date is at least 50,000
shares per day (excluding trading of shares in any accounts
controlled by the Company or Forseti or their respective
Affiliates, and provided, that if on any of the 21 days the
trading volume is greater than 300,000 shares, then only 300,000
shares on such days may be used in calculating the average), then
Value means the product of the Price, multiplied by 0.75.
(g) The Company represents and warrants to Forseti that the
definitions of the terms "Price" and "Value" in the JEDI Earn Up
Agreement are identical to the definitions of such terms in this
Agreement.
3.0 LIMITATION ON PAYMENT
The Company shall be obligated to pay Forseti under this Agreement
only to the extent that the Company has received a like amount as payment
from JEDI under the JEDI Earn Up Agreement. If JEDI shall fail to make
payments due under
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<PAGE> 8
the JEDI Earn Up Agreement on the Election Date, then Company shall have
no obligation to pay Forseti under this Agreement until such time that
JEDI makes payment to the Company under the JEDI Earn Up Agreement, and
then only to the extent of payments made by JEDI under the JEDI Earn Up
Agreement.
4.0 SHARING OF EXCESS PROCEEDS
If the sum of (i) $5,000,000 and (ii) the aggregate amount
received by Forseti from the Transfer of Warrants, exceeds the sum of (x)
$14,400,000 plus (y) a dollar amount equal to the sum of the expenses of
the Company paid by Forseti pursuant to the Securities Purchase Agreement,
the reasonable out-of-pocket expenses up to a maximum of $50,000 incurred
by Forseti in connection with the Securities Purchase Agreement, and the
escrow agent fees incurred by Forseti under the Escrow Agreement among the
Company, Forseti and Comerica Bank-Texas the sum of subclauses (x) and (y)
being referred to as "Net Proceeds," then within 10 days of the date (the
"Excess Determination Date") the aggregate amount received by Forseti
exceeds the Net Proceeds, (x) Forseti shall deliver to the Company an
amount in cash or by wire transfer of immediately available funds equal to
75% of such amount received by Forseti in excess of the Net Proceeds, and
(y) Forseti shall spend the remaining 25% of such excess amount to
purchase from the Company, subject to applicable securities laws, Common
Stock at a price equal to the average of the Nasdaq bid price over 21
trading days ending on the Excess Determination Date.
5.0 OPTION
Subject to this Section 5, the Company hereby grants to Forseti an
option to purchase from the Company a number of shares of Common Stock
equal to the quotient of (x) the amount by which the Earn Up Amount
exceeds $7,000,000 and (y) $2.50 (as such number of shares may be adjusted
pursuant to this Section 5, the "Shares"), at a price per share equal to
$2.50 (as such price may be adjusted pursuant to this Section 5). The
option granted in this Section 5 is exerciseable in full or in part (i)
only from the date that the Earn Up Amount is paid by the Company to
Forseti through the fifth business day after the date of payment of the
Earn Up Amount and (ii) by written notice to the Company of such exercise,
which notice shall be accompanied by proper payment in cash or certified
or bank check. The option in this Section 5.0 is not transferable. The
number of Shares for which the option in this Section 5 may be exercised,
and the price at which such option may be exercised, are subject to
appropriate adjustment in the event that the Company (i) pays a dividend
of shares of Common Stock or makes a distribution in shares of Common
Stock), (ii) subdivides its outstanding shares of Common Stock into a
larger number of shares of Common Stock, (iii) combines its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or
(iv) issues 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). THE OPTION IN THIS SECTION 5 AND THE
SHARES OF COMMON STOCK ISSUABLE UPON
8
<PAGE> 9
EXERCISE OF THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR
STATE SECURITIES OR BLUE SKY LAWS OR APPLICABLE NON-UNITED STATES
SECURITIES LAWS.
6.0 MEDIATION.
Any controversy, dispute or claim arising out of or relating to
this Agreement (a "Dispute") shall be submitted to non-binding mediation
upon the request of the Company or Forseti on the following terms. Upon
the request of either party, a neutral mediator acceptable to both parties
(the "Mediator") shall be appointed within 15 days. The Mediator shall
attempt through negotiations in any manner deemed reasonably appropriate
by the Mediator, in which the parties shall participate, to resolve the
Dispute. The Mediator shall be compensated at a rate agreeable to the
Company, Forseti and the Mediator, and each of the Company and Forseti
shall pay its pro rata share of such compensation and other expenses of
the mediation.
7.0 ARBITRATION.
In the event that mediation of a Dispute has not commenced within
15 days after a request for mediation is submitted or is terminated
without resolution under Section 6.0, any controversy or claim arising out
of or relating to this Agreement, including the right to or amount of
indemnity, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the AAA by three (3) arbitrators. Each of
Forseti and the Company shall appoint one arbitrator, who shall be an
impartial person. If a party fails to appoint an arbitrator within thirty
(30) days from the date a Demand to Arbitrate was made under Rule 6, the
AAA shall make the appointment of the arbitrator. The two (2) arbitrators
thus appointed shall appoint the third arbitrator, who shall be an
impartial person. If said two (2) arbitrators fail to appoint the third
arbitrator within sixty (60) days from the date a Demand to Arbitrate was
made under Rule 6, the AAA shall make the appointment of the third
arbitrator, who shall be an impartial person. Should any of the
arbitrators appointed die, resign, refuse or become unable to act before a
decision is given, the vacancy shall be filled by the method set forth in
this clause for the original appointment. The arbitration shall be held
in Dallas, Texas and shall be conducted in the English language. A
decision by the arbitrators shall be final and binding on all the parties.
The arbitrators shall execute and deliver to the respective parties the
arbitration panel's decision in writing. Judgment upon the award, if any,
rendered by the arbitrators (which must be expressed in United States
Dollars) may be entered in any court having jurisdiction thereof. In any
award, the arbitrators shall assess the arbitration costs and expenses,
including, without limitation, attorneys fees of the parties, in a manner
deemed equitable by the arbitrators, taking into account the arbitration
decision. Notwithstanding anything to the contrary in this Agreement, if
a Dispute involves the determination of Price, the Price, as determined by
arbitration under this Section 7, shall not (i) (a) exceed the higher or
Price1 and Price2, or (b) be lower than the lower of Price1 and Price2,
(ii) exceed the Price as determined under the JEDI Earn Up Agreement,
including a Price as
9
<PAGE> 10
determined by arbitration under the provisions of the JEDI Earn Up
Agreement, or (iii) exceed the amount received by the Company from JEDI
pursuant to the JEDI Earn Up Agreement.
8.0 MISCELLANEOUS
(a) Governing Law; Choice of Forum; Consent to Service of
Process. This Agreement shall be governed by the substantive laws
of the State of Texas. Except as provided in Sections 6 and 7,
the parties hereto agree that any suit, action or proceeding
arising out of or relating to this Agreement or any agreement or
obligation delivered in connection with this Agreement or any
judgment entered by any court in respect thereof shall be brought
in the Courts of the State of Texas, County of Dallas or in the
United States District Court for the Northern District of Texas
and each such party hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action or
proceeding relating to this Agreement or any related agreement or
obligation. Forseti hereby submits to the jurisdiction of the
State of Texas and agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the
United States against Forseti may be made upon CT Corporation
System at its offices located at 350 North St. Paul Street,
Dallas, Texas 75201 (or any subsequent address of CT Corporation
System), and Forseti hereby irrevocably appoints CT Corporation
System at its offices located at 350 North St. Paul Street,
Dallas, Texas 75201 (or any subsequent address of CT Corporation
System) its true and lawful attorney-in-fact in their name, place
and stead to accept such service of any and all such writs,
process and summonses, and agree that the failure of CT
Corporation System to give to Forseti any notice of any such
service of process shall not impair or affect the validity of such
service or of any judgment based thereon. The Company shall send,
within 5 days after service of process under this subsection (a),
notice to Forseti in accordance with subsection (e) of any service
of process on CT Corporation System under this subsection (a).
Service of process on the Company may be made to the Company's
registered agent in Delaware, Corporation Trust Centre, 1209
Orange Street, in the City of Wilmington, County of New Castle.
Each party hereto hereby irrevocably waives any objection
that it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this
Agreement or any agreement or obligation delivered in connection
with this Agreement, brought in the Courts of the State of Texas,
County of Dallas or the United States District Court for the
Northern District of Texas, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
(b) Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable, such provision
shall be fully severable.
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<PAGE> 11
(c) Entirety and Amendments. This Agreement and that certain
Letter Agreement dated as of the date hereof between the Company
and the individual who owns directly or indirectly all of the
Forseti Interests embody the entire agreement and understanding
relating to the subject matter hereof and supersede all prior
understandings between the parties relating to the subject matter
hereof. This Agreement may be amended only by an instrument in
writing executed by the Company and Forseti.
(d) Parties Bound. This Agreement shall be binding upon and
inure to the benefit of the Company and Forseti, and their
respective successors and permitted assigns. Neither the Company
nor Forseti may assign its rights or delegate its obligations
hereunder (whether voluntarily, involuntarily, or by operation of
law) without the prior written consent of the other party.
(e) Notices. Unless otherwise specified, whenever this
Agreement requires or permits any consent, approval, notice,
request, or demand from one party to another, that communication
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 Agreement, the address (and telecopy number) for
the Company and Forseti are:
If to Forseti: Forseti Investments Ltd.
205-206 Dowell House
Bridgetown, Barbados
West Indies
Attn: Dennis Chandler
Facsimile: (246) 427-5667
With copies to: Faust Fresenius Heyne Scherzberg, attorneys
Paul-Ehrlich-Strasse 37-39
60596 Frankfurt-Am-Main
Attn: Christoph Heyne
Facsimile: (49) 6963009090
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
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<PAGE> 12
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
Facsimile: (214) 651-5940
(f) Section and Other Headings. The headings contained in
this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original and
all of which together will constitute one instrument.
(h) Termination. This Agreement shall terminate upon the
earlier of (i) the Transfer of any Warrants in violation of the
restrictions on Transfer of Warrants under the Securities Purchase
Agreement, (ii) the election by Forseti to retain the Warrants
under Section 2(a)(ii), (iii) the Transfer of all of the Warrants,
(iv) upon the Transfer of any ownership interest in Forseti or any
entity controlling Forseti where the purpose of the transfer is to
realize or receive cash, securities or any other property as
consideration for the Warrants without transferring the Warrants;
and (v) as of the Election Date or the Payment Date, the
individual who, as of the date hereof owned, directly or
indirectly, all of the Forseti Interests does not own, directly or
indirectly, all of the Forseti Interests. No termination of this
Agreement shall affect the validity of the Warrants.
(i) Currency. All dollar amounts in this Agreement shall
mean United States dollars.
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<PAGE> 13
IN WITNESS WHEREOF, Forseti and the Company have executed this
Agreement as of the day and year first stated above.
FORSETI:
FORSETI INVESTMENTS LTD.
By: /s/ Michael L. Fecher
------------------------------------
Name: Michael L. Fecher
Title: Officer
COMPANY:
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
<PAGE> 14
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE THEREOF (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES OR BLUE SKY
LAWS OR APPLICABLE NON-UNITED STATES SECURITIES LAWS, AND HAVE BEEN ISSUED
IN A MANNER INTENDED TO COMPLY WITH THE CONDITIONS CONTAINED IN REGULATION
S UNDER THE ACT. PRIOR TO MAY 6, 1998, NO OFFER, SALE, TRANSFER, PLEDGE
OR OTHER DISPOSITION (COLLECTIVELY, A "DISPOSAL") OR EXERCISE OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE MAY BE MADE (A) IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY "U.S. PERSON" (AS
DEFINED IN REGULATION S) UNLESS (i) REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (ii) QUEEN SAND RESOURCES,
INC. (THE "COMPANY") RECEIVES A WRITTEN OPINION OF UNITED STATES LEGAL
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE EFFECT THAT SUCH
DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS OR (B) OUTSIDE THE
UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON WHO IS NOT
A "U.S. PERSON" UNLESS PRIOR TO SUCH DISPOSAL (i) THE BENEFICIAL OWNER OF
SUCH SECURITIES AND THE PROPOSED TRANSFEREE SUBMIT CERTAIN CERTIFICATIONS
TO THE COMPANY (FORMS OF WHICH ARE AVAILABLE FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES) AND (ii) THE COMPANY RECEIVES THE LEGAL
OPINION DESCRIBED IN (A)(ii) ABOVE. THE SECURITIES ARE ALSO SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AS SET FORTH IN THIS WARRANT AND THE
SECURITIES PURCHASE AGREEMENT DATED AS OF MARCH 27, 1997, A COPY OF WHICH
IS AVAILABLE FOR INSPECTION AT ITS PRINCIPAL PLACE OF BUSINESS.
QUEEN SAND RESOURCES, INC.
Class A Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Queen Sand Resources, Inc.
No. A-1
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<PAGE> 15
FOR VALUE RECEIVED, QUEEN SAND RESOURCES, INC., a Delaware
corporation (the "Company"), hereby certifies that Forseti Investments
Ltd., a Barbados corporation (the "Holder"), 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), a
total of 1,000,000 shares (as such number of shares may be adjusted
pursuant to the terms hereof, the "Warrant Shares") of Common Stock, par
value $.0015 per share, of the Company, at a price per share equal to the
Exercise Price (as defined below). This Warrant is issued to the Holder
(together with such other warrants as may be issued in exchange, transfer
or replacement of this Warrant, the "Warrants") 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, all on the terms and conditions and pursuant to the
provisions set forth herein and in the Securities Purchase Agreement.
Section 1. Definitions. The following terms, as used
herein, have the following respective meanings:
"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 the
date hereof, between the Company and the Holder.
"Exercise Period" means the period of time between the Date of
Issuance and 5:00 p.m. (New York City time) on December 31, 1998,
provided, however, that any Warrants held by Forseti Investments Ltd. on
the Election Date (as defined in the Earn Up Agreement) shall expire on
the Election Date unless Forseti Investments Ltd. elects to retain the
Warrants pursuant to Section 2(a)(ii) of the Earn Up Agreement.
"Exercise Price" means an amount, per share, equal to $2.50 (U.S.
dollars). The Exercise Price shall be subject to adjustment, as set forth
in Section 4.
"Holder" means Forseti Investments Ltd. 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 and Forseti, as
such agreement shall be modified, amended and supplemented and in effect
from time to time.
"Value" means, as of any date of determination, with respect to
the Common Stock, $3.50 per share of Common Stock.
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<PAGE> 16
"Warrants" is defined in the introductory paragraph of this
Warrant.
"Warrant Shares" is defined in the introductory paragraph of this
Warrant.
Section 2. Exercise of Warrant; Cancellations of Warrant.
Subject to the Securities Purchase Agreement and the provisions of
Regulation S promulgated under the Securities Act of 1933, as amended,
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 11 (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 for the purchase of at
least 100,000 shares of Common Stock. 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. 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, subject to the
provisions of Section 7 of this Warrant and Article 8 of the Securities
Purchase Agreement. 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.
16
<PAGE> 17
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 Date of Issuance as provided in this Section 4(a). In case
the Company shall at any time after the Date of Issuance (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 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
17
<PAGE> 18
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 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
18
<PAGE> 19
(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.
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. Restrictions on Transfer. The Warrants and the
Warrant Shares shall not be transferable except upon the conditions in
this Warrant and specified in the Securities Purchase Agreement. The
Warrants may not be transferred, sold or otherwise disposed of except in
blocks of Warrants for the purchase of at least 100,000 shares of Common
Stock; provided, that if at the time of such transfer, sale or other
disposition, the Warrants owned by the Holder are for the purchase of less
than 100,000 shares of Common Stock, the Holder may sell, transfer or
otherwise dispose of all, but not less than all, of the Warrants. This
Warrant bears and the certificates for Warrant Shares will bear a legend
as specified in the Securities Purchase Agreement. The Holder by its
acceptance of this Warrant agrees to comply with and to be bound by all
of the provisions of the Securities Purchase Agreement.
Section 8. 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
19
<PAGE> 20
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 9. 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 10. 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 11. Notices. Unless otherwise specified, whenever
this Warrant requires or permits any consent, approval, notice, request,
or demand from one party to another, that communication 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: Forseti Investments Ltd.
205-206 Dowell House
Bridgetown, Barados
West Indies
Attn: Dennis Chandler
Facsimile: (246) 427-5667
With copies to: Faust Fresenius Heyne Scherzberg, attorneys
Paul-Ehrlich-Strasse 37-39
60596 Frankfurt-Am-Main
Attn: Christoph Heyne
Facsimile: (49) 6963009090
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
20
<PAGE> 21
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: William L. Boeing, Esq.
Facsimile: (214) 651-5940
Section 12. 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 13. Governing Law; Choice of Forum; Consent to
Service of Process. 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 CONTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS. The parties hereto agree that any suit, action or proceeding
arising out of or relating to this Warrant or any agreement or obligation
delivered in connection with this Warrant or any judgment entered by any
court in respect thereof shall be brought in the Courts of the State of
Texas, County of Dallas or in the United States District Court for the
Northern District of Texas and each such party hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding relating to this Warrant or any related agreement or
obligation. The Holder hereby submits to the jurisdiction of the State of
Texas and agrees that service of all writs, process and summonses in any
such suit, action or proceeding brought in the United States against the
Holder may be made upon CT Corporation System at its offices located at
350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address
of CT Corporation System), and the Holder hereby irrevocably appoints CT
Corporation System at its offices located at 350 North St. Paul Street,
Dallas, Texas 75201 (or any subsequent address of CT Corporation System)
its true and lawful attorney-in-fact in their name, place and stead to
accept such service of any and all such writs, process and summonses, and
agree that the failure of CT Corporation System to give to the Holder any
notice of any such service of process shall not impair or affect the
validity of such service or of any judgment based thereon. The Company
shall send, within 5 days after any service of process under this Section
13, notice to the Holder in accordance with Section 11 of any service of
process on CT Corporation System under this Section 13. Service of
process on the Company may be made to the Company's registered agent in
Delaware, Corporation Trust Centre, 1209 Orange Street, in the City of
Wilmington, County of New Castle.
Each party hereto hereby irrevocably waives any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Warrant or any agreement or
obligation delivered in connection with this Warrant, brought in the
Courts of the State of Texas, County of Dallas or the United States
District Court for the Northern District of Texas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
21
<PAGE> 22
Section 14. 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.
* * * * *
22
<PAGE> 23
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 I. Benn By:/s/ Edward J. Munden
-------------------------- --------------------------------
Name: Edward J. Munden
Title: President and
Chief Executive Officer
and
Attest: /s/ Bruce I. Benn By:/s/ Robert P. Lindsay
-------------------------- --------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
23
<PAGE> 24
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: , .
-------------------------- ------
24
<PAGE> 25
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.
25
<PAGE> 26
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE THEREOF (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES OR BLUE SKY
LAWS OR APPLICABLE NON-UNITED STATES SECURITIES LAWS, AND HAVE BEEN ISSUED
IN A MANNER INTENDED TO COMPLY WITH THE CONDITIONS CONTAINED IN REGULATION
S UNDER THE ACT. PRIOR TO MAY 6, 1998, NO OFFER, SALE, TRANSFER, PLEDGE
OR OTHER DISPOSITION (COLLECTIVELY, A "DISPOSAL") OR EXERCISE OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE MAY BE MADE (A) IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY "U.S. PERSON" (AS
DEFINED IN REGULATION S) UNLESS (i) REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (ii) QUEEN SAND RESOURCES,
INC. (THE "COMPANY") RECEIVES A WRITTEN OPINION OF UNITED STATES LEGAL
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE EFFECT THAT SUCH
DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS OR (B) OUTSIDE THE
UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON WHO IS NOT
A "U.S. PERSON" UNLESS PRIOR TO SUCH DISPOSAL (i) THE BENEFICIAL OWNER OF
SUCH SECURITIES AND THE PROPOSED TRANSFEREE SUBMIT CERTAIN CERTIFICATIONS
TO THE COMPANY (FORMS OF WHICH ARE AVAILABLE FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES) AND (ii) THE COMPANY RECEIVES THE LEGAL
OPINION DESCRIBED IN (A)(ii) ABOVE. THE SECURITIES ARE ALSO SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AS SET FORTH IN THIS WARRANT AND THE
SECURITIES PURCHASE AGREEMENT DATED AS OF MARCH 27, 1997, A COPY OF WHICH
IS AVAILABLE FOR INSPECTION AT ITS PRINCIPAL PLACE OF BUSINESS.
QUEEN SAND RESOURCES, INC.
Class B Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Queen Sand Resources, Inc.
No. B-1
FOR VALUE RECEIVED, QUEEN SAND RESOURCES, INC., a Delaware
corporation (the "Company"), hereby certifies that Forseti Investments
Ltd., a Barbados
26
<PAGE> 27
corporation (the "Holder"), 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), a total of 2,000,000
shares (as such number of shares may be adjusted pursuant to the terms
hereof, the "Warrant Shares") of Common Stock, par value $.0015 per share,
of the Company, at a price per share equal to the Exercise Price (as
defined below). This Warrant is issued to the Holder (together with such
other warrants as may be issued in exchange, transfer or replacement of
this Warrant, the "Warrants") 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, all on the terms and conditions and pursuant to the
provisions set forth herein and in the Securities Purchase Agreement.
Section 15. Definitions. The following terms, as used
herein, have the following respective meanings:
"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 the
date hereof, between the Company and the Holder.
"Exercise Period" means the period of time between the Date of
Issuance and 5:00 p.m. (New York City time) on December 31, 1998,
provided, however, that any Warrants held by Forseti Investments Ltd. on
the Election Date (as defined in the Earn Up Agreement) shall expire on
the Election Date unless Forseti Investments Ltd. elects to retain the
Warrants pursuant to Section 2(a)(ii) of the Earn Up Agreement.
"Exercise Price" means an amount, per share, equal to $2.50 (U.S.
dollars). The Exercise Price shall be subject to adjustment, as set forth
in Section 4.
"Holder" means Forseti Investments Ltd. 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 and Forseti, as
such agreement shall be modified, amended and supplemented and in effect
from time to time.
"Value" means, as of any date of determination, with respect to
the Common Stock, $3.50 per share of Common Stock.
"Warrants" is defined in the introductory paragraph of this
Warrant.
27
<PAGE> 28
"Warrant Shares" is defined in the introductory paragraph of this
Warrant.
Section 16. Exercise of Warrant; Cancellations of Warrant.
Subject to the Securities Purchase Agreement and the provisions of
Regulation S promulgated under the Securities Act of 1933, as amended,
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 11 (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 for the purchase of at
least 100,000 shares of Common Stock. 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 17. Exchange, Transfer, Assignment or Loss of
Warrant. 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, subject to the
provisions of Section 7 of this Warrant and Article 8 of the Securities
Purchase Agreement. 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.
Section 18. 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
28
<PAGE> 29
subject to adjustment from time to time on and after the Date of Issuance
as provided in this Section 4(a). In case the Company shall at any time
after the Date of Issuance (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 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,
29
<PAGE> 30
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 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 19. 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
30
<PAGE> 31
(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.
Section 20. 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 21. Restrictions on Transfer. The Warrants and the
Warrant Shares shall not be transferable except upon the conditions
specified in this Warrant and in the Securities Purchase Agreement. The
Warrants may not be transferred, sold or otherwise disposed of except in
blocks of Warrants for the purchase of at least 100,000 shares of Common
Stock; provided, that if at the time of such transfer, sale or other
disposition, the Warrants owned by the Holder are for the purchase of less
than 100,000 shares of Common Stock, the Holder may sell, transfer or
otherwise dispose of all, but not less than all, of the Warrants. This
Warrant bears and the certificates for Warrant Shares will bear a legend
as specified in the Securities Purchase Agreement. The Holder by its
acceptance of this Warrant agrees to comply with and to be bound by all
of the provisions of the Securities Purchase Agreement.
Section 22. 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.
31
<PAGE> 32
Section 23. 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 24. 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 25. Notices. Unless otherwise specified, whenever
this Warrant requires or permits any consent, approval, notice, request,
or demand from one party to another, that communication 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: Forseti Investments Ltd.
205-206 Dowell House
Bridgetown, Barbados
West Indies
Attn: Dennis Chandler
Facsimile: (246) 427-5667
With copies to: Faust Fresenius Heyne Scherzberg, attorneys
Paul-Ehrlich-Strasse 37-39
60596 Frankfurt-Am-Main
Attn: Christoph Heyne
Facsimile: (49) 6963009090
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
32
<PAGE> 33
Section 26. 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 27. Governing Law; Choice of Forum; Consent to
Service of Process. 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 CONTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS. The parties hereto agree that any suit, action or proceeding
arising out of or relating to this Warrant or any agreement or obligation
delivered in connection with this Warrant or any judgment entered by any
court in respect thereof shall be brought in the Courts of the State of
Texas, County of Dallas or in the United States District Court for the
Northern District of Texas and each such party hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding relating to this Warrant or any related agreement or
obligation. The Holder hereby submits to the jurisdiction of the State of
Texas and agrees that service of all writs, process and summonses in any
such suit, action or proceeding brought in the United States against the
Holder may be made upon CT Corporation System at its offices located at
350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address
of CT Corporation System), and the Holder hereby irrevocably appoints CT
Corporation System at its offices located at 350 North St. Paul Street,
Dallas, Texas 75201 (or any subsequent address of CT Corporation System)
its true and lawful attorney-in-fact in their name, place and stead to
accept such service of any and all such writs, process and summonses, and
agree that the failure of CT Corporation System to give to the Holder any
notice of any such service of process shall not impair or affect the
validity of such service or of any judgment based thereon. The Company
shall send, within 5 days after any service of process under this Section
13, notice to the Holder in accordance with Section 11 of any service of
process on CT Corporation System under this Section 13. Service of
process on the Company may be made to the Company's registered agent in
Delaware, Corporation Trust Centre, 1209 Orange Street, in the City of
Wilmington, County of New Castle.
Each party hereto hereby irrevocably waives any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Warrant or any agreement or
obligation delivered in connection with this Warrant, brought in the
Courts of the State of Texas, County of Dallas or the United States
District Court for the Northern District of Texas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 28. 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.
* * * * *
33
<PAGE> 34
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 I. Benn By: /s/ Edward J. Munden
-------------------------- ----------------------------------
Name: Edward J. Munden
Title: President and
Chief Executive Officer
and
Attest: /s/Bruce I. Benn By: /s/ Robert P. Lindsay
-------------------------- ----------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
34
<PAGE> 35
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: , .
-------------------------- ------
35
<PAGE> 36
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.
36
<PAGE> 37
EXHIBIT C
JEDI EARN UP AGREEMENT
[See Exhibit 1.7 to this
Current Report
on Form 8-K]
37
<PAGE> 1
EXHIBIT 1.13
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
OTHER UNITED STATES FEDERAL OR STATE SECURITIES OR BLUE SKY LAWS OR APPLICABLE
NON-UNITED STATES SECURITIES LAWS, AND HAVE BEEN ISSUED IN A MANNER INTENDED TO
COMPLY WITH THE CONDITIONS CONTAINED IN REGULATION S UNDER THE ACT. PRIOR TO
MAY 6, 1998, NO OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
(COLLECTIVELY, A "DISPOSAL") OR EXERCISE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE (A) IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY "U.S. PERSON" (AS DEFINED IN REGULATION S) UNLESS (i)
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS
OR (ii) QUEEN SAND RESOURCES, INC. (THE "COMPANY") RECEIVES A WRITTEN OPINION
OF UNITED STATES LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE
EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS OR (B)
OUTSIDE THE UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON WHO
IS NOT A "U.S. PERSON" UNLESS PRIOR TO SUCH DISPOSAL (i) THE BENEFICIAL OWNER
OF SUCH SECURITIES AND THE PROPOSED TRANSFEREE SUBMIT CERTAIN CERTIFICATIONS TO
THE COMPANY (FORMS OF WHICH ARE AVAILABLE FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES) AND (ii) THE COMPANY RECEIVES THE LEGAL OPINION DESCRIBED IN
(A)(ii) ABOVE. THE SECURITIES ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS UPON
TRANSFER AS SET FORTH IN THIS WARRANT AND THE SECURITIES PURCHASE AGREEMENT
DATED AS OF MARCH 27, 1997, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT ITS
PRINCIPAL PLACE OF BUSINESS.
================================================================================
QUEEN SAND RESOURCES, INC.
Class A Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Queen Sand Resources, Inc.
------------
No. A-1
------------
FOR VALUE RECEIVED, QUEEN SAND RESOURCES, INC., a Delaware corporation
(the "Company"), hereby certifies that Forseti Investments Ltd., a Barbados
corporation (the "Holder"), 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), a total of 1,000,000 shares (as
such number of shares may be adjusted pursuant to
<PAGE> 2
the terms hereof, the "Warrant Shares") of Common Stock, par value $.0015 per
share, of the Company, at a price per share equal to the Exercise Price (as
defined below). This Warrant is issued to the Holder (together with such other
warrants as may be issued in exchange, transfer or replacement of this Warrant,
the "Warrants") 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, all on the terms
and conditions and pursuant to the provisions set forth herein and in the
Securities Purchase Agreement.
Section 1. Definitions. The following terms, as used herein,
have the following respective meanings:
"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 the date
hereof, between the Company and the Holder.
"Exercise Period" means the period of time between the Date of Issuance
and 5:00 p.m. (New York City time) on December 31, 1998, provided, however,
that any Warrants held by Forseti Investments Ltd. on the Election Date (as
defined in the Earn Up Agreement) shall expire on the Election Date unless
Forseti Investments Ltd. elects to retain the Warrants pursuant to Section
2(a)(ii) of the Earn Up Agreement.
"Exercise Price" means an amount, per share, equal to $2.50 (U.S.
dollars). The Exercise Price shall be subject to adjustment, as set forth in
Section 4.
"Holder" means Forseti Investments Ltd. 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 and Forseti, as such agreement
shall be modified, amended and supplemented and in effect from time to time.
"Value" means, as of any date of determination, with respect to the
Common Stock, $3.50 per share of Common Stock.
"Warrants" is defined in the introductory paragraph of this Warrant.
"Warrant Shares" is defined in the introductory paragraph of this
Warrant.
- 2 -
<PAGE> 3
Section 2. Exercise of Warrant; Cancellations of
Warrant. Subject to the Securities Purchase Agreement and the provisions of
Regulation S promulgated under the Securities Act of 1933, as amended, 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 11 (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 for the purchase of
at least 100,000 shares of Common Stock. 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. 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, subject to the provisions of Section 7 of this Warrant
and Article 8 of the Securities Purchase Agreement. 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.
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 Date of Issuance as provided in this Section 4(a). In case the
Company shall at any time after the Date of Issuance (i) pay a dividend of
shares of Common Stock or make a distribution of shares of Common Stock, (ii)
subdivide its
- 3 -
<PAGE> 4
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 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
- 4 -
<PAGE> 5
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 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
- 5 -
<PAGE> 6
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.
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. Restrictions on Transfer. The Warrants and the
Warrant Shares shall not be transferable except upon the conditions in this
Warrant and specified in the Securities Purchase Agreement. The Warrants may
not be transferred, sold or otherwise disposed of except in blocks of Warrants
for the purchase of at least 100,000 shares of Common Stock; provided, that if
at the time of such transfer, sale or other disposition, the Warrants owned by
the Holder are for the purchase of less than 100,000 shares of Common Stock,
the Holder may sell, transfer or otherwise dispose of all, but not less than
all, of the Warrants. This Warrant bears and the certificates for Warrant
Shares will bear a legend as specified in the Securities Purchase Agreement.
The Holder by its acceptance of this Warrant agrees to comply with and to be
bound by all of the provisions of the Securities Purchase Agreement.
Section 8. 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 9. 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 10. 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.
- 6 -
<PAGE> 7
Section 11. Notices. Unless otherwise specified, whenever this
Warrant requires or permits any consent, approval, notice, request, or demand
from one party to another, that communication 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: Forseti Investments Ltd.
205-206 Dowell House
Bridgetown, Barados
West Indies
Attn: Dennis Chandler
Facsimile: (246) 427-5667
With copies to: Faust Fresenius Heyne Scherzberg, attorneys
Paul-Ehrlich-Strasse 37-39
60596 Frankfurt-Am-Main
Attn: Christoph Heyne
Facsimile: (49) 6963009090
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 12. 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 13. Governing Law; Choice of Forum; Consent to Service
of Process. 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
CONTRUED IN ACCORDANCE WITH, THE LAWS OF
- 7 -
<PAGE> 8
THE STATE OF TEXAS. The parties hereto agree that any suit, action or
proceeding arising out of or relating to this Warrant or any agreement or
obligation delivered in connection with this Warrant or any judgment entered by
any court in respect thereof shall be brought in the Courts of the State of
Texas, County of Dallas or in the United States District Court for the Northern
District of Texas and each such party hereby submits to the exclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding relating to this Warrant or any related agreement or obligation.
The Holder hereby submits to the jurisdiction of the State of Texas and agrees
that service of all writs, process and summonses in any such suit, action or
proceeding brought in the United States against the Holder may be made upon CT
Corporation System at its offices located at 350 North St. Paul Street, Dallas,
Texas 75201 (or any subsequent address of CT Corporation System), and the
Holder hereby irrevocably appoints CT Corporation System at its offices located
at 350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address
of CT Corporation System) its true and lawful attorney-in-fact in their name,
place and stead to accept such service of any and all such writs, process and
summonses, and agree that the failure of CT Corporation System to give to the
Holder any notice of any such service of process shall not impair or affect the
validity of such service or of any judgment based thereon. The Company shall
send, within 5 days after any service of process under this Section 13, notice
to the Holder in accordance with Section 11 of any service of process on CT
Corporation System under this Section 13. Service of process on the Company
may be made to the Company's registered agent in Delaware, Corporation Trust
Centre, 1209 Orange Street, in the City of Wilmington, County of New Castle.
Each party hereto hereby irrevocably waives any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Warrant or any agreement or obligation
delivered in connection with this Warrant, brought in the Courts of the State
of Texas, County of Dallas or the United States District Court for the Northern
District of Texas, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum.
Section 14. 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> 9
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 I. Benn By: /s/ Edward J. Munden
-------------------- ----------------------------------
Name: Edward J. Munden
Title: President and Chief Executive
Officer
and
Attest: /s/ Bruce I. Benn By: /s/ Robert P. Lindsay
-------------------- ----------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
- 9 -
<PAGE> 10
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: , .
-------------------- -----
- 10 -
<PAGE> 11
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 -
<PAGE> 1
EXHIBIT 1.14
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
OTHER UNITED STATES FEDERAL OR STATE SECURITIES OR BLUE SKY LAWS OR APPLICABLE
NON-UNITED STATES SECURITIES LAWS, AND HAVE BEEN ISSUED IN A MANNER INTENDED TO
COMPLY WITH THE CONDITIONS CONTAINED IN REGULATION S UNDER THE ACT. PRIOR TO
MAY 6, 1998, NO OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
(COLLECTIVELY, A "DISPOSAL") OR EXERCISE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE (A) IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY "U.S. PERSON" (AS DEFINED IN REGULATION S) UNLESS (i)
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS
OR (ii) QUEEN SAND RESOURCES, INC. (THE "COMPANY") RECEIVES A WRITTEN OPINION
OF UNITED STATES LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE
EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS OR (B)
OUTSIDE THE UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON WHO
IS NOT A "U.S. PERSON" UNLESS PRIOR TO SUCH DISPOSAL (i) THE BENEFICIAL OWNER
OF SUCH SECURITIES AND THE PROPOSED TRANSFEREE SUBMIT CERTAIN CERTIFICATIONS TO
THE COMPANY (FORMS OF WHICH ARE AVAILABLE FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES) AND (ii) THE COMPANY RECEIVES THE LEGAL OPINION DESCRIBED IN
(A)(ii) ABOVE. THE SECURITIES ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS UPON
TRANSFER AS SET FORTH IN THIS WARRANT AND THE SECURITIES PURCHASE AGREEMENT
DATED AS OF MARCH 27, 1997, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT ITS
PRINCIPAL PLACE OF BUSINESS.
- --------------------------------------------------------------------------------
QUEEN SAND RESOURCES, INC.
Class B Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Queen Sand Resources, Inc.
No. B-1
FOR VALUE RECEIVED, QUEEN SAND RESOURCES, INC., a Delaware corporation
(the "Company"), hereby certifies that Forseti Investments Ltd., a Barbados
corporation (the "Holder"), 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), a total of 2,000,000 shares (as
such number of shares may be adjusted pursuant to
<PAGE> 2
the terms hereof, the "Warrant Shares") of Common Stock, par value $.0015 per
share, of the Company, at a price per share equal to the Exercise Price (as
defined below). This Warrant is issued to the Holder (together with such other
warrants as may be issued in exchange, transfer or replacement of this Warrant,
the "Warrants") 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, all on the terms
and conditions and pursuant to the provisions set forth herein and in the
Securities Purchase Agreement.
Section 1. Definitions. The following terms, as used
herein, have the following respective meanings:
"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 the date
hereof, between the Company and the Holder.
"Exercise Period" means the period of time between the Date of
Issuance and 5:00 p.m. (New York City time) on December 31, 1998, provided,
however, that any Warrants held by Forseti Investments Ltd. on the Election
Date (as defined in the Earn Up Agreement) shall expire on the Election Date
unless Forseti Investments Ltd. elects to retain the Warrants pursuant to
Section 2(a)(ii) of the Earn Up Agreement.
"Exercise Price" means an amount, per share, equal to $2.50 (U.S.
dollars). The Exercise Price shall be subject to adjustment, as set forth in
Section 4.
"Holder" means Forseti Investments Ltd. 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 and Forseti, as such
agreement shall be modified, amended and supplemented and in effect from time
to time.
"Value" means, as of any date of determination, with respect to the
Common Stock, $3.50 per share of Common Stock.
"Warrants" is defined in the introductory paragraph of this Warrant.
"Warrant Shares" is defined in the introductory paragraph of this
Warrant.
- 2 -
<PAGE> 3
Section 2. Exercise of Warrant; Cancellations of Warrant. Subject
to the Securities Purchase Agreement and the provisions of Regulation S
promulgated under the Securities Act of 1933, as amended, 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 11 (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 for the purchase of
at least 100,000 shares of Common Stock. 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. 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, subject to the provisions of Section 7 of this Warrant and Article
8 of the Securities Purchase Agreement. 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.
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
Date of Issuance as provided in this Section 4(a). In case the Company shall
at any time after the Date of Issuance (i) pay a dividend of shares of Common
Stock or make a distribution of shares of Common Stock, (ii) subdivide its
- 3 -
<PAGE> 4
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 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
- 4 -
<PAGE> 5
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 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
- 5 -
<PAGE> 6
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.
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. Restrictions on Transfer. The Warrants and the
Warrant Shares shall not be transferable except upon the conditions specified
in this Warrant and in the Securities Purchase Agreement. The Warrants may not
be transferred, sold or otherwise disposed of except in blocks of Warrants for
the purchase of at least 100,000 shares of Common Stock; provided, that if at
the time of such transfer, sale or other disposition, the Warrants owned by the
Holder are for the purchase of less than 100,000 shares of Common Stock, the
Holder may sell, transfer or otherwise dispose of all, but not less than all,
of the Warrants. This Warrant bears and the certificates for Warrant Shares
will bear a legend as specified in the Securities Purchase Agreement. The
Holder by its acceptance of this Warrant agrees to comply with and to be bound
by all of the provisions of the Securities Purchase Agreement.
Section 8. 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 9. 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 10. 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.
- 6 -
<PAGE> 7
Section 11. Notices. Unless otherwise specified, whenever this
Warrant requires or permits any consent, approval, notice, request, or demand
from one party to another, that communication 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: Forseti Investments Ltd.
205-206 Dowell House
Bridgetown, Barbados
West Indies
Attn: Dennis Chandler
Facsimile: (246) 427-5667
With copies to: Faust Fresenius Heyne Scherzberg, attorneys
Paul-Ehrlich-Strasse 37-39
60596 Frankfurt-Am-Main
Attn: Christoph Heyne
Facsimile: (49) 6963009090
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 12. 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 13. Governing Law; Choice of Forum; Consent to Service
of Process. 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
CONTRUED IN ACCORDANCE WITH, THE LAWS OF
- 7 -
<PAGE> 8
THE STATE OF TEXAS. The parties hereto agree that any suit, action or
proceeding arising out of or relating to this Warrant or any agreement or
obligation delivered in connection with this Warrant or any judgment entered by
any court in respect thereof shall be brought in the Courts of the State of
Texas, County of Dallas or in the United States District Court for the Northern
District of Texas and each such party hereby submits to the exclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding relating to this Warrant or any related agreement or obligation.
The Holder hereby submits to the jurisdiction of the State of Texas and agrees
that service of all writs, process and summonses in any such suit, action or
proceeding brought in the United States against the Holder may be made upon CT
Corporation System at its offices located at 350 North St. Paul Street, Dallas,
Texas 75201 (or any subsequent address of CT Corporation System), and the
Holder hereby irrevocably appoints CT Corporation System at its offices located
at 350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address
of CT Corporation System) its true and lawful attorney-in-fact in their name,
place and stead to accept such service of any and all such writs, process and
summonses, and agree that the failure of CT Corporation System to give to the
Holder any notice of any such service of process shall not impair or affect the
validity of such service or of any judgment based thereon. The Company shall
send, within 5 days after any service of process under this Section 13, notice
to the Holder in accordance with Section 11 of any service of process on CT
Corporation System under this Section 13. Service of process on the Company
may be made to the Company's registered agent in Delaware, Corporation Trust
Centre, 1209 Orange Street, in the City of Wilmington, County of New Castle.
Each party hereto hereby irrevocably waives any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Warrant or any agreement or obligation
delivered in connection with this Warrant, brought in the Courts of the State
of Texas, County of Dallas or the United States District Court for the Northern
District of Texas, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum.
Section 14. 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> 9
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 I. Benn By: /s/ Edward J. Munden
-------------------------- ---------------------------------
Name: Edward J. Munden
Title: President and Chief Executive
Officer
and
Attest: /s/ Bruce I. Benn By: /s/ Robert P. Lindsay
-------------------------- ---------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
- 9 -
<PAGE> 10
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: , .
-------------------------- -------
- 10 -
<PAGE> 11
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 -
<PAGE> 1
EXHIBIT 1.15
TERMINATION OF MANAGEMENT SERVICES AGREEMENT
This TERMINATION AGREEMENT (the "Agreement") is made as of May 5, 1997,
between Capital House A Finance and Investment Corporation, a Canadian
corporation ("Capital House") and Queen Sand Resources, Inc., a Delaware
corporation ("QSR").
RECITALS:
WHEREAS, Capital House and QSR entered into a Management Services
Agreement, dated as of July 1, 1996 (the "Management Agreement"); and
WHEREAS, Capital House and QSR have determined that it is in the best
interest of Capital House and QSR to terminate the Management Agreement; now,
therefore,
AGREEMENT:
The parties hereto agree as follows:
1. Termination. The Management Agreement shall be terminated effective as
of the date of execution of this Agreement, and as of such date such Management
Agreement shall be of no further force and effect as to Capital House or QSR.
The parties further acknowledge that from and after the date of execution of
this Agreement, the parties hereto shall have no obligation to each other with
respect to the Management Agreement, including, without limitation, obligations
for payment of monies due under the Management Agreement.
2. Reasonable Efforts; Cooperation. The parties shall use their reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective as promptly as practicable the provisions contained herein and
to cooperate with each other in connection with the foregoing.
3. Further Assurances. The parties agree to take such further actions and
execute and deliver such other documents, certificates, agreements and other
instruments as may be necessary or desirable in order to consummate or
implement this Agreement.
4. Binding Effect. This Agreement, and all the terms and provisions
hereof, shall be binding upon and shall inure to the benefit of Capital House
and QSR, and their respective successors and permitted assigns.
5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
6. Governing Law. THIS AGREEMENT IS MADE PURSUANT TO, WILL BE CONSTRUED
UNDER, AND WILL BE CONCLUSIVELY DEEMED FOR ALL PURPOSES TO HAVE BEEN EXECUTED
AND DELIVERED UNDER, THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO ITS PRINCIPLES OF CONFLICT OF LAWS.
*****
<PAGE> 2
This Agreement has been executed as of the date first written above.
CAPITAL HOUSE A FINANCE AND
INVESTMENT CORPORATION,
a Canadian corporation
By: /s/ Bruce Benn
---------------------------------
Name: Bruce Benn
-------------------------------
Title: President
------------------------------
QUEEN SAND RESOURCES, INC.,
a Delaware corporation
By: /s/ Robert P. Lindsay
---------------------------------
Name: Robert P. Lindsay
-------------------------------
Title: Chief Operating Officer
------------------------------
2
<PAGE> 1
EXHIBIT 1.16
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
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
<PAGE> 2
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 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
2
<PAGE> 3
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 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
3
<PAGE> 4
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.
(i) 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.
(ii) 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.
(iii) If neither the Company nor
the Management Stockholders deliver an Acceptance Notice
within thirty days after delivery of the Transfer Notice or
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:
4
<PAGE> 5
(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. 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 11(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
5
<PAGE> 6
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.
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
6
<PAGE> 7
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.
(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
7
<PAGE> 8
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> 9
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
<PAGE> 10
QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of Edward J. Munden executes this Consent and
Agreement to acknowledge her joining the Stockholders Agreement (a coy of which
is annexed hereto) with respect to her community property interest in the
Shares, such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
/s/ Witness /s/ Dorothy A. Munden
- ------------------------ --------------------------
<PAGE> 11
QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of Bruce I. Benn executes this Consent and
Agreement to acknowledge her joining the Stockholders Agreement (a coy of which
is annexed hereto) with respect to her community property interest in the
Shares, such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
/s/ Witness /s/ Theresa L. Benn
- ------------------------- --------------------------------
11
<PAGE> 12
QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of Ronald I Benn executes this Consent and
Agreement to acknowledge her joining the Stockholders Agreement (a coy of which
is annexed hereto) with respect to her community property interest in the
Shares, such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
/s/ Witness /s/ Rose L. Benn
- ------------------------------- ------------------------------
12
<PAGE> 13
QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of Robert P. Lindsay executes this Consent
and Agreement to acknowledge her joining the Stockholders Agreement (a coy of
which is annexed hereto) with respect to her community property interest in the
Shares, such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
/s/ Witness /s/ Theresa Lindsay
- ----------------------------- --------------------------------
13
<PAGE> 14
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
14
<PAGE> 15
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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EXHIBIT 1.17
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including Exhibit A hereto, is
entered into between Queen Sand Resources, Inc., a Delaware corporation having
offices at 3500 Oak Lawn, Suite 380, Dallas, Texas 75219 ("Employer"), and
Ronald I. Benn, an individual whose address is 60 Queen Street, Suite 1400,
Ottawa, Canada K1P 5Y7 ("Employee"), to be effective as of May 6, 1997 (the
"Effective Date").
WITNESSETH:
WHEREAS, Employer is desirous of employing Employee pursuant to the
terms and conditions and for the consideration set forth in this Agreement, and
Employee is desirous of entering the employ of Employer pursuant to such terms
and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES.
1.1 Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth in Exhibit A to this Agreement (the "Term") subject to the
terms and conditions of this Agreement.
1.2 Employee initially shall be employed in the position set forth in
Exhibit A to this Agreement. Employer may subsequently assign Employee to a
different position or modify Employee's duties and responsibilities consistent
with the Employee's existing duties, responsibilities and level of authority.
Employer may assign this Agreement and Employee's employment to any of its
affiliates. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3 Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer, or requires any significant portion of Employee's
business time. Notwithstanding anything herein to the contrary it is
acknowledged and agreed that the Employee may hold positions as director,
officer or employee of Capital House A Finance and Investment Corporation and
any corporation associated therewith; provided, that such activities do not
impair the performance by Employee of his duties hereunder or otherwise
interfere with Employee's compliance with his obligations set forth in the
preceding sentence.
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1.4 In connection with Employee's employment by Employer, Employer
shall endeavor to provide Employee access to such confidential information
pertaining to the business and services of Employer as is appropriate for
Employee's employment responsibilities. Employer also shall endeavor to
provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5 Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Employer and to do no act which would injure Employer's
business, its interests, or its reputation. It is agreed that any direct or
indirect interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which interest might in any way adversely
affect Employer or any of its affiliates, involves a possible conflict of
interest. In keeping with Employee's fiduciary duties to Employer, Employee
agrees that Employee shall not knowingly become involved in a conflict of
interest with Employer or its affiliates, or upon discovery thereof, allow such
a conflict to continue. Moreover, Employee agrees that Employee shall disclose
to Employer's Board of Directors any facts which might involve such a conflict
of interest.
1.6 Employer and Employee recognize that it is impossible to provide
an exhaustive list of actions or interests that constitute a conflict of
interest. Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's Board of Directors may be all that is necessary to enable Employer
or its affiliates to protect their interests. In others, if no improper
motivation appears to exist and the interests of Employer or its affiliates
have not suffered, prompt elimination of the outside interest will suffice. In
still others, it may be necessary for Employer to terminate the employment
relationship. Employer and Employee agree that Employer's determination as to
whether a conflict of interest exists shall be conclusive. Employer reserves
the right to take such action as, in its judgment, will end the conflict.
ARTICLE 2: COMPENSATION AND BENEFITS.
2.1 The Employee shall be entitled to receive the salary set forth in
Exhibit A to this Agreement and to participate in any other compensation and
benefit plans referred to on Exhibit A to this Agreement, which benefit plans
are implemented by the Company after the date hereof, in each case to the
extent determined by the Board (or a Compensation Committee thereof).
2.2 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the Effective
Date or thereafter are made available by Employer to all or substantially all
of Employer's employees. Such benefits, plans, and programs may, but are not
required to, include, without limitation, medical, health, and dental care,
life insurance, disability protection, pension plans, relocation, automobile
allowance and directors liability insurance. Nothing in this Agreement is to
be construed or interpreted to provide greater rights, participation, coverage,
or benefits under such benefit plans or programs than provided to similarly
situated employees pursuant to the terms and conditions of such benefit plans
and programs. Employee shall have the right to participate in an incentive
compensation plan for similarly situated employees to be adopted by Employer
(the "Plan"). The Plan shall provide for at least annual awards of cash,
performance shares or units, or
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other performance- or incentive-based compensation, or any combination thereof,
upon meeting the Employer's targeted performance objectives for the award year.
2.3 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer.
2.4 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling. It is
acknowledged by the parties that the Employee is and, at his option, may remain
a resident of Canada during the term of this Agreement. In the event that the
Employee should be liable for any federal, provincial, state or local income or
payroll taxes, on any income or benefits earned by Employee in respect of his
employment by Employer, in an amount greater than that amount of taxes that
Employee would be liable for (after taking into account any and all credits or
deductions permitted under the laws of the United States and Canada and any tax
treaties in effect between those countries) on the same income and benefits
solely under the federal, provincial or local laws in effect in the
Commonwealth of Canada (collectively, the "Excess Taxes"), then Employer shall
"gross up" Employee's compensation under this Agreement in an amount sufficient
to pay such Excess Taxes.
2.5 The Employer shall reimburse the Employee for all reasonable,
ordinary and necessary expenses incurred by him in connection with his duties
upon production of receipts and an itemized account; provided, that, the
Employee shall obtain the prior approval of the Board for any expense greater
than $10,000. (U.S.)
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM.
3.1 Notwithstanding any other provisions herein to the contrary,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time prior to the expiration of the Term for any of the
following reasons:
(i) For cause upon the good faith determination by the
Employer's Board of Directors that cause exists for the
termination of the employment relationship. As used in this
Section 3.1(i), the term "cause" shall mean (a) Employee has
willfully refused without proper legal reason to perform a duty
or responsibility required of Employee under this Agreement which
remains uncorrected for fifteen (15) days following written
notice to Employee by Employer of such breach; (b) Employee has
been convicted of a felony (which, through lapse of time or
otherwise, is not subject to appeal); (c) Employee's involvement
in a conflict of interest as referenced in Sections 1.5 and 1.6
for which Employer makes a determination to terminate the
employment of Employee; (d) Employee has willfully engaged in
conduct that Employee knows or should know is materially
injurious to Employer or any of its affiliates; or (e) Employee's
material breach of any material provision of this Agreement or
corporate code or policy which remains uncorrected for thirty
(30) days following written notice to Employee by Employer of
such breach. It is expressly
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acknowledged and agreed that the decision as to whether cause
exists for termination of the employment relationship by Employer
is delegated to the Board of Directors of Employer for
determination;
(ii) upon Employee's death; or
(iii) upon Employee's becoming incapacitated by accident,
sickness, or other circumstance which renders him mentally or
physically incapable of performing the duties and services
required of Employee for a period of 120 consecutive days, or for
a period of 180 days, regardless of whether or not such days are
consecutive, within a 12-month period.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The effect
of the employment relationship being terminated pursuant to Section 3.1(ii) as
a result of Employee's death is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.1(iii) as a
result of the Employee becoming incapacitated is specified in Section 3.6.
3.2 Notwithstanding any other provisions of this Agreement except
Section 6.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any other reason whatsoever, in the sole discretion of
Employee. The termination of Employee's employment by Employee prior to the
expiration of the Term shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2; the effect of such termination is specified in Section
3.3.
3.3 Upon a Voluntary Termination, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Voluntary Termination. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Voluntary
Termination other than those sums specified in this Section.
3.4 Upon a Termination for Cause, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Termination for Cause. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Termination for
Cause other than those sums specified in this Section.
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3.5 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination and
Employee's heirs, administrators, or legatees shall be entitled to any
individual bonuses or individual incentive compensation earned but not yet paid
to Employee at the date of such termination. The rights of Employee or his
heirs, administrators, or legatees under this Section are the sole and
exclusive rights of Employee, his heirs, administrators, and legatees against
Employer or its affiliates, and Employer's sole and exclusive liability to
Employee under this Agreement, in contract, tort, or otherwise, with respect to
such termination of the employment relationship.
3.6 Upon termination of the employment relationship as a result of
Employee's becoming incapacitated in the manner specified in Section 3.1(iii),
Employee shall be entitled to his pro rata salary through the date of such
termination and Employee shall be entitled to any individual bonuses or
individual incentive compensation earned but not yet paid to Employee at the
date of such termination. The rights of Employee or his heirs, administrators,
or legatees under this Section are the sole and exclusive rights of Employee,
his heirs, administrators, and legatees against Employer or its affiliates, and
Employer's sole and exclusive liability to Employee under this Agreement, in
contract, tort, or otherwise, with respect to such termination of the
employment relationship.
3.7 Termination of the employment relationship does not terminate
those obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 4 and 5.
ARTICLE 4: OWNERSHIP AND PROTECTION OF INFORMATION;
COPYRIGHTS.
4.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and
are and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
4.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable,
special, and unique assets which Employer or its affiliates use in their
business to obtain a competitive advantage over their competitors. Employee
further acknowledges that protection of such
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confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to Employer and its affiliates in
maintaining their competitive position. Employee hereby agrees that Employee
will not, at any time during or after his employment by Employer, make any
unauthorized disclosure of any confidential business information or trade
secrets of Employer or its affiliates, or make any use thereof, except in the
carrying out of his or her employment responsibilities hereunder. As a result
of Employee's employment by Employer, Employee may also from time to time have
access to, or knowledge of, confidential business information or trade secrets
of third parties, such as customers, suppliers, partners, joint venturers, and
the like, of Employer and its affiliates. Employee also agrees to preserve and
protect the confidentiality of such third party confidential information and
trade secrets to the same extent, and on the same basis, as Employer's
confidential business information and trade secrets. Employee acknowledges
that money damages would not be sufficient remedy for any breach of this
Article 4 by Employee, and Employer shall be entitled to enforce the provisions
of this Article 4 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 4, but shall be in addition to
all remedies available at law or in equity to Employer, including the recovery
of damages from Employee and his agents involved in such breach.
4.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon
termination of Employee's employment by Employer, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to Employer.
4.4 If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps, architectural
renditions, models, manuals, brochures, or the like) relating to Employer's
business, products, or services, whether such work is created solely by
Employee or jointly with others (whether during business hours or otherwise and
whether on Employer's premises or otherwise), Employee shall disclose such work
to Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his employment; or, if the work is not
prepared by Employee within the scope of his employment but is specially
ordered by Employer as a contribution to a collective work, as a part of a
motion picture or other audiovisual work, as a translation, as a supplementary
work, as a compilation, or as an instructional text, then the work shall be
considered to be work made for hire and Employer shall be the author of the
work. If such work is neither prepared by the Employee within the scope of his
employment nor a work specially ordered and is deemed to be a work made for
hire, then Employee hereby agrees to assign, and by these presents does assign,
to Employer all of Employee's worldwide right, title, and interest in and to
such work and all rights of copyright therein.
4.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and
its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or its nominee and the
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execution of all lawful oaths and applications for applications for patents and
registration of copyright in the United States and foreign countries.
ARTICLE 5: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS.
5.1 As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary
and in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-
competition provisions of this Article 5. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its affiliated companies are conducting any
business as of the date of termination of the employment relationship or have
during the previous twelve months conducted any business:
(i) engage in any business competitive with the
business conducted by Employer;
(ii) render advice or services to, or otherwise assist,
any other person, association, or entity who is engaged, directly
or indirectly, in any business competitive with the business
conducted by Employer;
(iii) induce any employee of Employer or any of its
affiliates to terminate his or her employment with Employer or
its affiliates, or hire or assist in the hiring of any such
employee by person, association, or entity not affiliated with
Employer.
These non-competition obligations shall be pursuant to the Termination and
Severance Provisions of Exhibit A.
5.2 Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits under this Agreement to
justify such restriction. Employee acknowledges that money damages would not
be sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating
any payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach
of this Article 5, but shall be in addition to all remedies available at law or
in equity to Employer, including, without limitation, the recovery of damages
from Employee and his agents involved in such breach.
5.3 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 5 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
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ARTICLE 6: MISCELLANEOUS.
6.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
6.2 Unless otherwise specified, whenever this Agreement requires or
permits any consent, approval, notice, request, or demand from one party to
another, that communication 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 Agreement, the addresses (and telecopy numbers) are:
If to Employer: 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
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.3 This Agreement shall be governed in all respects by the laws of
the State of Texas, excluding any conflict-of-law rule or principle that might
refer the construction of the Agreement to the laws of another State or
country.
6.4 No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
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6.5 If a dispute arises out of or related to this Agreement, other
than a dispute regarding Employee's obligations under Article 4 or Article 5,
and if the dispute cannot be settled through direct discussions, then Employer
and Employee agree to first endeavor to settle the dispute in an amicable
manner by mediation, before having recourse to any other proceeding or forum.
Thereafter, if either party to this Agreement brings legal action to enforce
the terms of this Agreement, the party who prevails in such legal action,
whether plaintiff or defendant, in addition to the remedy or relief obtained in
such legal action shall be entitled to recover its, his, or her expenses
incurred in connection with such legal action, including, without limitation,
costs of Court and attorneys fees.
6.6 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
6.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee
shall not be voluntarily or involuntarily assigned, alienated, or transferred,
whether by operation of law or otherwise, without the prior written consent of
Employer.
6.8 There exist other agreements between Employer and Employee
relating to the employment relationship between them, e.g., the agreement with
respect to Employer's policies booklet and agreements with respect to benefit
plans. This Agreement replaces and merges previous agreements and discussions
pertaining to the following subject matters covered herein: the nature of
Employee's employment relationship with Employer and the term and termination
of such relationship. This Agreement constitutes the entire agreement of the
parties with regard to such subject matters, and contains all of the covenants,
promises, representations, warranties, and agreements between the parties with
respect such subject matters. Each party to this Agreement acknowledges that
no representation, inducement, promise, or agreement, oral or written, has been
made by either party with respect to such subject matters, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Employee by Employer that is not contained in this Agreement
shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by each party whose rights
hereunder are affected thereby, provided that any such modification must be
authorized or approved by the Board of Directors of Employer.
* * * * *
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IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
QUEEN SAND RESOURCES, INC.
By: /s/ Robert P. Lindsay
----------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
/s/ Ronald I. Benn
---------------------------------------------
Ronald I. Benn
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EXHIBIT A
TO
EMPLOYMENT AGREEMENT
The Employer and Employee agree that the Employee will be employed for
the term, title and initial salary amount as specified below. The Employee
will be entitled to other compensation and employee benefit plans and programs
implemented by the Company after the date hereof, which plans and programs may,
but are not required to, include those enumerated in the list immediately
below.
I. TERM - Six Months
TITLE - Chief Financial Officer
INITIAL SALARY AMOUNT - $10,000 per month
REMUNERATION AND BENEFITS
o Bonuses
o Expense allowance
o Automobile
o Pension
o Key man and other life insurance
o Directors Liability Insurance
o Other (D&O liability insurance)
o Re-negotiation
o Relocation expenses
TERMINATION
SEVERANCE
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EXHIBIT 1.18
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including Exhibit A hereto, is
entered into between Queen Sand Resources, Inc., a Delaware corporation having
offices at 3500 Oak Lawn, Suite 380, Dallas, Texas 75219 ("Employer"), and
Bruce I. Benn, an individual whose address is 60 Queen Street, Suite 1400,
Ottawa, Canada K1P 5Y7 ("Employee"), to be effective as of May 6, 1997 (the
"Effective Date").
WITNESSETH:
WHEREAS, Employer is desirous of employing Employee pursuant to the
terms and conditions and for the consideration set forth in this Agreement, and
Employee is desirous of entering the employ of Employer pursuant to such terms
and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES.
1.1 Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth in Exhibit A to this Agreement (the "Term") subject to the
terms and conditions of this Agreement.
1.2 Employee initially shall be employed in the position set forth in
Exhibit A to this Agreement. Employer may subsequently assign Employee to a
different position or modify Employee's duties and responsibilities consistent
with the Employee's existing duties, responsibilities and level of authority.
Employer may assign this Agreement and Employee's employment to any of its
affiliates. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3 Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer, or requires any significant portion of Employee's
business time. Notwithstanding anything herein to the contrary it is
acknowledged and agreed that the Employee may hold positions as director,
officer or employee of Capital House A Finance and Investment Corporation and
any corporation associated therewith; provided, that such activities do not
impair the performance by Employee of his duties hereunder or otherwise
interfere with Employee's compliance with his obligations set forth in the
preceding sentence.
<PAGE> 2
1.4 In connection with Employee's employment by Employer, Employer
shall endeavor to provide Employee access to such confidential information
pertaining to the business and services of Employer as is appropriate for
Employee's employment responsibilities. Employer also shall endeavor to
provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5 Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Employer and to do no act which would injure Employer's
business, its interests, or its reputation. It is agreed that any direct or
indirect interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which interest might in any way adversely
affect Employer or any of its affiliates, involves a possible conflict of
interest. In keeping with Employee's fiduciary duties to Employer, Employee
agrees that Employee shall not knowingly become involved in a conflict of
interest with Employer or its affiliates, or upon discovery thereof, allow such
a conflict to continue. Moreover, Employee agrees that Employee shall disclose
to Employer's Board of Directors any facts which might involve such a conflict
of interest.
1.6 Employer and Employee recognize that it is impossible to provide
an exhaustive list of actions or interests that constitute a conflict of
interest. Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's Board of Directors may be all that is necessary to enable Employer
or its affiliates to protect their interests. In others, if no improper
motivation appears to exist and the interests of Employer or its affiliates
have not suffered, prompt elimination of the outside interest will suffice. In
still others, it may be necessary for Employer to terminate the employment
relationship. Employer and Employee agree that Employer's determination as to
whether a conflict of interest exists shall be conclusive. Employer reserves
the right to take such action as, in its judgment, will end the conflict.
ARTICLE 2: COMPENSATION AND BENEFITS.
2.1 The Employee shall be entitled to receive the salary set forth in
Exhibit A to this Agreement and to participate in any other compensation and
benefit plans referred to on Exhibit A to this Agreement, which benefit plans
are implemented by the Company after the date hereof, in each case to the
extent determined by the Board (or a Compensation Committee thereof).
2.2 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the Effective
Date or thereafter are made available by Employer to all or substantially all
of Employer's employees. Such benefits, plans, and programs may, but are not
required to, include, without limitation, medical, health, and dental care,
life insurance, disability protection, pension plans, relocation, automobile
allowance and directors liability insurance. Nothing in this Agreement is to
be construed or interpreted to provide greater rights, participation, coverage,
or benefits under such benefit plans or programs than provided to similarly
situated employees pursuant to the terms and conditions of such benefit plans
and programs. Employee shall have the right to participate in an incentive
compensation plan for similarly situated employees to be adopted by Employer
(the "Plan"). The Plan shall provide for at least annual awards of cash,
performance shares or units, or
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<PAGE> 3
other performance- or incentive-based compensation, or any combination thereof,
upon meeting the Employer's targeted performance objectives for the award year.
2.3 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer.
2.4 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling. It is
acknowledged by the parties that the Employee is and, at his option, may remain
a resident of Canada during the term of this Agreement. In the event that the
Employee should be liable for any federal, provincial, state or local income or
payroll taxes, on any income or benefits earned by Employee in respect of his
employment by Employer, in an amount greater than that amount of taxes that
Employee would be liable for (after taking into account any and all credits or
deductions permitted under the laws of the United States and Canada and any tax
treaties in effect between those countries) on the same income and benefits
solely under the federal, provincial or local laws in effect in the
Commonwealth of Canada (collectively, the "Excess Taxes"), then Employer shall
"gross up" Employee's compensation under this Agreement in an amount sufficient
to pay such Excess Taxes.
2.5 The Employer shall reimburse the Employee for all reasonable,
ordinary and necessary expenses incurred by him in connection with his duties
upon production of receipts and an itemized account; provided, that, the
Employee shall obtain the prior approval of the Board for any expense greater
than $10,000. (U.S.)
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM.
3.1 Notwithstanding any other provisions herein to the contrary,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time prior to the expiration of the Term for any of the
following reasons:
(i) For cause upon the good faith determination by the
Employer's Board of Directors that cause exists for the termination of
the employment relationship. As used in this Section 3.1(i), the term
"cause" shall mean (a) Employee has willfully refused without proper
legal reason to perform a duty or responsibility required of Employee
under this Agreement which remains uncorrected for fifteen (15) days
following written notice to Employee by Employer of such breach; (b)
Employee has been convicted of a felony (which, through lapse of time or
otherwise, is not subject to appeal); (c) Employee's involvement in a
conflict of interest as referenced in Sections 1.5 and 1.6 for which
Employer makes a determination to terminate the employment of Employee;
(d) Employee has willfully engaged in conduct that Employee knows or
should know is materially injurious to Employer or any of its
affiliates; or (e) Employee's material breach of any material provision
of this Agreement or corporate code or policy which remains uncorrected
for thirty (30) days following written notice to Employee by
Employer of such breach. It is expressly
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<PAGE> 4
acknowledged and agreed that the decision as to whether cause exists for
termination of the employment relationship by Employer is delegated to
the Board of Directors of Employer for determination;
(ii) upon Employee's death; or
(iii) upon Employee's becoming incapacitated by accident,
sickness, or other circumstance which renders him mentally or physically
incapable of performing the duties and services required of Employee for
a period of 120 consecutive days, or for a period of 180 days,
regardless of whether or not such days are consecutive, within a 12-
month period.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The effect
of the employment relationship being terminated pursuant to Section 3.1(ii) as
a result of Employee's death is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.1(iii) as a
result of the Employee becoming incapacitated is specified in Section 3.6.
3.2 Notwithstanding any other provisions of this Agreement except
Section 6.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any other reason whatsoever, in the sole discretion of
Employee. The termination of Employee's employment by Employee prior to the
expiration of the Term shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2; the effect of such termination is specified in Section
3.3.
3.3 Upon a Voluntary Termination, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Voluntary Termination. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Voluntary
Termination other than those sums specified in this Section.
3.4 Upon a Termination for Cause, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Termination for Cause. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Termination for
Cause other than those sums specified in this Section.
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<PAGE> 5
3.5 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination and
Employee's heirs, administrators, or legatees shall be entitled to any
individual bonuses or individual incentive compensation earned but not yet paid
to Employee at the date of such termination. The rights of Employee or his
heirs, administrators, or legatees under this Section are the sole and
exclusive rights of Employee, his heirs, administrators, and legatees against
Employer or its affiliates, and Employer's sole and exclusive liability to
Employee under this Agreement, in contract, tort, or otherwise, with respect to
such termination of the employment relationship.
3.6 Upon termination of the employment relationship as a result of
Employee's becoming incapacitated in the manner specified in Section 3.1(iii),
Employee shall be entitled to his pro rata salary through the date of such
termination and Employee shall be entitled to any individual bonuses or
individual incentive compensation earned but not yet paid to Employee at the
date of such termination. The rights of Employee or his heirs, administrators,
or legatees under this Section are the sole and exclusive rights of Employee,
his heirs, administrators, and legatees against Employer or its affiliates, and
Employer's sole and exclusive liability to Employee under this Agreement, in
contract, tort, or otherwise, with respect to such termination of the
employment relationship.
3.7 Termination of the employment relationship does not terminate
those obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 4 and 5.
ARTICLE 4: OWNERSHIP AND PROTECTION OF INFORMATION;
COPYRIGHTS.
4.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and
are and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
4.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable,
special, and unique assets which Employer or its affiliates use in their
business to obtain a competitive advantage over their competitors. Employee
further acknowledges that protection of such
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<PAGE> 6
confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to Employer and its affiliates in
maintaining their competitive position. Employee hereby agrees that Employee
will not, at any time during or after his employment by Employer, make any
unauthorized disclosure of any confidential business information or trade
secrets of Employer or its affiliates, or make any use thereof, except in the
carrying out of his or her employment responsibilities hereunder. As a result
of Employee's employment by Employer, Employee may also from time to time have
access to, or knowledge of, confidential business information or trade secrets
of third parties, such as customers, suppliers, partners, joint venturers, and
the like, of Employer and its affiliates. Employee also agrees to preserve and
protect the confidentiality of such third party confidential information and
trade secrets to the same extent, and on the same basis, as Employer's
confidential business information and trade secrets. Employee acknowledges
that money damages would not be sufficient remedy for any breach of this
Article 4 by Employee, and Employer shall be entitled to enforce the provisions
of this Article 4 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 4, but shall be in addition to
all remedies available at law or in equity to Employer, including the recovery
of damages from Employee and his agents involved in such breach.
4.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon
termination of Employee's employment by Employer, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to Employer.
4.4 If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps, architectural
renditions, models, manuals, brochures, or the like) relating to Employer's
business, products, or services, whether such work is created solely by
Employee or jointly with others (whether during business hours or otherwise and
whether on Employer's premises or otherwise), Employee shall disclose such work
to Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his employment; or, if the work is not
prepared by Employee within the scope of his employment but is specially
ordered by Employer as a contribution to a collective work, as a part of a
motion picture or other audiovisual work, as a translation, as a supplementary
work, as a compilation, or as an instructional text, then the work shall be
considered to be work made for hire and Employer shall be the author of the
work. If such work is neither prepared by the Employee within the scope of his
employment nor a work specially ordered and is deemed to be a work made for
hire, then Employee hereby agrees to assign, and by these presents does assign,
to Employer all of Employee's worldwide right, title, and interest in and to
such work and all rights of copyright therein.
4.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and
its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or its nominee and the
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<PAGE> 7
execution of all lawful oaths and applications for applications for patents and
registration of copyright in the United States and foreign countries.
ARTICLE 5: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS.
5.1 As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary
and in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-
competition provisions of this Article 5. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its affiliated companies are conducting any
business as of the date of termination of the employment relationship or have
during the previous twelve months conducted any business:
(i) engage in any business competitive with the business
conducted by Employer;
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business conducted by
Employer;
(iii) induce any employee of Employer or any of its affiliates
to terminate his or her employment with Employer or its affiliates, or
hire or assist in the hiring of any such employee by person,
association, or entity not affiliated with Employer.
These non-competition obligations shall be pursuant to the Termination and
Severance Provisions of Exhibit A.
5.2 Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits under this Agreement to
justify such restriction. Employee acknowledges that money damages would not
be sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating
any payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach
of this Article 5, but shall be in addition to all remedies available at law or
in equity to Employer, including, without limitation, the recovery of damages
from Employee and his agents involved in such breach.
5.3 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 5 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
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<PAGE> 8
ARTICLE 6: MISCELLANEOUS.
6.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
6.2 Unless otherwise specified, whenever this Agreement requires or
permits any consent, approval, notice, request, or demand from one party to
another, that communication 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 Agreement, the addresses (and telecopy numbers) are:
If to Employer: 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
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.3 This Agreement shall be governed in all respects by the laws of
the State of Texas, excluding any conflict-of-law rule or principle that might
refer the construction of the Agreement to the laws of another State or
country.
6.4 No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
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<PAGE> 9
6.5 If a dispute arises out of or related to this Agreement, other
than a dispute regarding Employee's obligations under Article 4 or Article 5,
and if the dispute cannot be settled through direct discussions, then Employer
and Employee agree to first endeavor to settle the dispute in an amicable
manner by mediation, before having recourse to any other proceeding or forum.
Thereafter, if either party to this Agreement brings legal action to enforce
the terms of this Agreement, the party who prevails in such legal action,
whether plaintiff or defendant, in addition to the remedy or relief obtained in
such legal action shall be entitled to recover its, his, or her expenses
incurred in connection with such legal action, including, without limitation,
costs of Court and attorneys fees.
6.6 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
6.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee
shall not be voluntarily or involuntarily assigned, alienated, or transferred,
whether by operation of law or otherwise, without the prior written consent of
Employer.
6.8 There exist other agreements between Employer and Employee
relating to the employment relationship between them, e.g., the agreement with
respect to Employer's policies booklet and agreements with respect to benefit
plans. This Agreement replaces and merges previous agreements and discussions
pertaining to the following subject matters covered herein: the nature of
Employee's employment relationship with Employer and the term and termination
of such relationship. This Agreement constitutes the entire agreement of the
parties with regard to such subject matters, and contains all of the covenants,
promises, representations, warranties, and agreements between the parties with
respect such subject matters. Each party to this Agreement acknowledges that
no representation, inducement, promise, or agreement, oral or written, has been
made by either party with respect to such subject matters, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Employee by Employer that is not contained in this Agreement
shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by each party whose rights
hereunder are affected thereby, provided that any such modification must be
authorized or approved by the Board of Directors of Employer.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
QUEEN SAND RESOURCES, INC.
By: /s/ ROBERT P. LINDSAY
----------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
/s/ BRUCE I. BENN
---------------------------------------------
Bruce I. Benn
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<PAGE> 11
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
The Employer and Employee agree that the Employee will be employed for
the term, title and initial salary amount as specified below. The Employee
will be entitled to other compensation and employee benefit plans and programs
implemented by the Company after the date hereof, which plans and programs may,
but are not required to, include those enumerated in the list immediately
below.
I. TERM - Six Months
TITLE - Executive Vice President
INITIAL SALARY AMOUNT - $10,000 per month
REMUNERATION AND BENEFITS
o Bonuses
o Expense allowance
o Automobile
o Pension
o Key man and other life insurance
o Directors Liability Insurance
o Other (D&O liability insurance)
o Re-negotiation
o Relocation expenses
TERMINATION
SEVERANCE
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<PAGE> 1
EXHIBIT 1.19
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), including Exhibit A hereto, is
entered into between Queen Sand Resources, Inc., a Delaware corporation having
offices at 3500 Oak Lawn, Suite 380, Dallas, Texas 75219 ("Employer"), and
Edward J. Munden, an individual whose address is 60 Queen Street, Suite 1400,
Ottawa, Canada K1P 5Y7 ("Employee"), to be effective as of May 6, 1997 (the
"Effective Date").
WITNESSETH:
WHEREAS, Employer is desirous of employing Employee pursuant to the
terms and conditions and for the consideration set forth in this Agreement, and
Employee is desirous of entering the employ of Employer pursuant to such terms
and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES.
1.1 Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date set forth in Exhibit A to this Agreement (the "Term") subject to the
terms and conditions of this Agreement.
1.2 Employee initially shall be employed in the position set forth in
Exhibit A to this Agreement. Employer may subsequently assign Employee to a
different position or modify Employee's duties and responsibilities consistent
with the Employee's existing duties, responsibilities and level of authority.
Employer may assign this Agreement and Employee's employment to any of its
affiliates. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3 Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer, or requires any significant portion of Employee's
business time. Notwithstanding anything herein to the contrary it is
acknowledged and agreed that the Employee may hold positions as director,
officer or employee of Capital House A Finance and Investment Corporation and
any corporation associated therewith; provided, that such activities do not
impair the performance by Employee of his duties hereunder or otherwise
interfere with Employee's compliance with his obligations set forth in the
preceding sentence.
<PAGE> 2
1.4 In connection with Employee's employment by Employer, Employer
shall endeavor to provide Employee access to such confidential information
pertaining to the business and services of Employer as is appropriate for
Employee's employment responsibilities. Employer also shall endeavor to
provide to Employee the opportunity to develop business relationships with
those of Employer's clients and potential clients that are appropriate for
Employee's employment responsibilities.
1.5 Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Employer and to do no act which would injure Employer's
business, its interests, or its reputation. It is agreed that any direct or
indirect interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which interest might in any way adversely
affect Employer or any of its affiliates, involves a possible conflict of
interest. In keeping with Employee's fiduciary duties to Employer, Employee
agrees that Employee shall not knowingly become involved in a conflict of
interest with Employer or its affiliates, or upon discovery thereof, allow such
a conflict to continue. Moreover, Employee agrees that Employee shall disclose
to Employer's Board of Directors any facts which might involve such a conflict
of interest.
1.6 Employer and Employee recognize that it is impossible to provide
an exhaustive list of actions or interests that constitute a conflict of
interest. Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by the Employee to
Employer's Board of Directors may be all that is necessary to enable Employer
or its affiliates to protect their interests. In others, if no improper
motivation appears to exist and the interests of Employer or its affiliates
have not suffered, prompt elimination of the outside interest will suffice. In
still others, it may be necessary for Employer to terminate the employment
relationship. Employer and Employee agree that Employer's determination as to
whether a conflict of interest exists shall be conclusive. Employer reserves
the right to take such action as, in its judgment, will end the conflict.
ARTICLE 2: COMPENSATION AND BENEFITS.
2.1 The Employee shall be entitled to receive the salary set forth in
Exhibit A to this Agreement and to participate in any other compensation and
benefit plans referred to on Exhibit A to this Agreement, which benefit plans
are implemented by the Company after the date hereof, in each case to the
extent determined by the Board (or a Compensation Committee thereof).
2.2 While employed by Employer (both during the Term and thereafter),
Employee shall be allowed to participate, on the same basis generally as other
employees of Employer, in all general employee benefit plans and programs,
including improvements or modifications of the same, which on the Effective
Date or thereafter are made available by Employer to all or substantially all
of Employer's employees. Such benefits, plans, and programs may, but are not
required to, include, without limitation, medical, health, and dental care,
life insurance, disability protection, pension plans, relocation, automobile
allowance and directors liability insurance. Nothing in this Agreement is to
be construed or interpreted to provide greater rights, participation, coverage,
or benefits under such benefit plans or programs than provided to similarly
situated employees pursuant to the terms and conditions of such benefit plans
and programs. Employee shall have the right to participate in an incentive
compensation plan for similarly situated employees to be adopted by Employer
(the "Plan"). The Plan shall provide for at least annual awards of cash,
performance shares or units, or
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<PAGE> 3
other performance- or incentive-based compensation, or any combination thereof,
upon meeting the Employer's targeted performance objectives for the award year.
2.3 Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer.
2.4 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling. It is
acknowledged by the parties that the Employee is and, at his option, may remain
a resident of Canada during the term of this Agreement. In the event that the
Employee should be liable for any federal, provincial, state or local income or
payroll taxes, on any income or benefits earned by Employee in respect of his
employment by Employer, in an amount greater than that amount of taxes that
Employee would be liable for (after taking into account any and all credits or
deductions permitted under the laws of the United States and Canada and any tax
treaties in effect between those countries) on the same income and benefits
solely under the federal, provincial or local laws in effect in the
Commonwealth of Canada (collectively, the "Excess Taxes"), then Employer shall
"gross up" Employee's compensation under this Agreement in an amount sufficient
to pay such Excess Taxes.
2.5 The Employer shall reimburse the Employee for all reasonable,
ordinary and necessary expenses incurred by him in connection with his duties
upon production of receipts and an itemized account; provided, that, the
Employee shall obtain the prior approval of the Board for any expense greater
than $10,000. (U.S.)
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM.
3.1 Notwithstanding any other provisions herein to the contrary,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time prior to the expiration of the Term for any of the
following reasons:
(i) For cause upon the good faith determination by the
Employer's Board of Directors that cause exists for the termination of
the employment relationship. As used in this Section 3.1(i), the term
"cause" shall mean (a) Employee has willfully refused without proper
legal reason to perform a duty or responsibility required of Employee
under this Agreement which remains uncorrected for fifteen (15) days
following written notice to Employee by Employer of such breach; (b)
Employee has been convicted of a felony (which, through lapse of time or
otherwise, is not subject to appeal); (c) Employee's involvement in a
conflict of interest as referenced in Sections 1.5 and 1.6 for which
Employer makes a determination to terminate the employment of Employee;
(d) Employee has willfully engaged in conduct that Employee knows or
should know is materially injurious to Employer or any of its
affiliates; or (e) Employee's material breach of any material provision
of this Agreement or corporate code or policy which remains uncorrected
for thirty (30) days following written notice to Employee by Employer of
such breach. It is expressly
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<PAGE> 4
acknowledged and agreed that the decision as to whether cause exists for
termination of the employment relationship by Employer is delegated to
the Board of Directors of Employer for determination;
(ii) upon Employee's death; or
(iii) upon Employee's becoming incapacitated by accident,
sickness, or other circumstance which renders him mentally or physically
incapable of performing the duties and services required of Employee for
a period of 120 consecutive days, or for a period of 180 days,
regardless of whether or not such days are consecutive, within a 12-
month period.
The termination of Employee's employment by Employer prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The effect
of the employment relationship being terminated pursuant to Section 3.1(ii) as
a result of Employee's death is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.1(iii) as a
result of the Employee becoming incapacitated is specified in Section 3.6.
3.2 Notwithstanding any other provisions of this Agreement except
Section 6.5, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term of employment for any other reason whatsoever, in the sole discretion of
Employee. The termination of Employee's employment by Employee prior to the
expiration of the Term shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2; the effect of such termination is specified in Section
3.3.
3.3 Upon a Voluntary Termination, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Voluntary Termination. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Voluntary
Termination other than those sums specified in this Section.
3.4 Upon a Termination for Cause, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination and Employee
shall be entitled to any individual bonuses or individual incentive
compensation earned but not yet paid at the date of such termination.
Employee's rights under this Section are Employee's sole and exclusive rights
against Employer or its affiliates, and Employer's sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Termination for Cause. Employee covenants not to sue or lodge any claim,
demand or cause of action against Employer for any sums for Termination for
Cause other than those sums specified in this Section.
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<PAGE> 5
3.5 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination and
Employee's heirs, administrators, or legatees shall be entitled to any
individual bonuses or individual incentive compensation earned but not yet paid
to Employee at the date of such termination. The rights of Employee or his
heirs, administrators, or legatees under this Section are the sole and
exclusive rights of Employee, his heirs, administrators, and legatees against
Employer or its affiliates, and Employer's sole and exclusive liability to
Employee under this Agreement, in contract, tort, or otherwise, with respect to
such termination of the employment relationship.
3.6 Upon termination of the employment relationship as a result of
Employee's becoming incapacitated in the manner specified in Section 3.1(iii),
Employee shall be entitled to his pro rata salary through the date of such
termination and Employee shall be entitled to any individual bonuses or
individual incentive compensation earned but not yet paid to Employee at the
date of such termination. The rights of Employee or his heirs, administrators,
or legatees under this Section are the sole and exclusive rights of Employee,
his heirs, administrators, and legatees against Employer or its affiliates, and
Employer's sole and exclusive liability to Employee under this Agreement, in
contract, tort, or otherwise, with respect to such termination of the
employment relationship.
3.7 Termination of the employment relationship does not terminate
those obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Articles 4 and 5.
ARTICLE 4: OWNERSHIP AND PROTECTION OF INFORMATION;
COPYRIGHTS.
4.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's
business, products or services (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names, and marks) shall be disclosed to Employer and
are and shall be the sole and exclusive property of Employer. Moreover, all
drawings, memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts,
improvements, discoveries, and inventions are and shall be the sole and
exclusive property of Employer.
4.2 Employee acknowledges that the business of Employer and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable,
special, and unique assets which Employer or its affiliates use in their
business to obtain a competitive advantage over their competitors. Employee
further acknowledges that protection of such
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<PAGE> 6
confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to Employer and its affiliates in
maintaining their competitive position. Employee hereby agrees that Employee
will not, at any time during or after his employment by Employer, make any
unauthorized disclosure of any confidential business information or trade
secrets of Employer or its affiliates, or make any use thereof, except in the
carrying out of his or her employment responsibilities hereunder. As a result
of Employee's employment by Employer, Employee may also from time to time have
access to, or knowledge of, confidential business information or trade secrets
of third parties, such as customers, suppliers, partners, joint venturers, and
the like, of Employer and its affiliates. Employee also agrees to preserve and
protect the confidentiality of such third party confidential information and
trade secrets to the same extent, and on the same basis, as Employer's
confidential business information and trade secrets. Employee acknowledges
that money damages would not be sufficient remedy for any breach of this
Article 4 by Employee, and Employer shall be entitled to enforce the provisions
of this Article 4 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 4, but shall be in addition to
all remedies available at law or in equity to Employer, including the recovery
of damages from Employee and his agents involved in such breach.
4.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer or its affiliates, as the case may be. Upon
termination of Employee's employment by Employer, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to Employer.
4.4 If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps, architectural
renditions, models, manuals, brochures, or the like) relating to Employer's
business, products, or services, whether such work is created solely by
Employee or jointly with others (whether during business hours or otherwise and
whether on Employer's premises or otherwise), Employee shall disclose such work
to Employer. Employer shall be deemed the author of such work if the work is
prepared by Employee in the scope of his employment; or, if the work is not
prepared by Employee within the scope of his employment but is specially
ordered by Employer as a contribution to a collective work, as a part of a
motion picture or other audiovisual work, as a translation, as a supplementary
work, as a compilation, or as an instructional text, then the work shall be
considered to be work made for hire and Employer shall be the author of the
work. If such work is neither prepared by the Employee within the scope of his
employment nor a work specially ordered and is deemed to be a work made for
hire, then Employee hereby agrees to assign, and by these presents does assign,
to Employer all of Employee's worldwide right, title, and interest in and to
such work and all rights of copyright therein.
4.5 Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer and its nominee, at any time, in the
protection of Employer's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and
its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or its nominee and the
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<PAGE> 7
execution of all lawful oaths and applications for applications for patents and
registration of copyright in the United States and foreign countries.
ARTICLE 5: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS.
5.1 As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary
and in order to protect Employer's interests in the confidential information of
Employer and the business relationships developed by Employee with the clients
and potential clients of Employer, and as an additional incentive for Employer
to enter into this Agreement, Employer and Employee agree to the non-
competition provisions of this Article 5. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its affiliated companies are conducting any
business as of the date of termination of the employment relationship or have
during the previous twelve months conducted any business:
(i) engage in any business competitive with the business
conducted by Employer;
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business conducted by
Employer;
(iii) induce any employee of Employer or any of its affiliates
to terminate his or her employment with Employer or its affiliates, or
hire or assist in the hiring of any such employee by person,
association, or entity not affiliated with Employer.
These non-competition obligations shall be pursuant to the Termination and
Severance Provisions of Exhibit A.
5.2 Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits under this Agreement to
justify such restriction. Employee acknowledges that money damages would not
be sufficient remedy for any breach of this Article 5 by Employee, and Employer
shall be entitled to enforce the provisions of this Article 5 by terminating
any payments then owing to Employee under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach
of this Article 5, but shall be in addition to all remedies available at law or
in equity to Employer, including, without limitation, the recovery of damages
from Employee and his agents involved in such breach.
5.3 It is expressly understood and agreed that Employer and Employee
consider the restrictions contained in this Article 5 to be reasonable and
necessary to protect the proprietary information of Employer. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
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<PAGE> 8
ARTICLE 6: MISCELLANEOUS.
6.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
6.2 Unless otherwise specified, whenever this Agreement requires or
permits any consent, approval, notice, request, or demand from one party to
another, that communication 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 Agreement, the addresses (and telecopy numbers) are:
If to Employer: 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
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
6.3 This Agreement shall be governed in all respects by the laws of
the State of Texas, excluding any conflict-of-law rule or principle that might
refer the construction of the Agreement to the laws of another State or
country.
6.4 No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
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<PAGE> 9
6.5 If a dispute arises out of or related to this Agreement, other
than a dispute regarding Employee's obligations under Article 4 or Article 5,
and if the dispute cannot be settled through direct discussions, then Employer
and Employee agree to first endeavor to settle the dispute in an amicable
manner by mediation, before having recourse to any other proceeding or forum.
Thereafter, if either party to this Agreement brings legal action to enforce
the terms of this Agreement, the party who prevails in such legal action,
whether plaintiff or defendant, in addition to the remedy or relief obtained in
such legal action shall be entitled to recover its, his, or her expenses
incurred in connection with such legal action, including, without limitation,
costs of Court and attorneys fees.
6.6 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
6.7 This Agreement shall be binding upon and inure to the benefit of
Employer and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of
Employer by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee
shall not be voluntarily or involuntarily assigned, alienated, or transferred,
whether by operation of law or otherwise, without the prior written consent of
Employer.
6.8 There exist other agreements between Employer and Employee
relating to the employment relationship between them, e.g., the agreement with
respect to Employer's policies booklet and agreements with respect to benefit
plans. This Agreement replaces and merges previous agreements and discussions
pertaining to the following subject matters covered herein: the nature of
Employee's employment relationship with Employer and the term and termination
of such relationship. This Agreement constitutes the entire agreement of the
parties with regard to such subject matters, and contains all of the covenants,
promises, representations, warranties, and agreements between the parties with
respect such subject matters. Each party to this Agreement acknowledges that
no representation, inducement, promise, or agreement, oral or written, has been
made by either party with respect to such subject matters, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Employee by Employer that is not contained in this Agreement
shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by each party whose rights
hereunder are affected thereby, provided that any such modification must be
authorized or approved by the Board of Directors of Employer.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
QUEEN SAND RESOURCES, INC.
By: /s/ Robert P. Lindsay
----------------------------------
Name: Robert P. Lindsay
Title: Chief Operating Officer
/s/ Edward J. Munden
---------------------------------------------
Edward J. Munden
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<PAGE> 11
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
The Employer and Employee agree that the Employee will be employed for
the term, title and initial salary amount as specified below. The Employee
will be entitled to other compensation and employee benefit plans and programs
implemented by the Company after the date hereof, which plans and programs may,
but are not required to, include those enumerated in the list immediately
below.
I. TERM - Six Months
TITLE - President and Chief Executive Officer
INITIAL SALARY AMOUNT - $10,000 per month
REMUNERATION AND BENEFITS
o Bonuses
o Expense allowance
o Automobile
o Pension
o Key man and other life insurance
o Directors Liability Insurance
o Other (D&O liability insurance)
o Re-negotiation
o Relocation expenses
TERMINATION
SEVERANCE
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<PAGE> 1
EXHIBIT 1.20
CONSENT AND AMENDMENT TO CREDIT AGREEMENT
Queen Sand Resources, Inc., a Nevada corporation, Queen Sand
Resources, Inc., a Delaware corporation, and Comerica Bank - Texas, a Texas
banking corporation, entered into and executed a Credit Agreement dated
December 1, 1995, and amendments thereto dated April 10, 1996, and November 14,
1996, in which BANK agreed to provide to BORROWER a line of credit and to make
to it loans and advances in the amounts, on the terms and conditions, and
subject to the limitations therein set forth. Each name, term and
identification herein used shall have the same meaning when used herein as is
provided in such Credit Agreement, as heretofore amended.
PARENT has delivered to BANK copies of the following instruments:
(1) Securities Purchase Agreement dated as of March 27, 1997,
between PARENT and Joint Energy Development Investments
Limited Partnership ("JEDI"); and
(2) Securities Purchase Agreement dated as of March 27, 1997,
between PARENT and Forseti Investments, Ltd.
BANK hereby consents to (i) the execution and delivery by PARENT of
both of such Securities Purchase Agreements and all Basic Documents and Forseti
Documents contemplated or provided in Item (1) to be executed and delivered by
it, and (ii) the performance by PARENT of all of the covenants, promises and
agreements therein made by it. BANK further consents and agrees that neither
the execution and delivery of such Securities Purchase Agreements, Basic
Documents or Forseti Documents by PARENT nor the performance by it of the
covenants, promises
<PAGE> 2
and agreements therein made by it will constitute (a) a breach of any covenant,
promise or agreement made by PARENT or BORROWER in such Credit Agreement or in
any instrument heretofore executed and delivered by PARENT or BORROWER pursuant
to such Credit Agreement to or for the benefit of BANK, or (b) an Event of
Default under such Credit Agreement or any such other instrument heretofore
executed and delivered.
BANK has no knowledge that an Event of Default has occurred and is
continuing under the Credit Agreement or any other instrument heretofore
executed and delivered by PARENT or BORROWER pursuant to such Credit Agreement,
nor of the existence of any circumstances that could reasonably be expected to
cause any Event of Default thereunder.
Such Credit Agreement, as heretofore amended, is further amended and
supplemented to include as clause (j) of Paragraph VIII thereof, the following
provision:
"(j) Default under Described Instruments. There shall occur an
event or there shall exist a condition (the occurrence or
existence of which is not waived within thirty (30) days)
which shall constitute an Event of Default under the Basic
Documents executed and delivered pursuant to the Securities
Purchase Agreement dated as of March 27, 1997, between PARENT
and Joint Energy Development Investments Limited Partnership
or the Certificate of Designation of Series A Participating
Convertible Preferred Stock of PARENT."
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<PAGE> 3
EXECUTED this 2nd day of May, 1997.
COMERICA BANK - TEXAS
By: /s/ Officer
------------------------------------
QUEEN SAND RESOURCES, INC.
(a Delaware corporation)
By: /s/ Edward J. Munden
------------------------------------
QUEEN SAND RESOURCES, INC.
(a Nevada corporation)
By: /s/ Edward J. Munden
------------------------------------
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