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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):
JULY 8, 1998
QUEEN SAND RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
STATE OF DELAWARE 0-21179 75-2615565
(State of incorporation) (Commission File No.) (IRS Employer Identification No.)
</TABLE>
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
GENERAL
On July 8, 1998, Queen Sand Resources, Inc., a Delaware corporation
(the "Company"), completed a private placement (the "Note Offering") of
$125,000,000 principal amount of its 12 1/2% Senior Notes due 2008 (the
"Notes"). In addition, on July 8, 1998 and July 20, 1998, the Company
completed private placements of Common Stock (collectively, the "Private Equity
Placements," and, together with the Note Offering, the "Offerings").
The net proceeds received by the Company from the Offerings completed
on July 8, 1998 of approximately $144.5 million and on July 20, 1998 of
approximately $6.9 million were used to repay indebtedness outstanding under
the Company's Amended and Restated Credit Agreement, dated as of April 17,
1998, as amended (the "Credit Agreement"), with Bank of Montreal, as Agent, and
certain lenders thereunder and to repay indebtedness outstanding under the
Variable Rate Senior Subordinated Debt Bridge Note Purchase Agreements and the
Variable Rate Subordinated Equity Bridge Note Purchase Agreements, each dated
as of April 17, 1998. Substantially all of this indebtedness was incurred to
fund the Company's acquisition of net revenue interests and royalty interests
in producing oil and natural gas properties from certain trusts managed by J.P.
Morgan Investments. Immediately following such repayments, the amount of
indebtedness outstanding under the Credit Agreement was $10.3 million.
THE NOTE OFFERING
GENERAL
Pursuant to the Note Offering, the Company issued and sold the Notes
to certain institutional buyers pursuant to Rules 144A and Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). The Notes mature on July 1, 2008, and interest on the Notes is payable
semiannually on January 1 and July 1 of each year, commencing January 1, 1999
at the rate of 12 1/2% per annum. The payment of the Notes is guaranteed (the
"Subsidiary Guarantees") by the Company's three operating subsidiaries (the
"Subsidiary Guarantors"). Initially capitalized terms used but not defined in
this section "The Note Offering" have the meanings ascribed to them in the
Indenture, dated as of July 1, 1998, among the Company, the Subsidiary
Guarantors and Harris Trust and Savings Bank, as trustee, filed as Exhibit 4.1
to this Report on Form 8-K and incorporated by reference herein.
RANKING
The Notes are senior unsecured obligations of the Company. The Notes
rank pari passu with any existing and future unsubordinated indebtedness of the
Company, but are effectively subordinated to the rights of holders of secured
unsubordinated indebtedness of the Company to the extent of the value of the
collateral securing such indebtedness. The Notes rank senior to all unsecured
subordinated indebtedness of the Company.
SUBSIDIARY GUARANTEES
The Notes are jointly, severally and unconditionally guaranteed by
each of the existing and future Restricted Subsidiaries of the Company. The
Subsidiary Guarantees are senior unsecured obligations of the Subsidiary
Guarantors and rank pari passu with any existing and future unsubordinated
indebtedness of the Subsidiary Guarantors, but are effectively subordinated to
the rights of holders of secured unsubordinated indebtedness of the Subsidiary
Guarantors to the extent of the value of the collateral securing such
indebtedness.
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OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in
part, at any time on and after July 1, 2003, at the redemption prices set forth
therein, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of redemption. Furthermore, prior to July 1, 2001, up to 20% of the
aggregate principal amount of the Notes originally issued may be redeemed from
time to time at the option of the Company, in whole or in part, at 112.5% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption, with the net cash proceeds of one
or more Equity Offerings, provided that at least 80% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after
each such redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control the Company is required to
make an offer to purchase the Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. There can be no assurance, however,
that the Company will have sufficient funds with which to purchase the Notes at
that time, and certain provisions of the Company's other debt agreements may
further limit the Company's ability to make such purchases.
A "Change of Control" shall be deemed to occur if (i) any person or
group becomes the beneficial owner of 50% or more of the total voting power of
all classes of the Voting Stock of the Company or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale,
lease, conveyance or transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole shall have occurred,
(iii) the stockholders of the Company shall have approved any plan of
liquidation or dissolution of the Company, (iv) the Company consolidates with
or merges into another Person or any Person merges into the Company in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is reclassified into or exchanged for cash, securities or other
property or (v) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors cease
for any reason to constitute a majority of the Company's Board of Directors
then in office, excluding directors elected by JEDI or its affiliates.
COVENANTS
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to (i) incur
additional Indebtedness (as described more particularly below), (ii) pay
dividends or make other distributions with respect to Capital Stock or
Redeemable Stock or purchase, redeem or retire Capital Stock or Redeemable
Stock or make other Restricted Payments (as described more particularly below),
(iii) enter into certain transactions with Affiliates, (iv) create certain
Liens, (v) enter into certain consolidations, mergers and transfers of assets,
(vi) issue any Capital Stock of a Restricted Subsidiary or permit any Person
other than the Company or a Wholly Owned Restricted Subsidiary to own such
stock, (vii) permit any Restricted Subsidiaries to suffer to exist certain
types of restrictions on the ability of Restricted Subsidiaries to pay
dividends and make other transfers of assets to the Company and other
Restricted Subsidiaries and (viii) dispose of the proceeds of certain Asset
Sales.
Pursuant to the covenant limiting the incurrence of Indebtedness,
neither the Company nor its Restricted Subsidiaries may incur Indebtedness
other than Permitted Indebtedness unless, after giving pro forma effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, (i) no Default or Event of Default would occur as a consequence of or
be continuing following, such Incurrence and application and (ii) the
Consolidated Interest Coverage Ratio would exceed (1) 2.25 to 1.0 if such
Incurrence is between the Issue Date and July 1, 1999 and (2) 2.50 to 1.0 if
such Incurrence is thereafter.
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Pursuant to the covenant limiting Restricted Payments, neither the
Company nor the Restricted Subsidiaries may make any Restricted Payment if, at
the time of and after giving effect to the proposed Restricted Payment, (i) any
Default or Event of Default would have occurred and be continuing, (ii) the
Company could not incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the Indenture or (iii) the aggregate amount
expended or declared for all Restricted Payments from the Issue Date would
exceed the sum (without duplication) of the following:
(A) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis commencing on the last day of
the fiscal quarter immediately preceding the Issue Date, and ending on
the last day of the fiscal quarter ending on or immediately preceding
the date of such proposed Restricted Payment (or, if such aggregate
Consolidated Net Income shall be a loss, minus 100% of such loss),
plus
(B) the aggregate net cash proceeds, or the Fair Market
Value of Property other than cash, received by the Company on or after
the Issue Date from the issuance or sale (other than to a Subsidiary
of the Company) of Capital Stock of the Company or any options,
warrants or rights to purchase Capital Stock of the Company, plus
(C) the aggregate net cash proceeds or the Fair Market
Value of Property other than cash received by the Company as capital
contributions to the Company (other than from a Subsidiary of the
Company) on or after the Issue Date, plus
(D) the aggregate net cash proceeds received by the
Company upon the exercise of any options, warrants or rights to
purchase shares of Capital Stock of the Company (other than from a
Subsidiary of the Company) on or after the Issue Date, plus
(E) the aggregate net cash proceeds received on or after
the Issue Date by the Company from the issuance or sale (other than to
any Subsidiary of the Company) of convertible debt or convertible
Redeemable Stock that has been converted into or exchanged for Capital
Stock of the Company, together with the aggregate cash received by the
Company at the time of such conversion or exchange, plus
(F) to the extent not otherwise included in the Company's
Consolidated Net Income, an amount equal to the net reduction in
Investments made by the Company and its Restricted Subsidiaries
subsequent to the Issue Date in any Person resulting from (1) payments
of interest on debt, dividends, repayments of loans or advances or
other transfers or distributions of Property, in each case to the
Company or any Restricted Subsidiary from any Person other than the
Company or a Restricted Subsidiary, and in an amount not to exceed the
book value of such Investments previously made in such Person that
were treated as Restricted Payments, or (2) the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount
not to exceed the lesser of (x) the book value of all Investments
previously made in such Unrestricted Subsidiary that were treated as a
Restricted Payments and (y) the Fair Market Value of such Unrestricted
Subsidiary.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect
to the Notes: (i) failure to pay any interest on the Notes when due, continued
for 30 days; (ii) failure to pay principal of (or premium or Liquidated
Damages, if any, on) the Notes when due; (iii) failure to perform or comply
with the covenants limiting merger, consolidations and sales of substantially
all assets; (iv) failure to perform any other covenant of the Company or any
Subsidiary Guarantor in the Indenture, continued for 30 days after written
notice as provided in the Indenture; (v) the occurrence and continuation beyond
any applicable grace period of any default in the payment of the principal of
(or premium, if any, on) or interest on any Indebtedness of the Company (other
than the Notes) or any Restricted Subsidiary for money borrowed
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when due (whether resulting from maturity, acceleration, mandatory redemption
or otherwise), or any other default causing acceleration of any Indebtedness of
the Company or any Restricted Subsidiary for money borrowed, provided that the
aggregate principal amount of such Indebtedness shall exceed $5.0 million; (vi)
one or more final judgments or orders by a court of competent jurisdiction are
entered against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount outstanding at any time in excess of $5.0
million and such judgments or orders are not discharged, waived, stayed,
satisfied or bonded for a period of 60 consecutive days; (vii) certain events
of bankruptcy, insolvency or reorganization with respect to the Company or any
Restricted Subsidiary; or (viii) a Subsidiary Guaranty ceases to be in full
force and effect (other than in accordance with the terms of the Indenture and
such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty.
The Indenture provides that if an Event of Default (other than an
Event of Default described in clause (vii) above) with respect to the Notes at
the time outstanding shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the outstanding Notes
by notice as provided in the Indenture may declare the principal amount of the
Notes to be due and payable immediately. If an Event of Default described in
clause (vii) above with respect to the Notes at the time outstanding shall
occur, the principal amount of all the Notes will automatically, and without
any action by the Trustee or any Holder, become immediately due and payable.
After any such acceleration, but before a judgment or decree based on
acceleration, the Holders of at least a majority in aggregate principal amount
of the outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of
accelerated principal (or other specified amount), have been cured or waived as
provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders of the
Notes, unless such Holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the Trustee,
the Holders of at least a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Notes.
No Holder of Notes will have any right to institute any proceeding
with respect to the Indenture, or for the appointment of a receiver or a
trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Notes, (ii) the Holders of at least 25% in aggregate
principal amount of the outstanding Notes have made written request, and such
Holder or Holders have offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee and (iii) the Trustee has failed to
institute such proceeding and has not received from the Holders of at least a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request, within 60 days after such notice, request and
offer. However, such limitations do not apply to a suit instituted by a Holder
of Notes for the enforcement of payment of the principal of or any premium or
interest on such Notes on or after the applicable due date specified in such
Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the
Indenture may be made by the Company, the Subsidiary Guarantors and the Trustee
without the consent of any Holders of Notes in certain limited circumstances,
including (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to
provide for the assumption of the obligations of the Company under the
Indenture upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole and certain other events specified in the covenants limiting
mergers, consolidations and sales of substantially all assets, (iii) to provide
for uncertificated Notes in
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addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, (v) to make any change that
does not adversely affect the rights of any Holder of Notes in any material
respect, (vi) to add or remove Subsidiary Guarantors pursuant to the procedure
set forth in the Indenture and (vii) certain other modifications and amendments
as set forth in the Indenture.
The Indenture contains provisions permitting the Company, the
Subsidiary Guarantors and the Trustee, with the written consent of the Holders
of not less than a majority in aggregate principal amount of the outstanding
Notes, to execute supplemental indentures or amendments adding any provisions
to or changing or eliminating any of the provisions of the Indenture or
modifying the rights of the Holders of the Notes, except that no such
supplemental indenture, amendment or waiver may, without the consent of all the
Holders of outstanding Notes, among other things, (i) reduce the principal
amount of Notes whose Holders must consent to an amendment or waiver, (ii)
reduce the rate of or change the time for payment of interest on any Notes,
(iii) change the currency in which any amount due in respect of the Notes is
payable, (iv) reduce the principal of or any premium on or change the Stated
Maturity of any Notes or alter the redemption or repurchase provisions with
respect thereto, (v) reduce the relative ranking of any Notes, (vi) release any
security that may have been granted to the Trustee in respect of the Notes
(except as contemplated in the documents under which such security was granted
to the Trustee) or (vii) make certain other significant amendments or
modifications as specified in the Indenture.
The Holders of at least a majority in principal amount of the
outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. The Holders of at least a majority in principal
amount of the outstanding Notes may waive any past default under the Indenture,
except a default in the payment of principal, premium or interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the Holders of each outstanding Note.
TRANSFER RESTRICTIONS
The Notes have not been registered under the Securities Act, or under
any state securities laws and are subject to certain restrictions on transfer.
The Exchange Notes (defined below) registered pursuant to an effective
registration statement generally will be freely transferable.
PORTAL LISTING
The Notes are eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages (PORTAL) Market of the National
Association of Securities Dealers, Inc.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Subsidiary Guarantors have agreed to use their
reasonable best efforts to file on or before September 5, 1998, a registration
statement (the "Exchange Offer Registration Statement") relating to an exchange
offer (the "Exchange Offer") pursuant to which another series of unsecured debt
securities of the Company (the "Exchange Notes") with substantially the same
terms as the Notes will be offered in exchange for the then outstanding Notes
tendered at the option of the holders thereof and to use its reasonable best
efforts to cause such registration statement to become effective as soon as
practicable thereafter, but in no event later than November 4, 1998. In the
event that the applicable law or interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, the Company will use
its reasonable best efforts to cause to become effective a shelf registration
statement with respect to the resale of the Notes and to keep such resale
registration statement effective for a period of up to two years. If such
exchange offer or shelf registration statement is not filed or is not declared
effective, or if such exchange offer is not consummated, within the time
periods set forth herein, Liquidated Damages will accrue and be payable on the
Notes until such registration or consummation.
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PRIVATE EQUITY PLACEMENTS
GENERAL
Pursuant to the Private Equity Placements, the Company raised $25
million of equity on July 8, 1998 and an additional $7.5 millon on July 20,
1998. Pursuant to the Securities Purchase Agreement, dated as of June 25,
1998, among the Company and the buyers signatory thereto (the "Buyers"), as
amended and restated pursuant to the Amended and Restated Securities Purchase
Agreement dated as of July 8, 1998 (as amended and restated, the "Purchase
Agreement"), the Company issued (i) 2,357,144 shares of the Company's Common
Stock on July 8, 1998 and issued an additional 1,071,430 shares of the
Company's Common Stock on July 20, 1998 to the Buyers (the "Common Shares"),
(ii) certain repricing rights (the "Repricing Rights") to acquire additional
shares of Common Stock (the "Repricing Common Shares") and (iii) warrants (the
"Warrants") to purchase an aggregate of up to 925,000 shares of Common Stock
(the "Warrant Common Shares"). The aggregate gross consideration for the
issuances was $24 million, $16.5 million of which was received by the Company
on July 8, 1998 and $7.5 million of which was received by the Company on July
20, 1998. The Company also agreed to register for resale the Common Shares,
Repricing Common Shares and Warrant Common Shares pursuant to the terms of a
registration rights agreement (the "Registration Rights Agreement"). Initially
capitalized terms used but not defined in this section "Private Equity
Placement" have the meanings ascribed to such terms in the Purchase Agreement
filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by
reference herein
On July 8, 1998, Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI"), exercised certain
warrants to acquire an aggregate of 908,935 shares of Common Stock for an
aggregate exercise price of approximately $3.3 million and exercised certain
nondilution rights to purchase 693,301 shares of the Company's Common Stock for
an aggregate purchase price of $1.67 million. A second holder of warrants
exercised warrants on July 8, 1998 to acquire an aggregate of 1,400,000 shares
of Common Stock. The Company received approximately $3.5 million for the
exercise of these warrants.
REPRICING RIGHTS
Pursuant to the Purchase Agreement, each of the Buyers (or their
permitted assignees or successors) may exercise its Repricing Rights and
acquire shares of Common Stock in accordance with the following formula (the
"Repricing Rate"):
(Repricing Price -- Market Price)
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Market Price
The "Repricing Price" means, (i) during the period beginning on and
including the date which is 121 days after the Closing Date and ending on and
including the date which is 150 days after the Closing Date, 124% of the
Purchase Price, (ii) during the period beginning on and including the date
which is 151 days after the Closing Date and ending on and including the date
which is 180 days after the Closing Date, 125% of the Purchase Price, (iii)
during the period beginning on and including the date which is 181 days after
the Closing Date and ending on and including the date which is 210 days after
the Closing Date, 126% of the Purchase Price, (iv) during the period beginning
on and including the date which is 211 days after the Closing Date and ending
on and including the date which is 240 days after the Closing Date, 127% of the
Purchase Price and (v) after the date which is 240 days after the Closing Date,
128% of the Purchase Price.
The "Market Price" means, as of any date of determination, the lowest
closing bid price during the fifteen consecutive trading days immediately
preceding such date of determination.
The Repricing Rate is multiplied by the number of Common Shares the
Buyer has chosen to reprice in order to determine the number of shares to be
issued to the Buyer.
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If the Company fails to issue a stock certificate for the number of
shares of Common Stock to which the holder is entitled or to credit the
holder's balance account with The Depository Trust Company for such number of
shares of Common Stock to which the holder is entitled upon such holder's
exercise of the Repricing Rights within three trading days after the Company's
or the transfer agent's receipt of the exercise notice, the Company shall pay
damages to such holder on each day after the third trading day that such
exercise is not effected. The amount of damages shall equal 0.5% of the product
of (i) the sum of the number of shares of Common Stock not issued to the holder
on a timely basis and (ii) the closing bid price of the Common Stock on the
last possible date which the Company could have issued such Common Stock
without violating its delivery requirements. In addition, if the Buyer to whom
the Company has failed to timely deliver the shares is forced to purchase other
outstanding shares of Common Stock of the Company in order to cover a sale
order by such Buyer (a "Buy-In"), then the Company will be required to pay to
such Buyer the positive difference between the price at which the Buyer bought
its covering shares and the sale price in respect of the shares sold by it.
The right of a holder of Repricing Rights to exercise such Repricing
Rights is limited as set forth below.
(i) Without the prior written consent of the Company, a
holder of Repricing Rights shall not be entitled to exercise an
aggregate number of Repricing Rights in excess of the number of
Repricing Rights which when divided by the number of Repricing Rights
purchased by such holder would exceed (A) 0.00 for the period
beginning on July 8, 1998 and ending on and including the 120th day
thereafter, (B) 0.25 for the period beginning on the 121st day after
July 8, 1998 and ending on and including the 150th day after July 8,
1998, (C) 0.50 for the period beginning on and including the 151st day
after July 8, 1998 and ending on and including the 180th day after
July 8, 1998, (D) 0.75 for the period beginning on the 181st day after
July 8, 1998 and ending on and including the 210th day after July 8,
1998, and (E) 1.00 for the period beginning on and including the 211th
day after July 8, 1998. This exercise restriction shall cease to apply
if a Major Transaction (as defined below) or Triggering Event (as
defined below) shall have occurred or been publicly announced or if a
registration statement meeting the requirements of the Registration
Rights Agreement shall not have been declared effective by the 180th
day after July 8, 1998.
(ii) As more fully described in the Purchase Agreement, a
holder of Repricing Rights shall not be entitled to exercise Repricing
Rights in excess of that number of Repricing Rights which, upon giving
effect to such exercise, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to
exceed 4.99% of the outstanding number of shares of the Common Stock
following such exercise. Such restriction is waivable by a holder
upon at least 61 days notice. In addition, as more fully described in
the Purchase Agreement, a holder of Repricing Rights shall not be
entitled to exercise Repricing Rights in excess of that number of
Repricing Rights which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates to exceed 9.99% of the
outstanding number of shares of the Common Stock following such
exercise. Such restriction is waivable by a holder upon at least 61
days notice.
In addition to the exercise restrictions, a Buyer's right to exercise
its Repricing Right terminates automatically (i) if the Initial Common Share
with respect to which such Repricing Right was acquired is sold prior to the
date which is 181 days after the date on which such Repricing Right was
acquired, (ii) if the Initial Common Share with respect to which such Repricing
Right was acquired is sold on or after the date which is 181 days after the
Closing Date on which such Repricing Right was acquired at a price equal to or
greater than the Repricing Price in effect on the date of such sale, (iii) on
the date immediately following the date which is one year after the date of the
sale of the Initial Common Share with respect to which such Repricing Right was
acquired and (iv) if the Buyer elects to terminate the Repricing Right in lieu
of the Company repurchasing such Buyer's related Initial Common Share.
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COMPANY REPURCHASE RIGHTS
Pursuant to the Purchase Agreement, the Company may elect to
repurchase Repricing Rights exercised in lieu of issuing Repricing Common
Shares upon such exercise if the average closing bid price of the Common Stock
for the five day trading period immediately preceding the exercise date of the
Repricing Rights is not greater than $5.30. The repurchase price per Repricing
Right shall be equal to the product of (i) the Repricing Rate of the Repricing
Right on the exercise date and (ii) the last reported sale price of the Common
Stock on the exercise date.
The Company may also elect to repurchase any or all of the Common
Shares issued to the Buyers and the Repricing Rights associated with such
Common Shares at any time prior to the Repricing Rights being exercised. The
repurchase price per Repricing Right shall be an amount per Common Share and
associated Repricing Right equal to (i) 119% of the Purchase Price, if the
repurchase date is prior to the date which is 120 days after the Closing Date
and (ii) 128% of the Purchase Price, if the repurchase date is on or after the
date which is 120 days after the Closing Date.
HOLDER PUT RIGHTS
Pursuant to the Purchase Agreement, each holder of Common Shares or
Repricing Rights, has the right to require the Company to repurchase all or a
portion of such holder's Common Shares or Repricing Rights upon the occurrence
of a Major Transaction or a Triggering Event. The repurchase price is equal to
(i) for each Common Share with an associated Repricing Right, the greater of
(A) 130% of the Purchase Price and (B) the sum of (i) the Purchase Price and
(ii) the product of (x) the Repricing Rate of the Repricing Right on the date
of such holder's delivery of a notice of repurchase and (y) the last reported
sale price of the Common Stock on the delivery date of a notice of repurchase,
(ii) for each Repricing Right without the associated Common Share, the product
of (A) the Repricing Rate of the Repricing Right on the date such holder's
delivery of a notice of repurchase and (B) the last reported sale price of the
Common Stock on the date of such holder's delivery of notice of repurchase and
(iii) for each Common Share without an associated Repricing Right, 130% of the
Purchase Price.
A "Major Transaction" is deemed to have occurred at such time as any
of the following events:
(i) the consolidation, merger or other business
combination of the Company with or into another person (other than (A)
a consolidation, merger or other business combination in which holders
of the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the
voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent
if other than a corporation) of such surviving entity or entities, or
(B) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or substantially all of
the Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 40% of the outstanding shares of
Common Stock.
A "Triggering Event" is deemed to have occurred at such time as any of
the following events:
(i) a registration statement in respect of the resale of
the Common Shares, Repricing Common Shares and Warrant Common Shares
(the "Resale Registration Statement") has not been deemed effective by
the Commission on or prior to the 210th day after the Closing Date;
(ii) the effectiveness of the Resale Registration
Statement lapses for any reason or is unavailable for sale of the
Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or
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<PAGE> 10
unavailability continues for a period of ten trading days in aggregate
(excluding any "blackout" periods permitted by the terms of the
Registration Rights Agreement);
(iii) the Common Stock is suspended from listing or is
delisted from The Nasdaq SmallCap Market or on any subsequent market
for a period of five consecutive days, unless such delisting is due to
the Company having the Common Stock relisted on a subsequent market
within such five day period;
(iv) the Company notifies any holder of Repricing Rights,
including by way of public announcement, at any time, of its intention
not to comply or inability to comply with proper requests for exercise
of any Repricing Rights into shares of Common Stock;
(v) the Company fails to deliver shares of Common Stock
pursuant to the exercise of Repricing Rights within ten days of an
exercise date or to pay the amount due in respect of a Buy-In within
ten days after notice of such Buy-In is delivered to the Company;
(vi) the Company is not required to issue any Repricing
Common Shares pursuant to the exercise of Repricing Rights due to
certain restrictions imposed under the rules and regulations of The
Nasdaq Stock Market or the Company is otherwise unable to issue shares
of Common Stock upon delivery of an exercise notice for any reason;
(vii) if stockholder approval of the issuance of the
securities is required, the Company's stockholders fail to approve the
issuance of the shares of Common Stock upon the exercise of Repricing
Rights within 135 days of a Proxy Statement Trigger Date (as defined
in the Purchase Agreement);
(viii) the Company breaches any representation, warranty,
covenant or other material term or condition of the Purchase
Agreement, the Warrants, the Registration Rights Agreement or the
irrevocable transfer agent instructions or any other agreement,
document, certificate or other instrument delivered in connection with
the transactions contemplated thereby or hereby, and such breach, if
curable, continues for a period of at least ten days after written
notice thereof to the Company; or
(ix) a voluntary or involuntary case or proceeding is
commenced by or against the Company or a subsidiary under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar proceeding (excluding any involuntary proceeding that is
dismissed within thirty days of the filing thereof).
At any time after receipt of a notice from the Company that a Major
Transaction is to occur (or, in the event a notice is not delivered at least
ten days prior to a Major Transaction), any holder of Common Shares, Repricing
Common Shares or Repricing Rights then outstanding may require the Company to
repurchase all or a portion of the holder's Common Shares, Repricing Common
Shares or Repricing Rights. At any time after the earlier of a holder's
receipt of a notice from the Company that a Triggering Event has occurred and
such holder becoming aware of a Triggering Event, but in no event later than
fifteen business days after a holder's receipt of such notice, any holder of
Common Shares, Repricing Common Shares or Repricing Rights then outstanding may
require the Company to repurchase all or a portion of the holder's Common
Shares, Repricing Common Shares or Repricing Rights.
The Company shall deliver the applicable repurchase price, in the case
of a repurchase pursuant to the occurrence of a Triggering Event, to such
holder within five business days after the Company's receipt of a notice of
repurchase from the holder and, in the case of a repurchase pursuant to the
occurrence of a Major Transaction, the Company shall deliver the applicable
repurchase price immediately prior to the consummation of the Major
Transaction; provided that if Common Shares are being repurchased, the holder's
stock certificates shall have been delivered to the Company; provided further
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<PAGE> 11
that if the Company is unable to repurchase all of the Common Shares or the
Repricing Rights to be repurchased, the Company shall repurchase an amount from
each holder on a pro rata basis.
OTHER TERMS OF THE PURCHASE AGREEMENT
The Purchase Agreement contains customary representations and
warranties of the Company for transactions of this type.
Pursuant to the Purchase Agreement, the Company has covenanted, among
other things, to abide by certain limitations on the Company's ability to raise
equity (the "Capital Raising Limitation"). The Capital Raising Limitation
prohibits the Company and its subsidiaries from negotiating with any party for
any equity financing or issue any equity securities of the Company or any
subsidiary or securities convertible or exchangeable into or for equity
securities of the Company or any subsidiary during the period beginning on July
8, 1998 and ending on and including the 365th day after the Closing Date unless
it first delivers a written notice of the future offering to each Buyer and
provides each Buyer an option to purchase up to its pro rata portion of the
shares to be offered in the future offering.
In addition, on or before November 4, 1998, the Company must provide
stockholders of the Company with a proxy statement relating to the next meeting
of stockholders of the Company, which meeting shall be not later than 60 days
after November 4, 1998, which proxy statement solicits the affirmative vote of
the stockholders for approval of the Company's issuance of all of the
Securities described in the Purchase Agreement (including the approval of
issuances as may be required by the Rules of the Nasdaq Stock Market, Inc.).
If the Company fails to hold the meeting by the deadline described above, then
the Company shall pay to each Buyer an amount in cash equal to the product of
(i) the aggregate Purchase Price paid by such Buyer multiplied by (ii) .025;
multiplied by (iii) the quotient of (x) the number of days after the deadline
that a meeting is not held, divided by (y) 30.
WARRANTS
Pursuant to the Purchase Agreement, on July 8, 1998 the Company issued
the Warrants to the Buyers. The Warrants are exercisable for three years
commencing July 8, 1998. The Warrants are exercisable for an aggregate of up
to 925,000 shares of Common Stock at an exercise price equal to 110% of the
Purchase Price. The 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 Warrants also include customary provisions with respect to, among
other things, transfer of the Warrants, mutilated or lost warrant certificates,
and notices to holder(s) of the Warrants.
REGISTRATION RIGHTS AGREEMENT
None of the Common Shares, the Repricing Common Shares or the Warrant
Common Shares will be registered under the Securities Act and therefore, will
be, when issued, "restricted securities." Effective July 8, 1998, the Company
entered into a Registration Rights Agreement with the Buyers pursuant to which
the Buyers are entitled to certain rights with respect to the registration
under the Securities Act of the Common Shares, the Repricing Common Shares and
the Warrant Common Shares (the "Registrable Securities").
Pursuant to the Registration Rights Agreement, the Company agreed to
file a registration statement on Form S-3 on or before September 5, 1998,
covering the resale of all of the Registrable Securities. The Company is
required to use its best efforts to cause such registration statement to become
effective as soon as practicable following the filing thereof; but in no event
later than the earlier of (i) November 4, 1998 and (ii) the fifth business day
after the Company learns that the Commission will not review the registration
statement or that the Commission has no further comments on the registration
statement. If the registration statement does not become effective by this
date, then the Company is required to make
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<PAGE> 12
cash payments to the holders of the Registrable Securities equal to 2.0% of the
aggregate Purchase Price paid by each holder on the first day of each month
during the default. The Registration Rights Agreement also provides for
unlimited piggyback registration rights prior to the expiration of the
registration period for the Registrable Securities. The Company generally
bears the expense of any registration statement, while selling holders
generally bear selling expenses such as underwriting fees and discounts. The
Registration Rights Agreement also includes customary indemnification
provisions. In addition, under the Purchase Agreement, the Company cannot file
a registration statement (other than a registration statement filed pursuant to
the Registration Rights Agreement, a registration statement filed pursuant to a
demand registration right or a registration statement on Form S-8) covering the
sale or resale of shares of Common Stock with the Securities and Exchange
Commission beginning on July 8, 1998 and ending on the 60th trading day after
the date that the registration statement filed on behalf of the holders has
been declared effective by the Securities an d Exchange Commission.
PLACEMENT AGENT
The Company paid $1.5 million cash and issued warrants to purchase
400,000 shares of the Company's Common Stock in consideration for Jesup &
Lamont Securities Corp., Phillip Louis Trading Co., Inc. and Laidlaw & Co.
acting as the placement agents in connection with the Private Equity Placements
to the Buyers.
ITEM 7. EXHIBITS.
1.1 Purchase Agreement dated June 30, 1998 among Queen Sand
Resources, Inc., a Delaware corporation (the "Company"),
Nesbitt Burns Securities Inc., CIBC Oppenheimer Corp. and
Societe Generale Securities Corporation.
4.1 Indenture dated as of July 8, 1998 among the Company, Queen
Sand Resources, Inc., a Nevada corporation ("QSR-N"),
Northland Operating Co., a Nevada corporation ("Northland"),
Corrida Resources, Inc., a Nevada corporation ("Corrida"), and
Harris Trust and Savings Bank.
4.2 Form of Warrant dated as of July 8, 1998 for the purchase of
shares of Common Stock issued by the Company to the persons
named on Schedule A.
10.1 Amended and Restated Securities Purchase Agreement dated as of
July 8, 1998 among Queen Sand Resources, Inc. and the buyers
signatory thereto.
10.2 Registration Rights Agreement dated as of July 8, 1998 among
the Company, QSR-N, Northland, Corrida, Nesbitt Burns
Securities, Inc., CIBC Oppenheimer Corp. and Societe Generale
Securities Corporation.
10.3 Registration Rights Agreement dated as of July 8, 1998 among
the Company and the buyers signatory thereto.
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<PAGE> 13
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: July 21, 1998 By: /s/ EDWARD J. MUNDEN
---------------------------------------
Name: Edward J. Munden
Title: Chief Executive Officer,
President and Chairman of the
Board
<PAGE> 14
EXHIBITS
<TABLE>
<S> <C>
1.1 Purchase Agreement dated June 30, 1998 among Queen Sand Resources, Inc., a Delaware corporation (the
"Company"), Nesbitt Burns Securities Inc., CIBC Oppenheimer Corp. and Societe Generale Securities Corporation.
4.1 Indenture dated as of July 8, 1998 among the Company, Queen Sand Resources, Inc., a Nevada corporation ("QSR-
N"), Northland Operating Co., a Nevada corporation ("Northland"), Corrida Resources, Inc., a Nevada corporation
("Corrida"), and Harris Trust and Savings Bank.
4.2 Form of Warrant dated as of July 8, 1998 for the purchase of shares of Common Stock issued by the Company to
the persons named on Schedule A.
10.1 Amended and Restated Securities Purchase Agreement dated as of July 8, 1998 among Queen Sand Resources, Inc.
and the buyers signatory thereto.
10.2 Registration Rights Agreement dated as of July 8, 1998 among the Company, QSR-N, Northland, Corrida, Nesbitt
Burns Securities, Inc., CIBC Oppenheimer Corp. and Societe Generale Securities Corporation.
10.3 Registration Rights Agreement dated as of July 8, 1998 among the Company and the buyers signatory thereto.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
QUEEN SAND RESOURCES, INC.
$125,000,000 12 1/2% Senior Notes due 2008
PURCHASE AGREEMENT
June 30, 1998
Nesbitt Burns Securities Inc.
CIBC Oppenheimer Corp.
Societe Generale Securities Corporation
c/o Nesbitt Burns Securities Inc.
111 West Monroe Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Queen Sand Resources, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Nesbitt Burns Securities Inc., CIBC Oppenheimer
Corp. and Societe Generale Securities Corp. (each, a "Purchaser" and together,
the "Purchasers") an aggregate of $125,000,000 principal amount of its 12 1/2%
Senior Notes due 2008 (the "Notes"), subject to the terms and conditions set
forth in this Purchase Agreement (herein "this Agreement"). The Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture") to be
dated as of July 1, 1998, among the Company, the Subsidiary Guarantors named
therein and Harris Trust and Savings Bank, as trustee (the "Trustee"). The
Notes will be guaranteed (the "Subsidiary Guarantees") by all existing and
future Restricted Subsidiaries (as defined in the Indenture) of the Company
(the "Subsidiary Guarantors"), as further provided in the Indenture.
The sale of the Notes to the Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof. The
Purchasers have advised the Company that the Purchasers will make offers of the
Notes purchased hereunder in accordance with Section 5 hereof on the terms set
forth in the Offering Memorandum, as amended or supplemented (as defined
below), as soon as the Purchasers deem advisable after this Agreement has been
executed and delivered, solely to (i) persons whom the Purchasers reasonably
believe to be "qualified institutional buyers" as defined in Rule 144A under
the Securities Act ("QIBs"), (ii) a limited number of institutional "accredited
investors" (as defined in rule 501(a)(1), (2), (3) or (7) under the Securities
Act) and (iii) to certain persons outside the United States in reliance on
Regulation S under the Securities Act.
<PAGE> 2
In connection with the sale of the Notes, the Company and the
Subsidiary Guarantors have prepared a preliminary offering memorandum, dated
May 27, 1998 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated June 30, 1998 (the "Offering Memorandum"), each setting forth
certain information concerning the Company, the Subsidiary Guarantors, the
Notes and the Subsidiary Guarantees. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale by the Purchasers of the
Notes. Any references herein to the Offering Memorandum shall be deemed to
include all exhibits thereto.
1. Representations and Warranties of the Company and the
Subsidiary Guarantors. Each of the Company and the Subsidiary Guarantors
represents and warrants to, and agrees with, the Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates did not, and the Offering Memorandum
(as the same may have been amended or supplemented) as of the Closing Date (as
defined below) will not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted
from the Preliminary Offering Memorandum and the Offering Memorandum (and any
amendment or supplement thereof or thereto) based solely upon information
furnished in writing to the Company by or on behalf of any Purchaser relating
to such Purchaser specifically for inclusion therein.
(b) The documents filed by the Company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") at the time they were
filed with the Commission, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein, in light
of the circumstances under which they were made, or necessary to make the
statements therein not misleading.
(c) Each of the Company and the Subsidiary Guarantors has been
duly organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of organization. Each of the Company and the
Subsidiary Guarantors has full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum. Each of the Company and the Subsidiary Guarantors is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which such qualification is required, except
where the failure to be so qualified or in good standing would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
(d) The Company's authorized capitalization is as set forth in the
Offering Memorandum, and all of the issued shares of capital stock of the
Company have been duly and
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<PAGE> 3
validly authorized and issued and are fully paid and nonassessable and conform
to the description thereof contained in the Offering Memorandum.
(e) All the outstanding shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the Offering
Memorandum, all outstanding shares of capital stock of the subsidiaries are
owned by the Company, either directly or through wholly owned subsidiaries free
and clear of any security interests, claims, liens, encumbrances or any other
claim of any third party.
(f) Since the date of the most recent financial statements
included or incorporated by reference in the Offering Memorandum (exclusive of
any amendment or supplement thereof or thereto), there has been no material
adverse change, or any development which could reasonably be expected to result
in a material adverse change, in the business, prospects, financial condition
or results of operations of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of business,
except as set forth in the Offering Memorandum (exclusive of any amendment or
supplement thereof or thereto); and, since the respective dates as of which
information is given in the Offering Memorandum, there has not been any change
in the capital stock (other than grants of options and issuances of common
stock pursuant to existing employee stock option plans or the exercise of
outstanding warrants to purchase shares of common stock) of the Company or any
of its subsidiaries or long-term debt of the Company or any of its
subsidiaries.
(g) Except as disclosed in the Offering Memorandum, there is no
action, suit, proceeding, inquiry or investigation before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or any
subsidiary thereof which might reasonably be expected to result in a (i)
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its Subsidiaries taken as whole or
(ii) adversely affect in any manner the validity of this Agreement or any other
agreement entered into in connection with the issuance of and sale of the Notes
(the events referred to in clauses (i) through (ii), a "Material Adverse
Effect");
(h) Ernst & Young L.L.P. and KPMG Peat Marwick L.L.P., who have
certified certain financial statements included or incorporated by reference in
the Offering Memorandum, are independent public accountants within the meaning
of the Securities Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder.
(i) The consolidated historical financial statements (including
the related notes and supporting schedules) included or incorporated by
reference in the Offering Memorandum present fairly the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
indicated and the consolidated results of the operations and cash flows of the
Company and its consolidated subsidiaries for the periods specified. Such
financial statements (except as disclosed in the notes thereto or otherwise
stated therein) have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
3
<PAGE> 4
involved. The selected historical consolidated financial data and the summary
historical financial information included in the Offering Memorandum present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited consolidated historical financial
statements included or incorporated by reference in the Offering Memorandum
except as otherwise specifically stated in the Offering Memorandum. The pro
forma condensed consolidated financial statements and other pro forma
consolidated financial information included in the Offering Memorandum have
been prepared on a basis consistent with such historical consolidated financial
statements, except as described in such pro forma financial statements and
except for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical and
proposed transactions described in the pro forma financial statements.
(j) Except as would not have a Material Adverse Effect, (i) the
Company and its subsidiaries possess all material licenses, certificates,
authorizations, permits and other authorizations issued by, (ii) have made all
declarations and filings with, the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary for the ownership of their respective
properties or the conduct of their respective businesses as described in the
Offering Memorandum and (iii) are in compliance with all such certificates,
authorities, permits and other authorizations. Neither the Company nor any of
its subsidiaries has received any written notice of proceedings relating to the
revocation or modification of any such certificate, authority, permit or other
authorization, other than any such revocation or modification that could not
reasonably be expected to, singly or in the aggregate, have a Material Adverse
Effect.
(k) The Company and its subsidiaries have good and defensible
title to all real property owned by the Company and its subsidiaries and good
title to all other properties owned by them, in each case, free and clear of
all mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the Offering
Memorandum or (b) would not, singly or in the aggregate, have a Material
Adverse Effect; and all of the leases and subleases (excluding such interests
in oil and gas properties and similar industry property interests) material to
the business of the Company and its subsidiaries, considered as one enterprise,
and under which the Company or any of its subsidiaries holds properties
described in the Offering Memorandum, are in full force and effect, and neither
the Company nor any of its subsidiaries has any notice of any material claim of
any sort that has been asserted by anyone adverse to the rights of the Company
or any of its subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of such the Company or any
subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease.
(l) The Company and each of its subsidiaries have timely filed all
United States federal income tax returns and all other material tax returns
which are required to be filed by them (except where the failure to so file any
such return could not reasonably be expected to have a Material Adverse Effect)
and have paid all taxes due and payable and any related assessments, fines or
penalties (other than taxes, assessments, fines or penalties, the payment of
which are being contested in good faith or the failure to pay which would not
have a Material
4
<PAGE> 5
Adverse Effect), and no tax liens have been filed and no claims are being
asserted with respect to any such taxes, which could reasonably be expected to
have a Material Adverse Effect.
(m) The present fair salable value of the assets of each of the
Company and the Subsidiary Guarantors exceed the amount that will be required
to be paid on or in respect of the existing debts and other liabilities
(including the maximum amount of liability that would reasonably be expected to
result from contingent liabilities) of the Company and the Subsidiary
Guarantors, respectively, as they mature; the respective assets of the Company
and the Subsidiary Guarantors do not constitute unreasonably small capital to
carry out their respective businesses as conducted or as proposed to be
conducted; neither the Company nor the Subsidiary Guarantors intend to, and do
not believe that they will, incur debts beyond their ability to pay such debts
as they mature; upon the issuance of the Notes and the Subsidiary Guarantees,
the present fair salable value of the assets of the Company and its
subsidiaries, taken as a whole, will exceed the amount that will be required to
be paid on or in respect of the existing debts and other liabilities (including
the maximum amount of liability that would reasonably be expected to result
from contingent liabilities) of the Company and its subsidiaries, taken as a
whole, as they mature; the assets of the Company and its subsidiaries, taken as
a whole, do not, and upon the issuance of the Notes and the Subsidiary
Guarantees will not, constitute unreasonably small capital for the Company and
its subsidiaries, taken as a whole, to carry out their respective business as
now conducted or as proposed to be conducted including the capital needs of the
Company and its subsidiaries, and projected capital requirements of the
business conducted by the Company and each of its subsidiaries, and projected
capital requirements and capital availability thereof; and neither the Company
nor the Subsidiary Guarantors intend to, and do not intend to permit any of
their subsidiaries to, incur debts beyond their respective ability to pay such
debts as they mature.
(n) The oil and gas reserve estimates of the Company and its
subsidiaries contained in the Offering Memorandum have been prepared by
independent petroleum consultants listed in the Offering Memorandum, and
neither the Company nor any of its subsidiaries has any reason to believe that
such estimates do not fairly reflect the oil and gas reserves of the Company
and its subsidiaries at the dates indicated.
(o) The Company and each of its subsidiaries have good and
defensible title to their respective interests in oil and gas properties, title
investigations having been carried out by or on behalf of the Company or its
subsidiaries in accordance with good practice in the oil and gas industry in
the areas in which they operate.
(p) The information provided by the Company or any of the
Subsidiaries to the Petroleum Consultants (as hereinafter defined) for the
preparation of the estimates of reserves in the reserve reports for the oil and
gas properties of the Company prepared by H.J. Gruy and Associates, Inc., Harper
and Associates, Inc., Ryder Scott Company and Joe C. Neal & Associates,
independent petroleum consultants (collectively the "Petroleum Consultants"),
were at the respective times of delivery thereof to the Petroleum Consultants
complete and accurate in all material respects. The Purchasers have received a
true and correct copy of the reserve
5
<PAGE> 6
reports referred to in the Offering Memorandum under "Experts" (each a "Reserve
Report"), and each of the Reserve Reports and the letters from each of the
Petroleum Consultants to the Company with respect thereto have been reviewed,
and accepted as having a reasonable basis, by the Company. The estimates of
reserves in the Reserve Reports were prepared in accordance with standard
geological and engineering methods generally accepted in the oil and gas
industry.
(q) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other release of any
kind of toxic or other wastes or other hazardous substances, including, but not
limited to, brine, crude oil, natural gas liquids and other petroleum
materials, by, due to, or caused by the Company or any of its subsidiaries (or,
to the best of the Company's knowledge, any other entity for whose acts or
omissions the Company or any of its subsidiaries is or may be liable) upon any
of the property now or, to the best of the Company's knowledge, previously
owned or leased by the Company or any of its subsidiaries in violation of any
statute or any ordinance, rule, regulation, order, judgment, decree or permit
or which would, under any statute or any ordinance, rule (including rule of
common law), regulation, order, judgment, decree or permit, give rise to any
liability, except for any violation or liability which would not have,
singularly or in the aggregate with all such violations and liabilities, a
Material Adverse Effect; there has been no disposal, discharge, emission or
other release of any kind onto such property or into the environment
surrounding such property or any toxic or other wastes or other hazardous
substances with respect to which the Company or any of its subsidiaries have
knowledge, except for any such disposal, discharge, emission, or other release
of any kind which would not have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect.
(r) As of the date hereof, (1) all royalties, rentals, deposits
and other amounts due on the oil and gas properties of and payable by the
Company and its subsidiaries have been properly and timely paid, and no
proceeds from the sale or production attributable to the oil and gas properties
of the Company and its subsidiaries are currently being held in suspense by any
purchaser thereof, except where such amount due could not, singly or in the
aggregate, have a Material Adverse Effect and (2) there are no claims under
take-or-pay contracts pursuant to which natural gas purchasers have any make-up
rights affecting the interest of the Company and its subsidiaries in its oil
and gas properties, except where such claims could not, singly or in the
aggregate, have a Material Adverse Effect.
(s) As of the date hereof, the aggregate undiscounted monetary
liability of the Company and its subsidiaries for petroleum taken or received
under any operating or gas balancing and storage agreement relating to its oil
and gas properties that permits any person to receive any portion of the
interest of the Company and its subsidiaries in any petroleum or to receive
cash or other payments to balance any disproportionate allocations of petroleum
could not, singly or in the aggregate, have a Material Adverse Effect.
(t) This Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
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<PAGE> 7
(u) The Indenture has been duly authorized by the Company and each
Subsidiary Guarantor and, when duly executed and delivered by the proper
officers of the Company and each Subsidiary Guarantor, will constitute a valid
and binding agreement of the Company and each Subsidiary Guarantor enforceable
against the Company and each Subsidiary Guarantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(v) The registration rights agreement to be dated as of the
Closing Date, among the Company, the Subsidiary Guarantors and the Purchasers
(the "Registration Rights Agreement") has been duly authorized by the Company
and each Subsidiary Guarantor and, when executed and delivered by the proper
officers of the Company and each Subsidiary Guarantor, will constitute a valid
and binding agreement of the Company and each Subsidiary Guarantor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(w) The Notes have been duly authorized by the Company and, when
duly executed, authenticated, issued and delivered as provided in the
Indenture, will be duly and validly issued and outstanding and will constitute
valid and binding obligations of the Company entitled to the benefits of the
Indenture and enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and the
Indenture and the Notes conform in all material respects to the descriptions
thereof contained in the Offering Memorandum.
(x) Each Subsidiary Guarantee has been duly authorized by each
Subsidiary Guarantor and, when duly executed, authenticated, issued and
delivered as provided in the Indenture and when the Notes have been issued and
authenticated in accordance with the terms of the Indenture and delivered to
and paid for by the Purchasers in accordance with the terms of this Agreement,
will be duly and validly issued and outstanding and will constitute valid and
binding obligations of each Subsidiary Guarantor entitled to the benefits of
the Indenture and enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(y) Neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any of its
subsidiaries is
7
<PAGE> 8
a party or by which or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(collectively, "Agreements and Instruments") except for such defaults that
would not result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement, the Indenture and the Registration Rights
Agreement by the Company and each of the Subsidiary Guarantors, the Notes by
the Company, the Guarantees by each of the Subsidiary Guarantors and any other
agreement or instrument entered into or issued or to be entered into or issued
by the Company or the Subsidiary Guarantors in connection with the transactions
contemplated hereby or thereby or in the Offering Memorandum and the
consummation of the transactions contemplated herein and in the Offering
Memorandum (including the issuance and sale of the Notes and the use of the
proceeds from the sale of the Notes as described in the Offering Memorandum
under the caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or default or
a Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, the Agreements and
Instruments except for such conflicts, breaches or defaults or liens, charges
or encumbrances that, singly or in the aggregate, would not result in a
Material Adverse Effect, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any of its subsidiaries
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or any
of their assets or properties. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any of its subsidiaries.
(z) No consent, approval, authorization or order of, or filing or
registration with, any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Indenture and the
Registration Rights Agreement by the Company and the Subsidiary Guarantors and
the Notes by the Company and the Subsidiary Guarantees by the Subsidiary
Guarantors and consummation of the transactions contemplated herein and
therein, except (i) such as may be required under foreign and Federal
securities laws and applicable state securities or "blue sky" laws in
connection with the purchase and distribution of the Notes by the Purchasers
(including a notice of sales on Form D pursuant to Rule 503 promulgated under
the Securities Act), (ii) the filing and effectiveness of a Registration
Statement as contemplated by the Registration Rights Agreement, (iii) such
approvals, registrations and qualifications as may be required under the
Securities Act, the Trust Indenture Act, and applicable state securities or
Blue Sky laws in connection with the exchange offer or resale registration
contemplated by the Offering Memorandum and set forth in the Registration
Rights Agreement, and (iv) such consents, approvals, authorizations,
registrations, filings or qualifications as may have been obtained or made or
of which the failure to obtain would not have a Material Adverse Effect.
8
<PAGE> 9
(aa) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act, in
connection with the offering of the Notes.
(bb) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) of the
Company has directly, or through any agent (provided that no representation is
made as to the Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require the
registration of the Notes under the Securities Act or (ii) engaged in any form
of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offering of the Notes.
(cc) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Purchasers in the manner contemplated by this
Agreement to register the Notes under the Securities Act (provided that no
representation is made as to action of the Purchasers or persons acting on
their behalf) or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
(dd) Assuming (i) that the representations and warranties of the
Purchasers in Section 4 are true, and (ii) compliance by the Purchasers with
their covenants set forth in Section 4, it is not necessary in connection with
the initial resale of the Notes by the Purchasers in the manner contemplated by
this Agreement to register the Notes under the Securities Act.
(ee) The Notes satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(ff) There is no "substantial U.S. market interest" as defined in
Rule 902(n) of Regulation S for the Notes or any security of the same class as
the Notes.
(gg) The Company, the Subsidiary Guarantors and their respective
affiliates and all persons acting on their behalf (other than the Purchasers
and their respective affiliates and all persons acting on their behalf, as to
whom the Company and the Subsidiary Guarantors make no representation) have
complied with and will comply with the "offering restrictions" requirements
(within the meaning of Regulation S) of Regulation S under the Securities Act
(including, without limitation, provisions regarding "directed selling efforts"
(within the meaning of Regulation S)) in connection with any offering of the
Notes outside the United States.
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations, warranties and covenants
contained in this Agreement, the Company agrees to issue and sell to each of
the Purchasers, and each of the Purchasers agrees to purchase from the Company,
the principal amount of the Notes set forth opposite the name of such Purchaser
on Schedule I hereto at a purchase price of 97.0% of the principal amount
thereof plus accrued interest, if any, from July 7, 1998 to the Closing Date.
9
<PAGE> 10
3. Delivery and Payment. (a) Delivery of and payment
for the Notes shall be made at the offices of Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, at 9:00 AM, New York time, on July 7, 1998,
or such other date, time or location as shall be agreed upon by the Purchasers
and the Company (such date and time of delivery and payment for the Notes being
herein called the "Closing Date"). Payment of the purchase price shall be made
to the Company by wire transfer of same day funds to an account or accounts
specified by the Company at least one business day prior to the Closing Date,
against delivery to the Purchasers for the respective accounts of the
Purchasers of the Notes to be purchased by them. Delivery of the Notes shall
be made at such location as the Purchasers shall reasonably designate at least
one business day in advance of the Closing Date.
(b) One or more of the Notes in the definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Notes (collectively, the "Global Note"),
shall be delivered by the Company to the Purchasers (or as the Purchasers
direct), in each case with any transfer taxes thereon duly paid by the Company.
The Global Note shall be made available to the Purchasers for inspection not
later than 10:30 a.m., New York time, on the business day immediately preceding
the Closing Date.
4. Offering of Notes; Restrictions on Transfer. The
several Purchasers propose to offer the Notes for resale upon the terms and
conditions set forth in this Agreement and the Offering Memorandum. Each
Purchaser hereby represents, warrants to, and agrees with the Company that:
(a) It will offer and sell the Notes only (i) to persons who it
reasonably believes are QIBs in transactions meeting the requirements of Rule
144A, (ii) a limited number of institutional "accredited investors" (as defined
in rule 501(a)(1), (2), (3) or (7) under the Securities Act) and who, as
purchasers, have executed and delivered to the Purchasers copies of the letter
set forth in Annex A to the Offering Memorandum or (iii) outside the United
States to certain persons in reliance on Regulation S under the Securities Act
upon the terms and conditions set forth in Annex I to this Agreement;
(b) It is an institutional "accredited investor" (as defined in
Rule 501 under the Securities Act) or a QIB; and
(c) It will not offer or sell the Notes by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Securities Act.
5. Agreements. The Company agrees with the Purchasers
that:
(a) The Company will furnish to the Purchasers, without charge,
during the period mentioned in paragraph (c) below, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum and any supplements
and amendments thereto as the Purchasers may
10
<PAGE> 11
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the offering.
(b) The Company will advise the Purchasers promptly of any
proposal to amend or supplement the Offering Memorandum and will not effect
such amendment or supplement without the prior consent of Nesbitt Burns
Securities Inc., which consent shall not be unreasonably withheld.
(c) If, at any time prior to the completion of the sale of the
Notes by the Purchasers, any event occurs as a result of which the Offering
Memorandum, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend or supplement the Offering
Memorandum to comply with applicable law, the Company promptly will notify the
Purchasers of the same and will prepare and provide to the Purchasers pursuant
to paragraph (a) of this Section 5 an amendment or supplement which will
correct such statement or omission or effect such compliance.
(d) The Company will use commercially reasonable efforts to
qualify the Notes for sale under the laws of such jurisdictions as the
Purchasers may reasonably designate, will use commercially reasonable efforts
to maintain such qualifications in effect so long as required for the sale of
the Notes. The Company will promptly advise the Purchasers of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. Notwithstanding the foregoing,
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(e) The Company will not solicit any offer to buy or offer or sell
the Notes by means of any form of general solicitation or general advertising
(within the meaning of Regulation D).
(f) None of the Company, its subsidiaries, its affiliates or any
person acting on behalf of any of them (other than the Purchasers and their
respective affiliates, as to whom this undertaking shall not be deemed to
apply) will engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Notes offered and sold pursuant to Regulation
S, and the Company, its subsidiaries, its affiliates and each person acting on
behalf of any of them (other than the Purchasers and their respective
affiliates, as to whom this undertaking by the Company shall not be deemed to
apply) will comply with the offering restrictions of Regulation S with respect
to those Notes offered and sold pursuant thereto.
(g) The Company shall, during any period in the two years after
the Closing Date in which the Company and the Subsidiary Guarantors are not
subject to Section 13 or 15(d) of the
11
<PAGE> 12
Exchange Act, make available, upon request, to any holder of such Notes in
connection with any sale thereof and any prospective purchaser of Notes from
such holder the information ("Rule 144A Information") specified in Rule
144A(d)(4) under the Securities Act.
(h) The Company will not, and will not permit any of its
subsidiaries to, resell any Notes which constitute "restricted securities"
under Rule 144 that have been acquired by any of them, otherwise than pursuant
to an effective registration statement under the Securities Act.
(i) Neither the Company nor any subsidiary will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) the offering of which security will be
integrated with the sale of the Notes in a manner which would require the
registration of the Notes under the Securities Act.
(j) The Company shall use commercial reasonable efforts in
cooperation with the Purchasers to permit the Notes to be eligible for
clearance and settlement through The Depository Trust Company, the Euroclear
System and Cedel Bank, societe anonyme.
(k) The Company will not, for a period of 90 days following the
date hereof, without the prior written consent of Nesbitt Burns Securities
Inc., offer, sell or contract to sell, or otherwise transfer or dispose of,
directly or indirectly, or announce the offering of, any debt securities issued
or guaranteed by the Company substantially similar to the Notes (other than the
securities offered pursuant to an Exchange Offer Registration Statement for the
Notes).
(l) The Company shall use its best efforts, in cooperation with
the Purchasers, to cause the Notes to be eligible for and designated for
trading on the PORTAL trading system of the National Association of Securities
Dealers, Inc.
6. Conditions to the Obligations of the Purchasers. The
obligations of the Purchasers to purchase the Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All representations and warranties of the Company and the
Subsidiary Guarantors contained in this Agreement shall be true and correct on
the date hereof and on the Closing Date with the same force and effect as if
made on and as of the Closing Date.
(b) The Company shall have furnished to the Purchasers the
opinion(which opinion may state that it is governed by and shall be interpreted
in accordance with the Legal Opinion Accord of the ABA Section of Business Law
(1991)) of Haynes and Boone, LLP, counsel for the Company, dated the Closing
Date, in form and substance satisfactory to the Purchasers, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware and has corporate
12
<PAGE> 13
power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum.
(ii) Each of the Subsidiary Guarantors has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of organization and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum.
(iii) The Company's authorized capitalization is as set
forth in the Offering Memorandum, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable and conform in all
material respects to the description thereof contained in the Offering
Memorandum.
(iv) All the outstanding shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise
set forth in the Offering Memorandum, all outstanding shares of
capital stock of the subsidiaries are owned by the Company, either
directly or through wholly owned subsidiaries free and clear of any
security interests, claims, liens, encumbrances or any other claim of
any third party.
(v) To the knowledge of such counsel, except as disclosed
in the Offering Memorandum, there is no action, suit, proceeding,
inquiry or investigation before or by any court or governmental agency
or body, domestic or foreign, now pending against or affecting the
Company or any subsidiary thereof which might reasonably be expected
to result in a Material Adverse Effect.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
(vii) The Indenture has been duly authorized, executed and
delivered by the Company and each Subsidiary Guarantor and constitutes
a valid and binding agreement of the Company and each Subsidiary
Guarantor enforceable against the Company and each Subsidiary
Guarantor in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(viii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and each Subsidiary
Guarantor and constitutes a valid and binding agreement of the Company
and each Subsidiary Guarantor in accordance with its terms, except as
enforceability may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, and by general equitable
principles (regardless of whether such enforceability
13
<PAGE> 14
is considered in a proceeding in equity or at law) and (B) public
policy considerations in respect of the enforceability of indemnity
provisions.
(ix) The Notes have been duly authorized, executed and
delivered by the Company and (assuming the due authentication thereof
by the Trustee) constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, and
by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and
the Indenture and the Notes conform in all material respects to the
description thereof contained in the Offering Memorandum.
(x) The Subsidiary Guarantee of each Subsidiary Guarantor
has been duly authorized, executed and delivered by such Subsidiary
Guarantor and when the Notes have been executed, authenticated and
issued in accordance with the terms of the Indenture and delivered to
and paid for by the Purchasers in accordance with this Agreement
constitutes a valid and binding obligation of such Subsidiary
Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, and by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(xii) The execution, delivery and performance of this
Agreement, the Indenture and the Registration Rights Agreement by the
Company and each of the Subsidiary Guarantors, the Notes by the
Company, the Guarantees by each of the Subsidiary Guarantors and the
consummation of the transactions contemplated herein (including the
issuance and sale of the Notes and the use of the proceeds from the
sale of the Notes as described in the Offering Memorandum under the
caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a
breach of, or default or a Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any reviewed agreement (as delivered and
defined in the opinion), except for such conflicts, breaches or
defaults or liens, charges or encumbrances that, singly or in the
aggregate, would not result in a Material Adverse Effect, nor will
such action result in any violation of the provisions of the charter
or by-laws of the Company or any of its subsidiaries or, breach or
violated any court order, any applicable law, statute, rule,
regulation, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their assets or properties and specifically
applicable to the Company which violation or breach would have a
Material Adverse Effect. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such
holder's
14
<PAGE> 15
behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Company or any of its
subsidiaries.
(xiii) No consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body
is required for the execution, delivery and performance of this
Agreement, the Indenture and the Registration Rights Agreement by the
Company and the Subsidiary Guarantors and the Notes by the Company and
the Subsidiary Guarantees by the Subsidiary Guarantors and
consummation of the transactions contemplated herein and therein,
except (A) as such may be required under foreign and United States
Federal securities laws and applicable state securities or "blue sky"
laws in connection with the purchase and distribution of the Notes by
the Purchasers (including a notice of sales on Form D pursuant to Rule
503 promulgated under the Securities Act), (B) the filing and
effectiveness of a Registration Statement as contemplated by the
Registration Rights Agreement, (C) such approvals, registrations and
qualifications as may be required under the Securities Act, the Trust
Indenture Act, and applicable state securities or Blue Sky laws in
connection with the exchange offer or resale registration contemplated
by the Offering Memorandum and set forth in the Registration Rights
Agreement, and (D) such consents, approvals, authorizations,
registrations, filings or qualifications as may have been obtained or
made or of which the failure to obtain would not have a Material
Adverse Effect.
(xiv) Neither the registration of the Notes under the
Securities Act, nor the qualification of an indenture under the Trust
Indenture Act of 1939 with respect thereto, is required for the offer
and sale of the Notes by the Company to the Purchasers or the reoffer
and resale of the Notes by the Purchasers in the manner contemplated
in this Agreement and the Offering Memorandum, other than any
registration or qualification that may be required in connection with
the Exchange Offer contemplated by the Offering Memorandum or in
connection with the Registration Rights Agreement.
(xv) The Company is not an "investment company" within the
meaning of the Investment Company Act.
(xvi) The statements in the Offering Circular under the
captions "Description of Notes," "Description of Other Indebtedness,"
"Description of Capital Stock," "Exchange Offer; Registration Rights"
and "Certain U.S. Federal Income Tax Considerations" insofar as such
statements constitute summaries of the provisions of the Company's
existing debt, the Notes, the Registration Rights Agreement, or
insofar as such statements purport to summarize federal laws of the
United States referred to thereunder, as the case may be, are accurate
in all material respects.
Such counsel shall also state that they examined various documents and
participated in conferences with representatives of the Company and its
accountants and with representatives of the Purchasers and their counsel at
which times the contents of the Offering Memorandum and related matters were
discussed. However such counsel need not pass upon nor assume any
15
<PAGE> 16
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum (except as provided above) or make any
representation that such counsel has independently verified or checked the
accuracy, completeness or fairness of such statements. Also, such counsel need
express no view as to the financial statements and other financial information
included or incorporated by reference in or excluded from the Offering
Memorandum. Subject to the foregoing, such counsel shall advise the Purchasers
that no facts have come to such counsel's attention that causes it to believe
that the Offering Memorandum and any amendments or supplements thereto made by
the Company prior to the Closing Date, contained, as of its date, or contains,
as of the Closing Date, an untrue statement of a material fact or omitted as of
its date, or omits, as of the Closing Date, to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Such counsel's opinion shall be limited to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the federal law
of the United States of America (it being understood, however, that with
respect to the validity, binding effect and enforceability of the Indenture,
the Notes and the Registration Rights Agreement, counsel may opine as if such
instruments were governed by the laws of the State of Texas). In rendering
such opinion, such counsel shall be entitled to rely, as to certain matters, on
information contained in certificates of officers of the Company.
(c) The Purchasers shall have received from Mayer, Brown & Platt,
counsel for the Purchasers, such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Notes, the Indenture, the Offering
Memorandum (together with any amendment or supplement thereof or thereto) and
other related matters as the Purchasers may reasonably require, and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Purchasers a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate have
carefully examined the Offering Memorandum, any amendment or supplement to the
Offering Memorandum and this Agreement and that:
(i) the representations and warranties of the
Company in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has complied in
all material respects with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at
or prior to the Closing Date; and
(ii) since the date of the most recent financial
statements included or incorporated by reference in the
Offering Memorandum (exclusive of any amendment or supplement
thereof or thereto), there has been no material adverse
16
<PAGE> 17
change, or any development which could reasonably be expected
to result in a material adverse change, in the business,
prospects, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Offering
Memorandum (exclusive of any amendment or supplement thereof
or thereto).
(e) On the date hereof and on and at the Closing Date, Ernst &
Young LLP shall have furnished to the Purchasers a letter or letters, dated
respectively as of the date hereof and as of the Closing Date, in form and
substance reasonably satisfactory to the Purchasers, confirming that they are
independent accountants within the meaning of the Securities Act and the Rules
of Conduct of the American Institute of Certified Public Accountants and
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to Initial Purchasers with respect to the
financial statements and certain financial information contained in the
Offering Memorandum.
(f) The Company shall have furnished to the Purchasers a letter
from each of the Petroleum Consultants dated the date of delivery thereof, in
form and substance satisfactory to the Purchasers, confirming that they are
independent petroleum consultants with respect to the Company and its
subsidiaries, attaching their report with respect to the Company's and its
subsidiaries oil and gas reserves and stating that as of the date of such
letter they have no reason to believe that the conclusions and findings of such
firm contained in such report are not true or correct (other than by reason of
changes in commodity prices since the date of the report).
(g) The Purchasers shall have received a letter (the "bring-down
letter") from each of the Petroleum Consultants, addressed to the Purchasers
and dated the Closing Date confirming, as of the Closing Date, the conclusions
and findings of such firm with respect to the information and other matters
covered by their letter delivered to the Purchasers pursuant to paragraph (f)
and confirming in all material respects the conclusions and findings set forth
in such prior letter.
(h) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereof or thereto), there shall not have been any
material adverse change, or any development which could reasonably be expected
to result in a material adverse change, in the business, prospects, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Offering Memorandum
(exclusive of any amendment or supplement thereof or thereto) the effect of
which is, in the judgment of the Purchasers so material and adverse as to make
it impracticable or inadvisable to proceed with the offering or the delivery of
the Notes on the terms and in the manner contemplated in this Agreement and the
Offering Memorandum.
(i) Subsequent to the date hereof, there shall not have been any
downgrading in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act) or any written
17
<PAGE> 18
notice given of any intended or potential downgrading in any such rating or of
a possible change in any such rating that does not indicate the direction of
the possible change.
(j) On the Closing Date, the Notes shall have been designated for
trading on PORTAL.
(k) Prior to or concurrently with the consummation of the
transaction contemplated hereby, the Company shall have consummated or shall
consummate the transactions contemplated by the Securities Purchase Agreement,
dated as of June 25, 1998, among the Company and the other parties thereto on
substantially the same terms as described in the Offering Memorandum under the
caption "Private Equity Placement."
(l) Prior to the Closing Date, the Company shall have furnished to
the Purchasers such further information, certificates and documents as the
Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Purchasers and counsel for the Purchasers, this Agreement
and all obligations of the Purchasers hereunder may be canceled at, or at any
time prior to, the Closing Date by the Purchasers. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
7. Reimbursement of Purchasers' Expenses. If the sale
of the Notes provided for herein is not consummated because any condition to
the obligations of the Purchasers set forth in Section 6 hereof is not
satisfied, or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof
other than by reason of a default by either Purchaser, the Company and the
Subsidiary Guarantors will reimburse the Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by it in connection with the proposed purchase
and sale of the Notes and the Company and the Subsidiary Guarantors shall then
be under no further liability to any Purchaser except as provided in Section 8.
8. Indemnification and Contribution. (a) The Company
and each Subsidiary Guarantor agree to indemnify and hold harmless the
Purchasers, the directors, officers, employees and agents of each Purchaser and
each person who controls any Purchaser within the meaning of either the
Securities Act or the Exchange Act, from and against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Offering Memorandum (or any amendment or
supplement thereto) or any Rule 144A Information provided by the Company to any
holder or prospective purchaser of Notes pursuant to Section 5(g), or arise out
of or are based upon the omission or
18
<PAGE> 19
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company and the Subsidiary Guarantors will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the Offering Memorandum, or in any
amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the
Purchasers relating to such Purchaser specifically for inclusion therein; and
provided, further, that the foregoing indemnity agreement with respect to the
Offering Memorandum shall not inure to the benefit of the Purchasers from whom
the person asserting or causing any such losses, claims, damages or liabilities
purchased Notes (or to the benefit of any person controlling any Purchaser or
any directors, officers, employees and agents of any Purchaser), if a copy of
the Offering Memorandum (or the Offering Memorandum as amended or supplemented)
(if the Company shall have timely furnished the Purchasers with sufficient
copies thereof) was not sent or given by or on behalf of the Purchasers to such
person at or prior to the written confirmation of the sale of the Notes to such
person and if the Offering Memorandum (or the Offering Memorandum as amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Purchasers agree to indemnify and hold harmless the
Company and the Subsidiary Guarantors, their respective directors, its
officers, and each person who controls the Company or the Subsidiary Guarantors
within the meaning of either the Securities Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company and the Subsidiary
Guarantors to the Purchasers, but only with reference to written information
relating to the Purchasers furnished to the Company by or on behalf of the
Purchasers specifically for inclusion in the Offering Memorandum or in any
amendment thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which the Purchasers may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by
19
<PAGE> 20
the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the indemnified party shall have been advised by counsel that
there may be legal defenses available to the indemnified party and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action
or (iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent (which consent shall not be
unreasonably withheld) of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be
a final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against
any loss or liability by reason of such settlement of judgment.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Subsidiary Guarantors, on
the one hand, and the Purchasers, on the other hand, agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which the Company and the Subsidiary
Guarantors, on the one hand, and the Purchasers, on the other hand, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Subsidiary Guarantors, on the one hand, and by
the Purchasers on the other hand, from the offering of the Notes; provided,
however, that in no case shall the Purchasers be responsible for any amount in
excess of the purchase discount or commission applicable to the Notes purchased
by the Purchasers hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Subsidiary Guarantors, on the one hand, and the Purchasers, on the other hand,
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Subsidiary
Guarantors, on the one hand, and of the Purchasers, on the other hand, in
connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by the
Company and the Subsidiary Guarantors shall be deemed to be equal to the total
net proceeds from the offering (before deducting expenses), and benefits
received by the Purchasers
20
<PAGE> 21
shall be deemed to be equal to the total purchase discounts and commissions, in
each case as set forth on the cover page of the Offering Memorandum. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or the Purchasers.
The Company and the Subsidiary Guarantors, on the one hand, and the Purchasers,
on the other hand, agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person who controls any Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of any Purchaser shall have the same rights to contribution as each
Purchaser, and each person who controls the Company or the Subsidiary
Guarantors within the meaning of either the Securities Act or the Exchange Act
and each officer and director of the Company and the Subsidiary Guarantors
shall have the same rights to contribution as the Company and the Subsidiary
Guarantors, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Purchasers, by written notice
given to the Company prior to delivery of and payment for the Notes, if prior
to such time any of the following events shall have occurred: (i) any outbreak
or escalation of hostilities or other national or international calamity or
crisis or change in economic conditions or in the financial markets of the
United States or elsewhere that, in the Purchasers' good faith judgment, make
it impracticable to market the Notes on the terms and in the manner
contemplated in the Offering Memorandum; (ii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market;
(iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the Purchasers'
good faith opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole; (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Purchasers' good faith opinion has a material adverse effect on the financial
markets in the Unites States and would, in the Purchasers' good faith judgment,
make it impracticable to market the Notes on the terms and in the manner
contemplated in the Offering Memorandum.
10. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Company, the Subsidiary Guarantors or their respective
officers and of the Purchasers set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by
or on
21
<PAGE> 22
behalf of the Purchasers or the Company or the Subsidiary Guarantors or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Notes. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the Purchasers, will be
mailed, delivered or sent by facsimile transmission and confirmed to them at
Nesbitt Burns Securities Inc., 111 West Monroe Street, Chicago, Illinois
60603, attention: legal department (facsimile: (312) 701-7711); or, if sent to
the Company, will be mailed, delivered or sent by facsimile transmission and
confirmed to it at Queen Sand Resources, Inc., 3500 Oak Lawn, Suite 380,
Dallas, Texas 75219, attention Chief Executive Officer (facsimile: (214)
521-9960).
12. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
the officers and directors and controlling persons referred to in Section 8
hereof, and no other person will have any right or obligation hereunder. No
purchaser of any Notes from any Purchaser should be deemed a successor or
assign by reason merely of such purchase.
13. Applicable Law. This Agreement will be governed by
and construed in accordance with the laws of the State of New York.
[Signatures appear on next page]
22
<PAGE> 23
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company, the Subsidiary Guarantors and the Purchasers.
Very truly yours,
QUEEN SAND RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
--------------------------
Name: Edward J. Munden
Title: Chief Executive
Officer, President
and Chairman of
the Board
QUEEN SAND RESOURCES, INC.,
a Nevada corporation
By: /s/ EDWARD J. MUNDEN
----------------------------
Name: Edward J. Munden
Title: President
CORRIDA RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
----------------------------
Name: Edward J. Munden
Title: President
NORTHLAND OPERATING CO.
By: /s/ EDWARD J. MUNDEN
----------------------------
Name: Edward J. Munden
Title: President
<PAGE> 24
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NESBITT BURNS SECURITIES INC.
CIBC OPPENHEIMER CORP.
SOCIETE GENERALE SECURITIES CORP.
BY: NESBITT BURNS SECURITIES INC.
By: /s/ MARK A. ROCHE
-------------------------------
Name: Mark A. Roche
Title: Managing Director
24
<PAGE> 25
SCHEDULE I
<TABLE>
Principal
Amount of
Name of Initial Purchaser Notes
------------------------- -----------
<S> <C>
Nesbitt Burns Securities Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,500,000
CIBC Oppenheimer Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000,000
Societe Generale Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500,000
-------------
Total . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . $125,000,000
============
</TABLE>
25
<PAGE> 26
ANNEX I
1. The Notes have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser represents
that it has offered and sold the Notes, and will offer and sell the Notes (i)
as part of their distribution at any time and (ii) otherwise until 40 days
after the later of the commencement of the offering and the Time of Delivery,
only in accordance with Rule 903 of Regulation S or Rule 144A under the
Securities Act or to a limited number of institutional "accredited investors"
(as defined in rule 501(a)(1), (2), (3) or (7) under the Securities Act).
Accordingly, each Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Notes, and it and they have
complied and will comply with the offering restrictions requirement of
Regulation S. Each Purchaser agrees that, at or prior to confirmation of sale
of Notes (other than a sale pursuant to Rule 144A or to an institutional
"accredited investor"), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases Notes
from it during the restricted period a confirmation or notice to substantially
the following effect:
"The securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their distribution at any time of (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery
of the Notes, except with its affiliates or with the prior written consent of
the Company.
2. Notwithstanding the foregoing, Notes may be offered, sold and
delivered by the Purchasers in the United States and to U.S. persons pursuant
to Section 4 of the Purchase Agreement to which this Annex I is attached
without delivery of the written statement required by paragraph 1 above.
3. Each Purchaser further represents and agrees that (i) it has not
offered or sold and will not offer or sell any Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning.
Annex I, Page 1
<PAGE> 27
of the Public Offers of Securities Regulations 1995, (b) it has
complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1996 of Great Britain or is a person to whom the document may otherwise
lawfully be issued or passed on.
4. Each Purchaser agrees that it will not offer, sell or deliver any
of the Notes in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Notes in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Notes to
be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Notes, except in any such case with
Nesbitt Burns Securities Inc.'s express written consent and then only at its
own risk and expense.
Annex I, Page 2
<PAGE> 1
================================================================================
EXHIBIT 4.1
QUEEN SAND RESOURCES, INC.
(a Delaware corporation)
as Issuer
AND
THE SUBSIDIARY GUARANTORS
PARTIES HERETO
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
-----------------------------------
INDENTURE
Dated as of July 1, 1998
-----------------------------------
$125,000,000
Series A and Series B
12 1/2
% Senior Notes due 2008
================================================================================
<PAGE> 2
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of June 15, 1998
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ---------
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ---------
<S> <C>
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 104. Acts of Holders; Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 105. Notices, Etc., to Trustee, Company and Guarantors. . . . . . . . . . . . . . . . . . . . . 27
SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 114. No Personal Liability of Partners, Stockholders, Officers, Directors. . . . . . . . . . . . 29
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE THREE
The Notes
SECTION 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 303. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 304. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 305. Registration, Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . . 32
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . . . . . . . . . . . . . . . . . 41
SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE FIVE
Remedies
SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . 46
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 505. Trustee May Enforce Claims Without Possession of Notes. . . . . . . . . . . . . . . . . . . 47
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 515. Waiver of Usury, Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 604. Not Responsible for Recitals or Issuance of Notes. . . . . . . . . . . . . . . . . . . . . 53
SECTION 605. May Hold Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 608. Disqualification; Conflicting Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 610. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . . 54
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 613. Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . . . . . . 56
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ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 702. Preservation of Information; Communications to Holders. . . . . . . . . . . . . . . . . . 57
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale or Consolidation. . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 802. When a Subsidiary Guarantor May Merge or
Transfer Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders. . . . . . . . . . . . . . . . . . . . 59
SECTION 902. Supplemental Indentures with Consent of Holders. . . . . . . . . . . . . . . . . . . . . . 59
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 906. Reference in Notes to Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1003. Money for Note Payments to be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1004. Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1005. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1006. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 1007. Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 1008. Limitation on Incurrence of Additional Indebtedness. . . . . . . . . . . . . . . . . . . . 64
SECTION 1009. Limitation on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1010. Limitations on Distributions from Restricted Subsidiaries. . . . . . . . . . . . . . . . . 68
SECTION 1011. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1012. Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 1013. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 1014. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. . . . . . . 73
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SECTION 1015. Repurchase of Notes at the Option of the Holder Upon a Change of Control. . . . . . . . . . 73
SECTION 1016. Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 1017. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 1018. Restricted and Unrestricted Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 1019. Future Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 1020. Statement by Officers as to Default; Compliance
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 1021. Waiver of Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1102. Applicability of Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1103. Election to Redeem; Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1104. Selection by Trustee of Notes to Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 1106. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1107. Notes Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1108. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . 81
SECTION 1202. Defeasance and Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 1203. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 1204. Conditions to Defeasance or Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . 82
SECTION 1205. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 1206. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE THIRTEEN
Subsidiary Guarantees
SECTION 1301. Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1302. Execution and Delivery of Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1309. Application of Certain Terms and Provisions to the Subsidiary Guarantors. . . . . . . . . . 89
</TABLE>
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Annex A FORM OF NOTE
Annex B FORM OF SUBSIDIARY GUARANTEE
Annex C FORM OF REGULATION S CERTIFICATE FOR HOLDER
Annex D SCHEDULE OF AFFILIATE AGREEMENTS
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INDENTURE, dated as of July 1, 1998, among Queen Sand Resources, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 3500 Oak
Lawn, Suite 380, Dallas, Texas 75219 (telecopier no. (214) 521-9960), the
Company's existing and certain future now or hereafter party hereto
Subsidiaries (the "Subsidiary Guarantors") and Harris Trust and Savings Bank, a
banking corporation duly organized and existing under the laws of the State of
Illinois, as Trustee (herein called the "Trustee").
Each party agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Company's 12 1/2%
Series A Senior Notes due 2008 and the 12 1/2% Series B Senior Notes due 2008
to be exchanged for the 12 1/2% Series A Senior Notes due 2008 of the Company
in accordance with the terms hereof:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
(4) unless otherwise specifically set forth herein, all
calculations or determinations of a Person shall be performed or made on a
consolidated basis in accordance with GAAP; and
(5) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"12% Bonds" means the Series A Deutschemark denominated (DEM) 12%
notes issued by the Company and being due and payable on July 15, 2000, and any
renewals, extensions or replacements (but not increases in principal amount)
thereof.
<PAGE> 10
"40-day restricted period" has the meaning set forth in Section 201.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Additional Assets" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) made in
compliance with Section 1009 and as a result of which such other Person becomes
a Restricted Subsidiary in compliance with Section 1018, (iii) the acquisition
from third parties of Capital Stock of a Restricted Subsidiary, (iv) the costs
of acquiring, exploiting, developing and exploring in respect of oil and gas
properties or (v) Permitted Business Investments.
"Adjusted Consolidated Net Tangible Assets" means (without
duplication), as of the date of determination, the remainder of: (i) the sum of
(a) discounted future net revenues from proved oil and gas reserves of the
Company and its Restricted Subsidiaries calculated in accordance with
Commission guidelines before any state, federal or foreign income taxes, as
estimated by the Company and confirmed by a nationally recognized firm of
independent petroleum engineers in a reserve report prepared as of the end of
the Company's most recently completed fiscal year for which audited financial
statements are available, as increased by, as of the date of determination, the
estimated discounted future net revenues from (1) estimated proved oil and gas
reserves acquired since such year-end, which reserves were not reflected in
such year-end reserve report, and (2) estimated oil and gas reserves
attributable to upward revisions of estimates of proved oil and gas reserves
since such year-end due to exploration, development or exploitation activities,
in each case calculated in accordance with SEC guidelines (utilizing the prices
utilized in such year-end reserve report), and decreased by, as of the date of
determination, the estimated discounted future net revenues from (3) estimated
proved oil and gas reserves produced or disposed of since such year-end and (4)
estimated oil and gas reserves attributable to downward revisions of estimates
of proved oil and gas reserves since such year-end due to changes in geological
conditions or other factors which would, in accordance with standard industry
practice, cause such revisions, in each case calculated in accordance with SEC
guidelines (utilizing the prices utilized in such year-end reserve report);
provided that, in the case of each of the determinations made pursuant to
clauses (1) through (4), such increases and decreases shall be as estimated by
the Company's petroleum engineers, unless there is a Material Change as a
result of such acquisitions, dispositions or revisions, in which event the
discounted future net revenues utilized for purposes of this clause (i)(a)
shall be confirmed in writing by a nationally recognized firm of independent
petroleum engineers, (b) the capitalized costs that are attributable to oil and
gas properties of the Company and its Restricted Subsidiaries to which no
proved oil and gas reserves are attributable, based on the Company's books and
records as of a date no earlier than the date of the Company's latest annual or
quarterly financial statements, (c) the Net Working Capital on a date no
earlier than the date of the Company's latest annual or quarterly financial
statements and (d) the greater of (1) the net book value on a date no earlier
than the date of the Company's latest annual or quarterly financial statements
and (2) the appraised value, as estimated by independent appraisers, of other
tangible assets (including, without duplication,
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<PAGE> 11
Investments in unconsolidated Restricted Subsidiaries) of the Company and its
Restricted Subsidiaries, as of the date no earlier than the date of the
Company's latest audited financial statements, minus (ii) the sum of (a)
minority interests, (b) any net gas balancing liabilities of the Company and
its Restricted Subsidiaries reflected in the Company's latest audited financial
statements, (c) to the extent included in (i)(a) above, the discounted future
net revenues, calculated in accordance with Commission guidelines (utilizing
the prices utilized in the Company's year-end reserve report), attributable to
reserves which are required to be delivered to third parties to fully satisfy
the obligations of the Company and its Restricted Subsidiaries with respect to
Volumetric Production Payments (determined, if applicable, using the schedules
specified with respect thereto) and (d) the discounted future net revenues,
calculated in accordance with Commission guidelines, attributable to reserves
subject to Dollar-Denominated Production Payments which, based on the estimates
of production and price assumptions included in determining the discounted
future net revenues specified in (i)(a) above, would be necessary to fully
satisfy the payment obligations of the Company and its Restricted Subsidiaries
with respect to Dollar-Denominated Production Payments (determined, if
applicable, using the schedules specified with respect thereto).
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the Property of such Subsidiary Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
the Subsidiary Guaranty, of such Subsidiary Guarantor at such date.
"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of the
Voting Stock of such specified Person or of any Subsidiary of such specified
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person directly or indirectly, whether through the ownership of Voting
Stock, by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (collectively, "dispositions," and
including, without limitation, dispositions pursuant to any consolidation or
merger) by such Person or any of its Restricted Subsidiaries in any single
transaction or series of transactions of (i) shares of Capital Stock or other
ownership interests of another Person (including Capital Stock of Restricted
Subsidiaries and Unrestricted Subsidiaries) or (ii) any other Property of such
Person or any of its Restricted Subsidiaries; provided, however, that the term
"Asset Sale" shall not include: (a) the disposition of Permitted Short-Term
Investments, inventory, accounts receivable or other Property (excluding the
disposition of oil and gas in place and other interests in real property unless
made in connection with a Permitted Business Investment) in the ordinary course
of business; (b) the disposition of Property received in settlement of debts
owing to the Company or any Restricted Subsidiary as a result of foreclosure,
perfection or enforcement of any Lien or debt, which debts were owing
3
<PAGE> 12
to the Company or any Restricted Subsidiary in the ordinary course of business
of the Company or such Restricted Subsidiary; (c) any disposition that
constitutes a Restricted Payment made in compliance with Section 1009; (d) when
used with respect to the Company, any disposition of all or substantially all
of the Property of the Company permitted pursuant to Section 801; (e) the
disposition of any Property by the Company or a Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary; (f) the disposition of any
asset with a Fair Market Value of less than $5.0 million; or (g) any Production
Payment and Reserve Sale created, incurred, issued, assumed or guaranteed in
connection with the financing of, and within 90 days after the acquisition of,
the Property that is subject thereto.
"Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a
Restricted Subsidiary to the Company that the Company has assigned to the
lenders under any Senior Credit Facility, as collateral securing Indebtedness
of the Company under such Senior Credit Facility.
"Attributable Indebtedness" means the total net amount of rent
required to be paid during the remaining primary term of any particular lease
under which any person is at the time liable, discounted at the rate per annum
equal to the weighted average interest rate borne by the Notes.
"Average Life" means, with respect to any Indebtedness, at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (b) the
amount of each such principal payment by (ii) the sum of all such principal
payments.
"Bankruptcy Code" means 11 U.S.C. Section 101 et seq.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal or
state law for the relief of debtors.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of Change of Control and Affiliate has the meaning attributed to it
in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
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<PAGE> 13
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
or Chicago, Illinois are authorized or obligated by law or executive order to
close.
"Capital Lease Obligation" means any obligation which is required to
be classified and accounted for as a capital lease obligation in accordance
with GAAP, and the amount of Indebtedness represented by such obligation shall
be the capitalized amount of such obligation determined in accordance with
GAAP, and the Stated Maturity thereof shall be the date of the last payment
date of rent or any other amount due in respect of such obligation. For
purposes of Section 1011, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the Property being leased.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; provided, however, that "Capital Stock" shall not
include Redeemable Stock.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million and a Keefe Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's or S&P and, in each case, maturing
within six months after the date of acquisition.
"CEDEL" has the meaning set forth in Section 201.
"Change of Control" has the meaning specified in Section 1015.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
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<PAGE> 14
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"consolidated" means, with respect to the Company, the consolidated
accounts of its Subsidiaries with those of the Company, all in accordance with
GAAP; provided that "consolidated" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of the Company.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date for which
financial statements are available to (ii) the aggregate Consolidated Interest
Expense of the Company and its Restricted Subsidiaries that is anticipated to
accrue during a period consisting of the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately subsequent
thereto (based upon the pro forma amount and maturity of, and interest payments
in respect of, Indebtedness of the Company and its Restricted Subsidiaries
expected by the Company to be outstanding on the Transaction Date), assuming
for the purposes of this measurement the continuation of market interest rates
prevailing on the Transaction Date and base interest rates in respect of
floating interest rate obligations equal to the base interest rates on such
obligations in effect as of the Transaction Date; provided, that if the Company
or any of its Restricted Subsidiaries is a party to any Interest Rate
Protection Agreement which would have the effect of changing the interest rate
on any Indebtedness of the Company or any of its Restricted Subsidiaries for
such four quarter period (or a portion thereof), the resulting rate shall be
used for such four quarter period or portion thereof; provided further that any
Consolidated Interest Expense with respect to Indebtedness Incurred or retired
by the Company or any of its Restricted Subsidiaries during the fiscal quarter
in which the Transaction Date occurs shall be calculated as if such
Indebtedness was so Incurred or retired on the first day of the fiscal quarter
in which the Transaction Date occurs. In addition, if since the beginning of
the four full fiscal quarter period preceding the Transaction Date, (a) the
Company or any of its Restricted Subsidiaries shall have engaged in any Asset
Sale, EBITDA for such period shall be reduced by an amount equal to the EBITDA
(if positive), or increased by an amount equal to the EBITDA (if negative),
directly attributable to the assets which are the subject of such Asset Sale
for such period calculated on a pro forma basis as if such Asset Sale and any
related retirement of Indebtedness had occurred on the first day of such period
or (b) the Company or any of its Restricted Subsidiaries shall have acquired
any material assets, EBITDA shall be calculated on a pro forma basis as if such
asset acquisitions had occurred on the first day of such four fiscal quarter
period.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, (i) the sum of (a) the aggregate amount of
cash and noncash interest expense (including capitalized interest) of such
Person and its Restricted Subsidiaries for such period as
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<PAGE> 15
determined on a consolidated basis in accordance with GAAP in respect of
Indebtedness (including, without limitation, (1) any amortization of debt
discount, (2) net costs associated with Interest Rate Protection Agreements
(including any amortization of discounts), (3) the interest portion of any
deferred payment obligation, (4) all accrued interest and (5) all commissions,
discounts, commitment fees, origination fees and other similar fees and charges
owed with respect to the Senior Credit Facilities and other Indebtedness) paid,
accrued or scheduled to be paid or accrued during such period; (b) Redeemable
Stock dividends of such Person (and of its Restricted Subsidiaries if paid to a
Person other than such Person or its Restricted Subsidiaries) declared and
payable other than in kind; (c) the portion of any rental obligation of such
Person or its Restricted Subsidiaries in respect of any Capital Lease
Obligation allocable to interest expense in accordance with GAAP; (d) the
portion of any rental obligation of such Person or its Restricted Subsidiaries
in respect of any Sale and Leaseback Transaction that is Indebtedness allocable
to interest expense (determined as if such obligation were treated as a Capital
Lease Obligation); and (e) to the extent any Indebtedness of any other Person
(other than Restricted Subsidiaries) is Guaranteed by such Person or any of its
Restricted Subsidiaries, the aggregate amount of interest paid, accrued or
scheduled to be paid or accrued by such other Person during such period
attributable to any such Indebtedness; less (ii) to the extent included in (i)
above, amortization or write-off of deferred financing costs of such Person and
its Restricted Subsidiaries during such period; in the case of both (i) and
(ii) above, after elimination of intercompany accounts among such Person and
its Restricted Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom, without
duplication, (i) the amount of non-cash writedowns attributable to any period
ending on or before January 1, 1999 if in compliance with GAAP or Commission
guidelines, and plus or minus, as appropriate, foreign currency translation
adjustments, all determined on a consolidated basis; (ii) items classified as
extraordinary gains or losses net of tax (less all fees and expenses relating
thereto); (iii) any gain or loss, net of taxes, on the sale or other
disposition of assets (less all fees and expenses relating thereto and
including the Capital Stock of any other Person) (but in no event shall this
clause (iv) apply to the sale in the ordinary course of business of oil, gas or
other hydrocarbons produced or manufactured or other personal property other
than oil and gas in place); (v) the net income of any Subsidiary of such
specified Person to the extent the transfer to that Person of that income is
restricted by contract or otherwise, except for any cash dividends or cash
distributions actually paid by such Subsidiary to such Person during such
period; (vi) the net income (or loss) of any other Person in which such
specified Person or any of its Restricted Subsidiaries has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of such specified Person in accordance with GAAP or is an
interest in a consolidated Unrestricted Subsidiary), except to the extent of
the amount of cash dividends or other cash distributions actually paid to such
Person or its Restricted Subsidiaries by such other Person during such period;
(vii) the net income of any Person acquired by such specified Person or any of
its Restricted Subsidiaries in a pooling-of-interests transaction for any
period prior to the date of
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<PAGE> 16
such acquisition; (viii) any gain or loss, net of taxes, realized on the
termination of any employee pension benefit plan; (ix) any adjustments of a
deferred tax liability or asset pursuant to Statement of Financial Accounting
Standards No. 109 which result from changes in enacted tax laws or rates; and
(x) the cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" means (without duplication), as of
the date of determination, the sum of (a) discounted future net revenues from
proved oil and gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with Commission guidelines before any state, federal
or foreign income taxes, as estimated by the Company and confirmed by a
nationally recognized firm of independent petroleum engineers in a reserve
report prepared as of the end of the Company's most recently completed fiscal
year for which audited financial statements are available, as increased by, as
of the date of determination, the estimated discounted future net revenues from
(1) estimated proved oil and gas reserves acquired since such year-end, which
reserves were not reflected in such year-end reserve report, and (2) estimated
oil and gas reserves attributable to upward revisions of estimates of proved
oil and gas reserves since such year-end due to exploration, development or
exploitation activities, in each case calculated in accordance with SEC
guidelines (utilizing the prices utilized in such year-end reserve report), and
decreased by, as of the date of determination, the estimated discounted future
net revenues from (3) estimated proved oil and gas reserves produced or
disposed of since such year-end and (4) estimated oil and gas reserves
attributable to downward revisions of estimates of proved oil and gas reserves
since such year-end due to changes in geological conditions or other factors
which would, in accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report); provided that,
in the case of each of the determinations made pursuant to clauses (1) through
(4), such increases and decreases shall be as estimated by the Company's
petroleum engineers, unless there is a Material Change as a result of such
acquisitions, dispositions or revisions, in which event the discounted future
net revenues utilized for purposes of this clause (i)(a) shall be confirmed in
writing by a nationally recognized firm of independent petroleum engineers, (b)
the capitalized costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and gas reserves
are attributable, based on the Company's books and records as of a date no
earlier than the date of the Company's latest annual or quarterly financial
statements, (c) the Net Working Capital on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (d) the
greater of (1) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (2) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including, without duplication, Investments in unconsolidated Restricted
Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no
earlier than the date of the Company's latest audited financial statements.
"Consolidated Net Worth" of any Person means the stockholders' equity
of such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.
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"Corporate Trust Office" means the principal office of the Trustee at
311 W. Monroe Street, Chicago, Illinois 60606 (telecopier no. (312) 461-3525),
attention: Corporate Trust Department at which at any particular time its
corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Agreement" means the Amended and Restated Credit Agreement,
dated as of April 17, 1998, by and among the Company, Queen Sand Resources,
Inc., a Nevada corporation, Bank of Montreal, Enron Capital & Trade Resources
Corp., Joint Energy Development Investments II Limited Partnership and each of
the lenders now or hereafter signatories thereto and Bank of Montreal, as agent
for such lenders, as the same may be amended, modified, extended, renewed,
refunded, replaced or refinanced from time to time.
"Default" has the meaning set forth in Section 602.
"Defaulted Interest" has the meaning specified in Section 307.
"Definitive Notes" means Notes that are in the form of Annex A hereof
that do not include the information called for by footnotes 1 and 7 thereof.
"Depositary" has the meaning set forth in Section 201.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EBITDA" means with respect to any Person for any period, the
Consolidated Net Income of such Person for such period, plus (i) the sum of, to
the extent reflected in the consolidated income statement of such Person and
its Restricted Subsidiaries for such period from which Consolidated Net Income
is determined and deducted in the determination of such Consolidated Net
Income, without duplication, (a) income tax expense (but excluding income tax
expense relating to sales or other disposition of assets (including the Capital
Stock of any other Person) the gains and losses from which are excluded in the
determination of such Consolidated Net Income), (b) Consolidated Interest
Expense, (c) depreciation and depletion expense, (d) amortization expense, (e)
exploration expense, and (f) any other noncash charges including, without
limitation, unrealized foreign exchange losses; less (ii) the sum of, to the
extent reflected in the consolidated income statement of such Person and its
Restricted Subsidiaries for such period from which Consolidated Net Income is
determined and added in the determination of such Consolidated Net Income,
without duplication (a) income tax recovery (but excluding income tax recovery
relating to sales or other dispositions of assets (excluding the Capital Stock
of any other Person) the gains and losses from which are included in the
determination of such Consolidated Net Income) and (b) unrealized foreign
exchange gains.
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<PAGE> 18
"ECT Credit Agreement" means that certain Subordinated Revolving
Credit Loan Agreement, dated as of December 29, 1997, by and among Queen Sand
Resources, Inc., a Nevada corporation, and Enron Capital & Trade Resources
Corp., as agent for itself and the other lenders now or hereafter party
thereto, as the same may be amended, modified, extended, renewed, refunded,
replaced or refinanced from time to time.
"Equity Offering" means any public or private sale of Capital Stock
(including options, warrants or rights with respect thereto) of the Company.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership or membership interests in, such Person.
"Euroclear" has the meaning set forth in Section 201.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" refers to the Securities Exchange Act of 1934 as it may
be amended and any successor act thereto.
"Exchange Notes" means the 12 1/2% Series B Senior Notes due 2008, as
supplemented from time to time in accordance with the terms hereof, to be
issued pursuant to this Indenture in connection with the offer to exchange the
Exchange Notes for the Initial Notes that may be made by the Company pursuant
to the Registration Rights Agreement.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchanged Properties" means properties used or useful in the Oil and
Gas Business received by the Company or a Restricted Subsidiary in trade or as
a portion of the total consideration for other such properties.
"Fair Market Value" means, with respect to any assets to be
transferred pursuant to any Asset Sale or Sale and Leaseback Transaction or any
non-cash consideration or property transferred or received by any Person, the
fair market value of such consideration or property as determined in good faith
by the Board of Directors of the Company as evidenced by a certified resolution
delivered to the Trustee; provided that if such resolution indicates that such
fair market value is equal to or in excess of $5.0 million and such transaction
involves any Affiliate of the Company (other than a Restricted Subsidiary),
such resolution shall be accompanied by the written opinion of an independent,
nationally recognized investment banking firm or appraisal firm, in either case
specializing or having a specialty in the type and subject matter of the
transaction (or series of transactions) at issue, to the effect that such
consideration or property is fair, from a financial point of view, to such
Person.
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"GAAP" means United States generally accepted accounting principles as
in effect on the date of the Indenture, unless stated otherwise.
"Global Note" means a Note (including a Rule 144A Global Note or a
Regulation S Global Note) that contains the information referred to in
footnotes 1 and 7 to the form of Note as set forth in Annex A hereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including, without limitation,
any Lien on the assets of such Person securing obligations to pay Indebtedness
of the primary obligor and any obligation of such Person (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
or to purchase (or to advance or supply funds for the purchase or payment of)
any security for the payment of such Indebtedness, (ii) to purchase Property,
securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have
meanings correlative to the foregoing); provided, however, that a Guarantee by
any Person shall not include (a) endorsements by such Person for collection or
deposit, in either case, in the ordinary course of business or (b) a
contractual commitment by one Person to invest in another Person for so long as
such Investment is reasonably expected to constitute a Permitted Investment
under clause (ii) of the definition of Permitted Investments.
"Holder" means a Person in whose name a Note is registered in the
Securities Register.
"IAI Notes" means Notes sold to Institutional Accredited Investors.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Subsidiary shall be deemed to be Incurred by the Company or such Restricted
Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly
Owned Subsidiary or in the event such Indebtedness is transferred to a Person
other than the Company or a Wholly Owned Subsidiary. For purposes of this
definition, any non-interest bearing or other discount Indebtedness shall be
deemed to have been incurred only on the date of original issue thereof.
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<PAGE> 20
"Indebtedness" means at any time (without duplication), with respect
to any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any Obligation of such Person for
borrowed money, (ii) any Obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including, without
limitation, any such Obligations Incurred in connection with the acquisition of
Property, assets or businesses, (iii) any reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) any Obligation of such
Person issued or assumed as the deferred purchase price of Property or services
(other than Trade Accounts Payable and other accrued current liabilities
incurred in the ordinary course of business), (v) any Capital Lease Obligation
of such Person, (vi) the maximum fixed redemption or repurchase price of
Redeemable Stock of such Person at the time of determination, (vii) any payment
obligation of such Person under Interest Rate Protection Agreements or Oil and
Gas Hedging Contracts at the time of determination, (viii) any obligation to
pay rent or other payment amounts of such Person with respect to any Sale and
Leaseback Transaction to which such Person is a party and (ix) any obligation
of the type referred to in clauses (i) through (viii) of this paragraph of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly
or indirectly, as obligor, Guarantor or otherwise; provided that Indebtedness
shall not include Production Payments and Reserve Sales. For purposes of this
definition, the maximum fixed repurchase price of any Redeemable Stock that
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Redeemable Stock as if such Redeemable Stock were repurchased
on any date on which Indebtedness shall be required to be determined pursuant
to the terms of this Indenture; provided, however, that if such Redeemable
Stock is not then permitted to be repurchased, the repurchase price shall be
the book value of such Redeemable Stock. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional Obligations as described above and the maximum liability at such
date in respect of any contingent Obligations described above.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Independent Investment Banker" means Nesbitt Burns Securities Inc.
and its successor or, if such firm is unwilling or unable to select the
applicable Comparable Treasury Issue, an independent investment banking
institution of national standing appointed by the Trustee.
"Initial Notes" means the 12 1/2% Series A Senior Notes due 2008, as
supplemented from time to time in accordance with the terms hereof, issued
under this Indenture that contain the information referred to in footnotes 1,
5, 6 and 8 to the form of Note as set forth in Annex A hereof.
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<PAGE> 21
"Initial Purchasers" means Nesbitt Burns Securities Inc., CIBC
Oppenheimer Corp. and Societe Generale Securities Corp. (each an "Initial
Purchaser").
"Initial Subsidiary Guarantors" means Queen Sand Resources, Inc., a
Nevada corporation, Northland Operating Co., a Nevada corporation, and Corrida
Resources, Inc., a Nevada corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act who are not also QIBs.
"Interest Payment Date" means each January 1 and July 1, commencing
January 1, 1999.
"Interest Rate Protection Agreement" means, with respect to any
Person, any interest rate swap agreement, forward rate agreement, interest rate
cap or collar agreement or other financial agreement or arrangement entered
into for the purpose of limiting or managing interest rate risks, to or under
which such Person is a party or otherwise obligated.
"Investment" means, with respect to any Person (i) any amount paid by
such Person, directly or indirectly, to any other Person for Capital Stock or
other Property of, or as a capital contribution to, any other Person or (ii)
any direct or indirect loan or advance to any other Person (other than accounts
receivable of such Person arising in the ordinary course of business);
provided, however, that Investments shall not include extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and any increase in the equity ownership in any Person resulting from
retained earnings of such Person.
"Issue Date" means the date on which the Notes were first issued under
the Indenture.
"JEDI II" means Joint Energy Development Investments II Limited
Partnership.
"Lien" means, with respect to any Property, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance, preference,
priority or other security or similar agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing). For
purposes of Section 1011, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the Property being leased.
"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market and (iii)
as to which the Company is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; provided, that securities
meeting the requirements of clauses (i), (ii)
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<PAGE> 22
and (iii) above shall be treated as Liquid Securities from the date of receipt
thereof until and only until the earlier of (x) the date on which such
securities are sold or exchanged for cash or Permitted Short-Term Investments
and (y) 180 days following the date of receipt of such securities. If such
securities are not sold or exchanged for cash or Permitted Short-Term
Investments within 180 days of receipt thereof, for purposes of determining
whether the transaction pursuant to which the Company or a Restricted
Subsidiary received the securities was in compliance with Section 1013, such
securities shall be deemed not to have been Liquid Securities at any time.
"Liquidated Damages" shall have the meaning specified in the
Registration Rights Agreement.
"Material Change" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30% during a fiscal quarter in
the estimated discounted future net revenues from proved oil and gas reserves
of the Company and its Restricted Subsidiaries, calculated in accordance with
clause (i)(a) of the definition of Adjusted Consolidated Net Tangible Assets;
provided, however, that the following will be excluded from the calculation of
Material Change: (i) any acquisitions during the quarter of oil and gas
reserves with respect to which the Company's estimate of the discounted future
net revenues from proved oil and gas reserves has been confirmed by independent
petroleum engineers and (ii) any dispositions of Properties during such quarter
that were disposed of in compliance with Section 1013.
"Maturity", when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Sale means cash proceeds received
therefrom (including (i) any cash proceeds received by way of deferred payment
of principal pursuant to a note or installment receivable or otherwise, but
only as and when received and (ii) the Fair Market Value of Liquid Securities
and Permitted Short-Term Investments, and excluding (i) any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets and (ii) except to the
extent subsequently converted to cash, Liquid Securities or Permitted
Short-Term Investments within 240 days after such Asset Sale, consideration
constituting Exchanged Properties or consideration other than Permitted
Consideration), in each case net of (a) all legal, title and recording
expenses, commissions and other fees and expenses incurred, and all federal,
state, foreign and local taxes required to be paid or accrued as a liability
under GAAP as a consequence of such Asset Sale, (b) all payments (which
payments are made in a manner that results in the permanent reduction in the
balance of such Indebtedness and, if applicable, a permanent reduction in any
outstanding commitment for future incurrences of Indebtedness thereunder) made
on any Indebtedness (but specifically excluding Indebtedness of the Company and
its Restricted Subsidiaries assumed in connection with or in anticipation of
such Asset Sale) which is secured by any assets subject to
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<PAGE> 23
such Asset Sale, in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Sale or by applicable law, be repaid out of the proceeds from such Asset
Sale, (c) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Sale and (d) the deduction of appropriate amounts to be provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the assets disposed of in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale (to the extent such reserves are
not subsequently reversed within 365 days after such Asset Sale); provided,
however, that if any consideration for an Asset Sale (which would otherwise
constitute Net Available Cash) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to such Person or its Restricted Subsidiaries from
escrow; and provided, further, however, that any Exchanged Properties and any
consideration other than Permitted Consideration received in connection with an
Asset Sale which is subsequently converted to cash, Liquid Securities or
Permitted Short-Term Investments within 240 days after such Asset Sale shall be
deemed to be Net Available Cash at such time and shall thereafter be applied in
accordance with Section 1013.
"Net Working Capital" means (i) all current assets of the Company and
its Restricted Subsidiaries, less (ii) all current liabilities of the Company
and its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.
"Notes" means, collectively, the Initial Notes and, when and if issued
as provided in the Registration Rights Agreement, the Exchange Notes.
"Notes Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Obligation" means any principal, interest, premium, penalty, fee and
any other liability payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum, dated June 30,
1998, relating to the offering of the Notes.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee. One of the officers signing an Officer's
Certificate given pursuant to Section 1020 shall be the principal executive,
financial or accounting officer of the Company.
"Oil and Gas Business" means the business of exploiting, exploring
for, developing, acquiring and producing hydrocarbons and other related energy
businesses.
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<PAGE> 24
"Oil and Gas Hedging Contract" means, with respect to any Person, any
agreement or arrangement, or any combination thereof, financially tied to oil
and gas or other hydrocarbon prices, transportation or basis costs or
differentials, or similar factors, that is customary in the Oil and Gas
Business and is entered into for the purpose of limiting or managing risks
associated with fluctuations in such prices, costs, differentials or similar
factors.
"Oil and Gas Liens" means (i) Liens on any specific property or any
interest therein, construction thereon or improvement thereto to secure all or
any part of the costs incurred for surveying, exploration, drilling,
extraction, development, operation, production, construction, alteration,
repair or improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood that, in the case of
oil and gas producing properties, or any interest therein, costs incurred for
"development" shall include costs incurred for all facilities relating to such
properties or to projects, ventures or other arrangements of which such
properties form a part or which relate to such properties or interests); (ii)
Liens on an oil or gas producing property to secure obligations Incurred or
guarantees of obligations Incurred in connection with or necessarily incidental
to commitments for the purchase or sale of, or the transportation or
distribution of, the products derived from such property; (iii) Liens arising
under partnership agreements, oil and gas leases, overriding royalty
agreements, net profits agreements, production payment agreements, royalty
trust agreements, master limited partnership agreements, farm-out agreements,
division orders, contracts for the sale, purchase, exchange, transportation,
gathering or processing of oil, gas or other hydrocarbons, unitizations and
pooling designations, declarations, orders and agreements, development
agreements, operating agreements, production sales contracts, area of mutual
interest agreements, gas balancing or deferred production agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements
which are customary in the Oil and Gas Business, provided in all instances that
such Liens are limited to the assets that are the subject of the relevant
agreement; (iv) Liens arising in connection with Production Payments and
Reserve Sales; and (v) Liens on pipelines or pipeline facilities that arise by
operation of law.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the Holders
of such Notes; provided, that if such Notes are to be redeemed,
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notice of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
(iii) Notes which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect of
which there shall have been presented to the Trustee proof satisfactory to it
that such Notes are held by a bona fide purchaser in whose hands such Notes are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which the Trustee knows to be so owned
shall be so disregarded. Notes so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Notes and
that the pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest (and Liquidated Damages, if any)
on any Notes on behalf of the Company.
"Permitted Business Investments" means Investments and expenditures
made in the ordinary course of, and of a nature that is or shall have become
customary in, the Oil and Gas Business as a means of actively engaging therein
through agreements, transactions, interests or arrangements which permit one to
share risks or costs, comply with regulatory requirements regarding local
ownership or satisfy other objectives customarily achieved through the conduct
of Oil and Gas Business jointly with third parties, including, without
limitation, (i) ownership interests in oil and gas properties or gathering,
transportation, processing, storage or related systems and (ii) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries).
"Permitted Hedging Agreements" means (i) Oil and Gas Hedging Contracts
to the extent entered into to limit or manage risks incurred in the ordinary
course of business and (ii) Interest Rate Protection Agreements but only to the
extent that the stated aggregate notional amount thereunder does not exceed
100% of the aggregate principal amount of the Indebtedness of the Company or a
Restricted Subsidiary covered by such Interest Rate Protection Agreements at
the time such agreements were entered into.
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"Permitted Indebtedness" has the meaning set forth in Section 1008.
"Permitted Investments" means any and all of the following: (i)
Permitted Short-Term Investments; (ii) Investments in property, plant and
equipment used in the ordinary course of business and Permitted Business
Investments; (iii) Investments by any Restricted Subsidiary in the Company;
(iv) Investments by the Company or any Restricted Subsidiary in any Restricted
Subsidiary; (v) Investments by the Company or any Restricted Subsidiary in a
Person where that Person becomes a Restricted Subsidiary or transfers or
assigns all of its assets to the Company (including the acquisition from a
third party of the Capital Stock of a Restricted Subsidiary or any other
Person) if such Person or a Subsidiary of such Person will, as a result of the
making of such Investment and all other contemporaneous related transactions,
become a Restricted Subsidiary or be merged or consolidated with or transfer or
convey all or substantially all of its assets to the Company or a Restricted
Subsidiary; (vi) Investments in the form of securities received from Asset
Sales, provided, that such Asset Sales are made in compliance with Section
1013; (vii) Investments in negotiable instruments held for collection, lease,
utility and other similar deposits, and stock, obligations or other securities
received in settlement of debts (including, without limitation, under any
bankruptcy or other similar proceeding) owing to the Company or any of its
Restricted Subsidiaries as a result of foreclosure, perfection or enforcement
of any Liens or Indebtedness, in each of the foregoing cases in the ordinary
course of business of the Company or such Restricted Subsidiary; (viii)
Investments in the form of Permitted Hedging Agreements of the Company and its
Restricted Subsidiaries; and (ix) Investments pursuant to any agreement or
obligation of the Company or any of its Restricted Subsidiaries as in effect on
the Issue Date (other than Investments described in clauses (i) through (viii)
above).
"Permitted Lien" has the meaning set forth in Section 1011.
"Permitted Refinancing Indebtedness" means Indebtedness ("new
Indebtedness") Incurred in exchange for, or proceeds of which are used to
refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i)
such new Indebtedness is in an aggregate principal amount not in excess of the
sum of (a) the aggregate principal amount then outstanding of the old
Indebtedness (or, if such old Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination), and
(b) an amount necessary to pay any fees and expenses, including premiums
related to such exchange or refinancing, (ii) such new Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the old Indebtedness,
(iii) such new Indebtedness has an Average Life to Stated Maturity at the time
such new Indebtedness is Incurred that is equal to or greater than the Average
Life to Stated Maturity of the old Indebtedness at such time and (iv) such new
Indebtedness shall only be permitted if (A) in the case of any refinancing or
refunding of Indebtedness that is pari passu with the Notes the refinancing or
refunding Indebtedness is made pari passu with the Notes or subordinated to the
Notes, (B) in the case of any refinancing or refunding of Indebtedness that is
subordinated to the Notes the refinancing or refunding of Indebtedness is made
subordinated to the Notes at least to the same extent as the Indebtedness being
refinanced or refunded was subordinated to the Notes
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and (C) in the case of the refinancing or refunding of Indebtedness that is
subordinated to the Notes, the refinancing or refunding Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, (x) does not provide for payments of principal of such
Indebtedness at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by the Company or such Restricted Subsidiary
(including any redemption, retirement or repurchase which is contingent upon
events or circumstances, but excluding any retirement required by virtue of
acceleration of such Indebtedness upon an event of default thereunder), in each
case prior to the final stated maturity of the Indebtedness being refinanced or
refunded and (y) does not permit redemption or other retirement (including
pursuant to an offer to purchase made by the Company or such Restricted
Subsidiary) of such Indebtedness at the option of the holder thereof prior to
the final stated maturity of the Indebtedness being refinanced or refunded,
other than a redemption or other retirement at the option of the holder of such
Indebtedness (including pursuant to an offer to purchase made by the Company or
such Restricted Subsidiary), which is conditioned upon the change of control of
the Company or such Restricted Subsidiary)
"Permitted Short-Term Investments" means (i) Investments in U.S.
Government Obligations maturing within one year of the date of acquisition
thereof, (ii) Investments in demand accounts, time deposit accounts,
certificates of deposit, bankers acceptances and money market deposits maturing
within one year of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America or
any State thereof or the District of Columbia that is a member of the Federal
Reserve System having capital, surplus and undivided profits aggregating in
excess of $500.0 million and whose long-term indebtedness is rated "A" (or
higher) according to Moody's, (iii) Investments in demand accounts, time
deposit accounts, certificates of deposit, bankers acceptances and money market
deposits maturing within one year of the date of acquisition thereof issued by
a Canadian bank to which the Bank Act (Canada) applies having capital, surplus
and undivided profits aggregating in excess of U.S. $500.0 million, (iv)
Investments in deposits available for withdrawal on demand with any commercial
bank that is organized under the laws of any country in which the Company or
any Restricted Subsidiary maintains an office or is engaged in the Oil and Gas
Business, provided that (a) all such deposits have been made in such accounts
in the ordinary course of business and (b) such deposits do not at any one time
exceed $20.0 million in the aggregate, (v) repurchase and reverse repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) entered into with a bank meeting the
qualifications described in either clause (ii) or (iii), (vi) Investments in
commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or
any State thereof or the District of Columbia with a rating at the time as of
which any Investment therein is made of "P-1" (or higher) according to Moody's
or "A-1" (or higher) according to S&P and (vii) Investments in any money market
mutual fund having assets in excess of $250.0 million substantially all of
which consist of other obligations of the types described in clauses (i), (ii),
(v) and (vi) hereof.
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"Person" means any individual, corporation, partnership, joint
venture, limited liability company, unlimited liability company, trust, estate,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person; provided, however, that
"Preferred Stock" shall not include Redeemable Stock.
"Prepayment Offer" has the meaning set forth in Section 1013.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Principal Property" means any oil and gas properties and oil and gas
gathering assets or related group of such assets of the Company having a fair
market value in excess of $10.0 million.
"Production Payments and Reserve Sales" means the grant or transfer by
the Company or a Restricted Subsidiary to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties where the holder of such
interest has recourse solely to such production or proceeds of production,
subject to the obligation of the grantor or transferor to operate and maintain,
or cause the subject interests to be operated and maintained, in a reasonably
prudent manner or other customary standard or subject to the obligation of the
grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business.
"pro forma" includes, with respect to an acquisition or the incurrence
of Indebtedness in connection therewith, all adjustments, permitted or required
to be included pursuant to Article 11 of Regulation S-X under the Exchange Act.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock and other
securities issued by any other Person (but excluding Capital Stock or other
securities issued by such first mentioned Person).
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"Purchase Date" means the settlement date specified by the Company in
a Prepayment Offer or Change of Control Offer, which shall be within three
business days of the expiration date specified in such offer.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
"Redeemable Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), is or could become required to be redeemed for cash or
other Property or is or could become redeemable for cash or other Property at
the option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Stated Maturity of the Notes; or is or could become
exchangeable at the option of the holder thereof for Indebtedness at any time
in whole or in part, on or prior to the first anniversary of the Stated
Maturity of the Notes; provided, however, that Redeemable Stock shall not
include the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock or any security by virtue of the fact that it may be
exchanged or converted at the option of the holder for Capital Stock of the
Company having no preference as to dividends or liquidation over any other
Capital Stock of the Company.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the registration rights
agreement made and entered into as of the Issue Date among the Company and the
Initial Purchasers.
"Regular Record Date" means each June 15 and July 15.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" has the meaning set forth in Section 305.
"Regulation S Notes" has the meaning set forth in Section 201.
"Regulation S Global Note" has the meaning set forth in Section 201.
"Regulation S Permanent Global Note" has the meaning set forth in
Section 201.
"Regulation S Temporary Global Note" has the meaning set forth in
Section 201.
"Restricted Payment" means (i) a dividend or other distribution
declared or paid on the Capital Stock or Redeemable Stock of the Company or to
the Company's stockholders (other than
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dividends, distributions or payments made solely in Capital Stock of the
Company or in options, warrants or other rights to purchase or acquire Capital
Stock or Redeemable Stock), or declared and paid to any Person other than the
Company or any of its Restricted Subsidiaries on the Capital Stock or
Redeemable Stock of any Restricted Subsidiary, (ii) a payment made by the
Company or any of its Restricted Subsidiaries (other than to the Company or any
Restricted Subsidiary) to purchase, redeem, acquire or retire any Capital Stock
or Redeemable Stock or any options, warrants or other rights to acquire such
Capital Stock or Redeemable Stock of the Company or of a Restricted Subsidiary,
(iii) a payment made by the Company or any of its Restricted Subsidiaries to
redeem, repurchase, defease or otherwise acquire or retire for value (including
pursuant to mandatory repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or scheduled mandatory redemption, any Subordinated
Indebtedness of the Company except (a) to the extent such Indebtedness may be
purchased out of Net Available Cash in compliance with Section 1013, (b) to the
extent such Indebtedness may be purchased out of the net cash proceeds of one
or more Equity Offerings as described in Section 1101, (c) out of Net Available
Cash and to the extent required by the indenture or other agreement or
instrument pursuant to which any other Indebtedness was issued, an offer to
purchase such Indebtedness upon a disposition of assets, (d) to the extent of
Excess Proceeds remaining after compliance with Section 1013, and to the extent
required by the indenture or other agreement or instrument pursuant to which
any Indebtedness was issued, an offer to purchase such Indebtedness upon a
disposition of assets, and (e) upon a "Change of Control" (even if such event
is not a Change of Control under the Indenture) to the extent required by the
indenture or other agreement or instrument pursuant to which any Indebtedness
was issued provided the Company is then in compliance with Section 1015, (iv)
an Investment (other than a Permitted Investment) by the Company or a
Restricted Subsidiary in any Person other than the Company or a Restricted
Subsidiary, or (v) the sale or issuance of Capital Stock of a Restricted
Subsidiary to a Person other than the Company or another Restricted Subsidiary
if the result thereof is that such Restricted Subsidiary shall cease to be a
Restricted Subsidiary, in which event the amount of such "Restricted Payment"
shall be the Fair Market Value of the remaining interest, if any, in such
former Restricted Subsidiary held by the Company and its other Restricted
Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated an Unrestricted Subsidiary in the manner provided in
Section 1018.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Notes" has the meaning set forth in Section 201.
"Rule 144A Global Note" has the meaning set forth in Section 201.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means, with respect to any Person,
any direct or indirect arrangement (excluding, however, any such arrangement
between such Person and a
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Wholly Owned Restricted Subsidiary of such Person or between one or more Wholly
Owned Restricted Subsidiaries of such Person) pursuant to which Property is
sold or transferred by such Person or a Restricted Subsidiary of such Person
and is thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries.
"Securities Act" refers to the Securities Act of 1933 as it may be
amended and any successor act thereto.
"Securities Register" and "Securities Registrar" have the respective
meaning specified in Section 305.
"Senior Credit Facilities" means collectively, one or more senior
credit facilities or commercial paper facilities with banks or other
institutional lenders (including, without limitation, the credit facility
pursuant to the Credit Agreement and the ECT Revolving Credit Agreement),
together with any guarantees, security and related documents, as all such
credit facilities and documents may be amended, supplemented, extended,
increased, refinanced or replaced from time to time.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary of a Person that, together with its Subsidiaries, (i) for the most
recent fiscal year of such Person, accounted for more than 5% of the
consolidated revenues of such Person and its Subsidiaries or (ii) as of the end
of such fiscal year, was the owner of more than 5% of the consolidated assets
of such Person and its Subsidiaries.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including
pursuant to any mandatory redemption provision (but excluding any provision
providing for the repurchase of such security at the option of the holder
thereof upon the happening of any contingency unless such contingency has
occurred).
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Notes or
the relevant Subsidiary Guarantor pursuant to a written agreement to that
effect.
"Subsidiary" of a Person means (i) another Person which is a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned or controlled by (a) the first Person, (b) the first Person
and one or more of its Subsidiaries or (c) one or more of the first Person's
Subsidiaries or (ii) another Person which is not a corporation (x) at least 50%
of the ownership interest of which and (y) the power to elect or direct the
election of a majority of the
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directors or other governing body of which are controlled by Persons referred
to in clause (a), (b) or (c) above.
"Subsidiary Guarantors" means (i) as of the Issue Date, the Initial
Subsidiary Guarantors, and (ii) thereafter, unless released from their
Subsidiary Guarantees as permitted by the Indenture, the Initial Subsidiary
Guarantors and any other Restricted Subsidiary that becomes a guarantor of the
Notes in compliance with the provisions of the Indenture and executes a
supplemental indenture agreeing to be bound by the terms of the Indenture.
"Subsidiary Guarantee" has the meaning set forth in Section 1301.
"Trade Accounts Payable" means accounts payable or other obligations
of the Company or any Restricted Subsidiary to trade creditors created or
assumed by the Company or such Restricted Subsidiary in the ordinary course of
business in connection with the obtaining of goods or services.
"Transaction Date" has the meaning set forth in the definition of
"Consolidated Interest Coverage Ratio."
"Transfer Restricted Notes" means Notes that bear or are required to
bear the legend set forth in Section 305(g)(i).
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means (i) each Subsidiary of the Company
that the Company has designated pursuant to Section 1018 as an Unrestricted
Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian, with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder
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of such depository receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
to the extent all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company.
"Wholly Owned Subsidiary" means any Subsidiary of the Company to the
extent all of the Capital Stock or other ownership interests in such
Subsidiary, other than any directors' qualifying shares mandated by applicable
law, is owned directly or indirectly by the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as it may reasonably request or as
may be required under the Trust Indenture Act. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be given
by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company with respect to such
factual matters unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are received
by the Trustee and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient
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for any purpose of this Indenture and (subject to Section 601) conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or
their duly designated proxies) shall be entitled to give or take, or vote on,
the relevant action.
(d) The ownership of Notes shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Note.
SECTION 105. Notices, Etc., to Trustee, Company and Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, by the Company or by any Guarantor
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office in Person
or mailed by first class mail (registered or certified, return receipt
requested), telecopier (with original sent by overnight air courier) or
overnight air courier guaranteeing next day delivery, or
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(2) the Company or any Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and in Person or mailed by first class mail
(registered on certified, return receipt requested), telecopier (with original
sent by overnight air courier) or overnight air courier guaranteeing next day
delivery, to the Company addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or by overnight air
courier guaranteeing next day delivery to each Holder affected by such event,
at his address as it appears in the Securities Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
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SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Trustee shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Notes, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of interest or principal (and premium, if any) need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, Redemption Date or Purchase
Date, or at the Stated Maturity, provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity, as the case may be.
SECTION 114. No Personal Liability of Partners, Stockholders, Officers,
Directors.
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Indenture or
the Notes solely by reason of his or its status as such stockholder, employee,
officer or director. Each Holder of Notes by accepting a Note waives and
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releases all such liability and further acknowledges such waiver and release
are part of the consideration for the issuance of the Notes.
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally.
The Notes (including the Trustee's certificates of authentication) and
the Subsidiary Guarantees shall be in substantially the forms set forth in
Annex A and Annex B, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their
execution of the Notes.
The Definitive Notes shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted or required by the rules of any securities exchange on which
the Notes may be listed, all as determined by the officers executing such
Notes, as evidenced by their execution of such Notes.
The Initial Notes are being offered and sold to (i) qualified
institutional buyers in reliance on Rule 144A ("Rule 144A Notes"), (ii) a
limited number of Institutional Accredited Investors ("IAI Notes") and (iii) in
offshore transactions in reliance on Regulation S ("Regulation S Notes").
Rule 144A Notes initially will be represented by one or more Notes in
registered global form without interest coupons (collectively, the "Rule 144A
Global Note"). The Rule 144A Global Note will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company (the "Depositary"),
in Chicago, Illinois and registered in the name of the Depositary or its
nominee, in each case for credit to an account of a direct or indirect
participant in the Depositary.
IAI Notes will be represented by definitive certificates registered in
the name of the registered holder thereof.
Regulation S Notes initially will be represented by one or more
temporary Notes in registered global form without interest coupons
(collectively, the "Regulation S Temporary Global Note"). The Regulation S
Temporary Global Note will be deposited on behalf of the subscribers thereof
with a custodian for the Depositary. The Regulation S Temporary Global Note
will be registered in the name of a nominee of the Depositary for credit to the
subscribers' respective accounts at Euroclear System ("Euroclear") and Cedel
Bank, S.A. ("CEDEL"). Beneficial
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interests in the Regulation S Temporary Global Note may be held only through
Euroclear or CEDEL.
Within a reasonable period of time after the expiration of the "40-day
restricted period" (within the meaning of Rule 903(c)(3) of Regulation S under
the Securities Act) (the "40-day restricted period"), the Regulation S
Temporary Global Note will be exchanged for one or more permanent Notes in
registered global form without interest coupons (the "Regulation S Permanent
Global Notes" and, together with the Regulation S Temporary Global Note, the
"Regulation S Global Note") upon delivery to the Trustee of certification as
provided in Section 305(f) hereof. During the 40-day restricted period,
beneficial interests in the Regulation S Temporary Global Note may be held only
through Euroclear or CEDEL (as indirect participants in the Depositary), and,
pursuant to the Depositary's procedures, beneficial interests in the Regulation
S Temporary Global Note may not be transferred to a Person that takes delivery
thereof in the form of an interest in the Rule 144A Global Note or a Definitive
Note. After the 40-day restricted period, (i) beneficial interests in the
Regulation S Permanent Global Notes may be transferred to a Person that takes
delivery in the form of an interest in the Rule 144A Global Note and (ii)
beneficial interests in the Rule 144A Global Note may be transferred to a
Person that takes delivery in the form of an interest in the Regulation S
Permanent Global Notes, provided, that the certification requirements described
in Section 305(e) hereof are complied with.
The provisions of the "Operating Procedures of the Euroclear System"
and the "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S Global
Note that are held by participants through Euroclear or Cedel Bank.
ARTICLE THREE
The Notes
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $125,000,000, except for Notes
authenticated and delivered upon registration of, transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 304, 305, 306, 906 or 1108
or in connection with a Prepayment Offer or Change of Control Offer pursuant to
Sections 1013 or 1015.
The Initial Notes shall be known and designated as the "12 1/2% Series
A Senior Notes due 2008" of the Company. Their Stated Maturity shall be July
1, 2008 and they shall bear interest at 12 1/2% from the Issue Date or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable semi-annually on January 1 and July
1, commencing January 1, 1999, until the principal thereof is paid or made
available for payment.
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The principal of (and premium, if any) and interest (and Liquidated
Damages, if any) on the Notes shall be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register.
The Notes shall be subject to repurchase by the Company pursuant to a
Prepayment Offer or Change of Control Offer, respectively, as provided in
Sections 1013 and 1015.
The Notes shall be subject to defeasance at the option of the Company
as provided in Article Twelve.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution and Authentication.
The Notes shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents, and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes executed by the Company to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes; and the Trustee in accordance with
such Company Order shall authenticate and deliver such Notes as in this
Indenture provided and not otherwise.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
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SECTION 304. Temporary Notes.
Pending the preparation of Definitive Notes, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
Definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Company will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at any office or agency of the Company
designated pursuant to Section 1002, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes the Company shall
execute and upon request of a Company Order the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of Definitive Notes of
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Securities Register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. The Trustee is hereby
appointed "Securities Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at an office
or agency of the Company designated pursuant to Section 1002 for such purpose,
the Company shall execute, and upon request of a Company Order the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Company shall execute, and upon
request of a Company Order the Trustee shall authenticate and deliver, the
Notes which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligation of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
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(a) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented to the Securities Registrar with a request (x) to register
the transfer of such Definitive Notes or (y) to exchange such Definitive Notes
for an equal principal amount of Definitive Notes of other authorized
denominations, the Securities Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are
met; provided, however, that the Definitive Notes surrendered for registration
of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and the
Securities Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Transfer Restricted Notes that are
Definitive Notes, shall be accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Note is being
delivered to the Securities Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the Note); or
(B) if such Transfer Restricted Note is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) that is aware that any sale of Notes to it will be made in
reliance on Rule 144A under the Securities Act and that is acquiring such
Transfer Restricted Note for its own account or for the account of another such
"qualified institutional buyer," a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the Note); or
(C) if such Transfer Restricted Note is being
transferred pursuant to an exemption from registration in accordance with Rule
144, or outside the United States in an offshore transaction in compliance with
Rule 904 under the Securities Act, or pursuant to an effective registration
statement under the Securities Act, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the Note); or
(D) if such Transfer Restricted Note is being
transferred in reliance on another exemption from the registration requirements
of the Securities Act and with all applicable securities laws of the States of
the United States, a certification from such Holder to that effect (in
substantially the form set forth on the reverse of the Note) and an Opinion of
Counsel from the Holder reasonably acceptable to the Company, the Trustee and
to the Securities Registrar to the effect that such transfer is in compliance
with the Securities Act.
(b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
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(i) if such Definitive Note is a Transfer Restricted
Note and is being transferred for an interest in the Rule 144A Global Note,
certification, in substantially the form set forth on the reverse of the Note,
that such Definitive Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in accordance with
Rule 144A under the Securities Act;
(ii) if such Definitive Note is a Transfer Restricted Note
and is being transferred for an interest in the Regulation S Permanent Global
Note pursuant to an exemption from registration in accordance with Rule 144, or
outside the United States in an offshore transaction in compliance with Rule
904 under the Securities Act, or pursuant to an effective registration
statement under the Securities Act, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the Note); and
(iii) whether or not such Definitive Note is a Transfer
Restricted Note, written instructions directing the Trustee to make, or to
direct the Notes Custodian to make, an endorsement on the Global Note to
reflect an increase in the aggregate principal amount of the Notes represented
by the Global Note, then the Trustee shall cancel such Definitive Note and
cause, or direct the Notes Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Notes
Custodian, the aggregate principal amount of the Global Note to be increased
accordingly. If no Global Notes are then outstanding, the Company shall issue
and upon receipt of a Company Order the Trustee shall authenticate a new Global
Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor. Except as set forth in clause (d) through (f), a Global
Note may not be transferred as a whole except by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) A beneficial interest in a Global Note is
exchangeable for Definitive Notes in registered certificated form if (A) the
Depositary (x) notifies the Company that it is unwilling or unable to continue
as depositary for the Global Note and the Company thereupon fails to appoint a
successor depositary or (y) has ceased to be a clearing agency registered under
the Exchange Act, (B) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Notes in certificated form
or (C) there shall have occurred and be continuing an Event of Default or any
event which after notice or lapse of time or both would be an Event of Default
with respect to the Notes. In all cases, Definitive Notes delivered in
exchange for any Global Note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the Depositary (in
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accordance with its customary procedures) and will bear the applicable
restrictive legend, unless the Company determines otherwise in compliance with
applicable law.
(ii) Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in a Global Note, and upon receipt by the Trustee of a written instruction or
such other form of instructions as is customary for the Depositary or the
Person designated by the Depositary as having such a beneficial interest in a
Transfer Restricted Note only, the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as being the beneficial
owner, a certification from the transferor to that effect (in substantially the
form set forth on the reverse of the Note); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) that is aware that any sale of Notes to it will be made in
reliance on Rule 144A under the Securities Act and that is acquiring such
beneficial interest in the Transfer Restricted Note for its own account or the
account of another such "qualified institutional buyer", a certification to
that effect from the transferor (in substantially the form set forth on the
reverse of the Note); or
(C) if such beneficial interest is being
transferred pursuant to an exemption from registration in accordance with Rule
144, or outside the United States in an offshore transaction in compliance with
Rule 904 under the Securities Act, or pursuant to an effective registration
statement under the Securities Act, a certification from the transferor to that
effect (in substantially the form set forth on the reverse of the Note); or
(D) if such beneficial interest in being
transferred in reliance on another exemption from the registration requirements
of the Securities Act and in accordance with all applicable securities laws of
the States of the United States, a certification to that effect from the
transferor (in substantially the form set forth on the reverse of the Note) and
an Opinion of Counsel from the transferee or transferor reasonably acceptable
to the Company and to the Securities Registrar to the effect that such transfer
is in compliance with the Securities Act, then the Trustee shall cause, or
direct the Notes Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Notes
Custodian, the aggregate principal amount of the Global Note to be reduced
accordingly and, following such reduction, the Company will execute and, upon
receipt of a Company Order, the Trustee will authenticate and deliver to the
transferee a Definitive Note in the appropriate principal amount.
(e) Exchanges between Regulation S Notes and Rule 144A Notes.
Prior to the expiration of the 40-day restricted period, beneficial interests
in the Regulation S Temporary Global Note may not be transferred to a Person
who takes delivery in the form of an interest in a Rule 144A Global Note. After
the expiration of the 40-day restricted period, beneficial interests
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in Regulation S Permanent Global Notes may be transferred to a Person who takes
delivery in the form of an interest in a Rule 144A Global Note. Upon receipt
by the Trustee of written instructions or such other form of instructions as is
customary for the Depositary, from the Depositary or its nominee on behalf of
any Person having a beneficial interest in the Regulation S Global Note, then
the Trustee shall cause, or direct the Notes Custodian to cause, in accordance
with the standing instructions and procedures existing between the Depositary
and the Notes Custodian, the aggregate principal amount of the applicable
Regulation S Global Note to be decreased and the aggregate principal amount of
the Rule 144A Global Note to be increased by the principal amount of the
beneficial interest in the Regulation S Global Note to be exchanged, to credit,
or cause to be credited, to the account of the transferor a beneficial interest
in the Rule 144A Global Note equal to the reduction in the aggregate principal
amount of the Regulation S Global Note, and to debit, or cause to be debited,
from the account of the transferor the beneficial interest in the Regulation S
Global Note that is being exchanged or transferred.
Prior to the expiration of the 40-day restricted period, beneficial
interests in the Rule 144A Global Note may not be transferred to any Person
that takes delivery thereof in the form of an interest in the Regulation S
Temporary Global Note. After the expiration of the 40-day restricted period,
beneficial interests in the Rule 144A Global Note may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S
Permanent Global Notes only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being
made in accordance with Rule 904 of Regulation S. Upon receipt by the Trustee
of written instructions or such other form of instructions as is customary for
the Depositary, from the Depositary or its nominee on behalf of any Person
having a beneficial interest in the Rule 144A Global Note, then the Trustee
shall cause, or direct the Notes Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Notes Custodian, the aggregate principal amount of the Rule 144A Global Note to
be decreased and the aggregate principal amount of the Regulation S Global Note
to be increased by the principal amount of the beneficial interest in the Rule
144A Global Note to be exchanged, to credit, or cause to be credited, to the
account of the transferor a beneficial interest in the Regulation S Global Note
equal to the reduction in the aggregate principal amount of the Rule 144A
Global Note, and to debit, or cause to be debited, from the account of the
transferor the beneficial interest in the Rule 144A Global Note that is being
exchanged or transferred.
(f) Restrictions on Transfer and Exchange of Regulation S
Temporary Global Notes. A holder of a beneficial interest in a Regulation S
Temporary Global Note must provide Euroclear or CEDEL, as the case may be, with
a certificate in the form set forth in Annex C certifying that the beneficial
owner of the interest in the Regulation S Temporary Global Note is either not a
U.S. Person (as defined below) or has purchased such interest in a transaction
that is exempt from the registration requirements under the Securities Act (the
"Regulation S Certificate"), and Euroclear or CEDEL, as the case may be, must
provide to the Trustee (or to the Paying Agent if other than the Trustee) a
certificate in the form set forth in Annex C prior to (i) the payment of
interest or principal with respect to such holder of beneficial interests in
the Regulation S Temporary Global Note and (ii) any exchange of such beneficial
interest for a beneficial interest in the Regulation S Permanent Global Notes.
"U.S. Person" means (i) any
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individual resident in the United States, (ii) any partnership or corporation
organized or incorporated under the laws of the United States, (iii) any estate
of which an executor or administrator is a U.S. Person (other than an estate
governed by foreign law and of which at least one executor or administrator is
a non-U.S. Person who has sole or shared investment discretion with respect to
its asset(s)), (iv) any trust of which any trustee is a U.S. Person (other than
a trust of which at least one trustee is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets and no beneficiary of
the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any
agency or branch of a foreign entity located in the United States, (vi) any
non-discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary for the benefit or account of a U.S. Person, (vii)
any discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary organized, incorporated or (if an individual)
resident in the United States (other than such an account held for the benefit
or account of a non-U.S. Person), (viii) any partnership or corporation
organized or incorporated under the laws of a foreign jurisdiction and formed
by a U.S. Person principally for the purpose of investing in securities not
registered under the Securities Act (unless it is organized or incorporated and
owned, by accredited investors within the meaning of Rule 501(a) under the
Securities Act who are not natural persons, estates or trusts); provided,
however, that the term "U.S. Person" shall not include (A) a branch or agency
of a U.S. Person that is located and operating outside the United States for
valid business purposes as a locally regulated branch or agency engaged in the
banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(7) of Regulation S under the Securities Act and any other
similar international organizations, and their agencies, affiliates and pension
plans.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii), (iv) and (v), each Note certificate evidencing the Global Notes and the
Definitive Notes (and all Notes issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE
HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE
OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE
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RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY),
(4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2) (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN
INSTITUTIONAL ACCREDITED INVESTOR OR A NON-U.S. PERSON HOLDING THIS SECURITY
AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES, LEGAL
OPINIONS AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT
ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS.
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT
IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION.
Additional legend for Regulation S Notes:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT IS AVAILABLE.
(ii) Except as permitted by the following paragraphs
(iii), (iv) and (v), each Regulation S Temporary Global Note (and all Notes
issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the form set forth in the form of
Note attached to this Indenture.
(iii) Except as permitted by the following paragraphs (iv)
and (v), each Regulation S Permanent Global Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear a legend in substantially
the form set forth in the form of Note attached to this Indenture.
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(iv) Upon any sale or transfer of a Transfer Restricted
Note (including any Transfer Restricted Note represented by a Global Note)
pursuant to Rule 144 or an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Note,
the Securities Registrar shall permit the Holder thereof to exchange such
Transfer Restricted Note for a Definitive Note that does not bear the legend
set forth in (i), (ii) or (iii) above and rescind any restriction on the
transfer of such Transfer Restricted Note; and
(B) any such Transfer Restricted Note represented
by a Global Note shall not be subject to the provisions set forth in (i), (ii)
or (iii) above (such sales or transfers being subject only to the provisions of
Section 305(c) hereof); provided, however, that with respect to any request for
an exchange of a Transfer Restricted Note that is represented by a Global Note
for a Definitive Note that does not bear a legend, which request is made in
reliance upon Rule 144, the Holder thereof shall certify in writing to the
Securities Registrar that such request is being made pursuant to Rule 144 (such
certification to be in substantially the form set forth on the reverse of the
Note).
(v) Any Exchange Notes issued in connection with the
Exchange Offer shall not bear the legend set forth in (i), (ii) or (iii) above
and the Trustee shall rescind any restriction on the transfer of such Exchange
Notes.
(h) Cancellation and/or Adjustment of Global Note. At such time
as all beneficial interests in a Global Note have either been exchanged for
Definitive Notes or beneficial interests in other Global Notes, redeemed,
repurchased or canceled, such Global Note shall be returned to or retained and
canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for Definitive Notes or a
beneficial interest in another Global Note, redeemed, repurchased or canceled,
the principal amount of Notes represented by such Global Note shall be reduced
and an endorsement shall be made on such Global Note, by the Trustee or the
Notes Custodian, at the direction of the Trustee, to reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of
Definitive Notes. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive Notes and
Global Notes at the Securities Registrar's request.
(j) General. No service charge shall be made for any registration
of transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 304, 906 or 1108 or in
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accordance with any Prepayment Offer or Change of Control Offer pursuant to
Section 1013 or 1015 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 1104 and ending at the close of business on the
day of such mailing, or (ii) to register the transfer of or exchange any Note
so selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
Neither the Trustee or the Securities Registrar shall have any
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under applicable law
with respect to any transfer of any interest in any Note (including any
transfers between or among Depositary participants or beneficial owners of
interests in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by the terms of, this Indenture,
and to examine the same to determine substantial compliance as to form with the
express requirements thereof. Nothing herein shall require the Trustee or
Securities Registrar to confirm the truth or accuracy of any representations or
statements made in any certificates.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee and the Company may deem and treat the Person in whose name
any Note is registered as the absolute power of such Note for all purposes, and
none of the Trustee or the Company shall be affected by notice to the contrary.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
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Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date of
the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days prior
to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his
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address as it appears in the Securities Register, not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Notes (or
their respective Predecessor Notes) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Note is registered as the owner of such Note for the
purpose of receiving payment of principal of (and premium, if any) and (subject
to Section 307) interest (and Liquidated Damages, if any) on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange or any Prepayment Offer or Change of Control Offer
pursuant to Section 1013 or 1015 shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be disposed of as directed by a Company Order.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest (and Liquidated Damages, if any) to the date of
such deposit (in the case of Notes which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, the obligations of the Company to the Trustee under Section
607 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) the failure by the Company to pay any installment of interest
(or Liquidated Damages, if any) on the Notes as and when the same becomes due
and payable and the continuance of any such failure for 30 days;
(2) the failure by the Company to pay all or any part of the
principal or premium, if any, on the Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Payment or the Prepayment
Offer Payment, or otherwise;
(3) the failure by the Company or any Restricted Subsidiary of the
Company to observe or perform the provisions of Article VIII;
(4) the failure by the Company or any Restricted Subsidiary of
the Company to observe or perform any other covenant or agreement contained in
the Notes or the Indenture and the continuance of such failure for a period of
30 days after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes outstanding, specifying such Default;
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(5) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any Restricted
Subsidiary of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company or any such
Subsidiary a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company or any such Subsidiary under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any such Subsidiary or
of any substantial part of the property of the Company or any such Subsidiary,
or ordering the winding up or liquidation of the affairs of the Company or any
such Subsidiary, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of 60
consecutive days;
(6) the commencement by the Company or any Restricted Subsidiary
of the Company of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by the Company or any such Subsidiary to the entry of a decree or order
for relief in respect of the Company or any Restricted Subsidiary of the
Company in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company or any Restricted Subsidiary of the Company, or the filing by the
Company or any such Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by the Company or any such Subsidiary to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Company
or any Restricted Subsidiary of the Company or of any substantial part of the
property of the Company or any Restricted Subsidiary of the Company, or the
making by the Company or any Restricted Subsidiary of the Company of an
assignment for the benefit of creditors, or the admission by the Company or any
such Subsidiary in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Company or any such
Subsidiary in furtherance of any such action;
(7) a default beyond any applicable grace period in the payment of
the principal of (or premium, if any, on) or interest on any Indebtedness of
the Company (other than the Notes) or any Restricted Subsidiary, for money
borrowed when due (whether resulting from maturity, acceleration, mandatory
redemption or otherwise), or any other default causing acceleration of any
Indebtedness of the Company or any Restricted Subsidiary for money borrowed,
with an aggregate principal amount in excess of $5.0 million;
(8) a final unappealable unsatisfied judgment or final
unappealable unsatisfied judgments not covered by insurance for the payment of
money are entered against the Company or any Restricted Subsidiary of the
Company in an aggregate amount in excess of $15 million by a court or courts of
competent jurisdiction, which judgments remain unstayed, undischarged or
unbonded for a period (during which execution shall not be effectively stayed)
of 60 days; or
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(9) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of this Indenture and such Subsidiary
Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under
its Subsidiary Guarantee.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(5) or (6)) occurs and is continuing, then and in every such case,
unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Notes may declare all the Notes to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders). If an Event of Default specified in Section
501(5) or (6) occurs, the Notes will be immediately due and payable without any
declaration or other Act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Outstanding Notes, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if and except on default with respect to any provision requiring a
supermajority approval to amend, which may be waived only by such
supermajority, all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest (and Liquidated Damages, if
any) on the Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest (and Liquidated
Damages, if any) on any Note when such interest (and Liquidated Damages, if
any) becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof or, with respect to any
Note required to have been purchased pursuant to a Prepayment Offer or Change
of Control Offer made by the Company, at the Purchase Date hereof, the Company
will, upon demand of the Trustee, pay to it, for the benefit of the Holders of
such Notes, the whole amount then due and payable on such Notes for principal
(and premium, if any) and interest (and Liquidated Damages, if any), and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest and
Liquidated Damages, at the rate provided by
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the Notes, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Notes), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for election of a
trustee in bankruptcy or similar official and may be a member of the creditors'
committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be
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brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Notes in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest (or Liquidated Damages, if any), upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection, including
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses and disbursements of the Trustee, its agents and counsel
and all other amounts due the Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest (and Liquidated Damages, if
any) on the Notes in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal (and
premium, if any) and interest (and Liquidated Damages, if any), respectively.
THIRD: To the Company or to such party as a court of competent
jurisdiction shall direct.
SECTION 507. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Notes; it being understood and intended
that no one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holders, or to obtain or to seek
to obtain priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the equal
and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest (and Liquidated Damages, if any) on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date or in the case of a Prepayment Offer or Change of Control Offer
made by the Company and required to be accepted as to such Note, on the
Purchase Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
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SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided, that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture or involve the Trustee in personal liability, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Notes may on behalf of the Holders of all the Notes waive
any past Default or Event of Default hereunder and its consequences, except a
Default or Event of Default with respect to any provision requiring a
supermajority to amend, which Default or Event of Default may only be waived by
such a supermajority, except a Default or Event of Default
(1) in the payment of the principal of (or premium, if any) or
interest (or Liquidated Damages, if any) on any Note (including any Note which
is required to have been purchased pursuant to a Prepayment Offer or Change of
Control Offer which has been made by the Company), or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
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SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess reasonable
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any Default hereunder, to
the extent it has knowledge of such Default, as and to the extent provided by
the Trust Indenture Act. The term "Default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default. Except in
the case of a Default or Event of Default in payment of principal of, premium
if any, or interest on, any Note, the Trustee may withhold the notice if and so
long
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as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) before the Trustee acts or refrains from acting, it may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonable to it against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally or by
agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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(h) the Trustee shall not be required to given any bond or surety
in respect of the performance of its powers and duties hereunder.
(i) the permissive rights of the Trustee to do things enumerated
in this Indenture shall not be construed as a duty.
(j) except for (i) a Default under Sections 501(1) or (2) hereof,
or (ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or Event of Default unless specifically
notified in writing of such event by the Company or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding; as
used herein, the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard thereto.
SECTION 604. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or
application by the Company of the Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Securities Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Notes and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it were not
Trustee, Paying Agent, Securities Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time, and the Trustee shall
be entitled to, reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Article Five hereof, the expenses (including
reasonable fees and expenses of its counsel) and the compensation for the
services in connection therewith are intended to constitute expense of
administration under any applicable bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and a Corporate
Trust Office or agent in the Borough of Manhattan, The City of New York or
Chicago, Illinois. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
If at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered
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to the Trustee within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Notes, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608
after written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Notes
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
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SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Notes), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
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(a) semi-annually, not more than 15 days after each Regular Record
Date a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Securities Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Notes and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to the names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Notes are listed on any stock
exchange.
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale or Consolidation.
(a) (i) The Company will not merge or consolidate with or into any
other Person (whether or not the Company is the surviving entity), and (ii) the
Company will not and will not permit its Restricted Subsidiaries to, directly
or indirectly, sell, transfer, assign, lease, convey or otherwise dispose of
all or substantially all of the Property of the Company and its Restricted
Subsidiaries taken as a whole to any Person in any one transaction or a series
of transactions (including, without limitation, dispositions pursuant to
mergers, consolidations, Investments and Production Payments and Reserve
Sales), in each case unless: (A) the Surviving Entity (as defined) shall be a
corporation organized and existing under the laws of the United States of
America or a State thereof or the District of Columbia; (B) in the case of a
transaction described in clause (ii) above, such Property shall have been
transferred as an entirety or virtually as an entirety to one Person; (C)
immediately before and immediately after giving effect to such transaction or
series of transactions on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing; (D) except in the case of a merger of
the Company with a Restricted Subsidiary, immediately after giving effect to
such transaction or series of transactions on a pro forma basis, the Surviving
Entity would be able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 1008; (E) except in the case of a
merger of the Company with a Restricted Subsidiary, immediately after giving
effect to such transaction or series of transactions on a pro forma basis, the
Surviving Entity shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to the transaction
or series of transactions; (F) if the Company is not the Surviving Entity, then
(1) the Surviving Entity shall have executed and delivered to the Trustee a
supplemental indenture satisfactory to the Trustee pursuant to which the
Surviving Entity assumes the obligations of the Company under the Indenture and
the Notes, (2) each Subsidiary Guarantor (unless it is the Surviving Entity)
shall have executed and delivered to the Trustee a supplemental indenture
satisfactory to the Trustee confirming that such Subsidiary Guarantor's
Subsidiary Guaranty remains in full force and effect and guarantees the
Surviving Entity's obligations under the Indenture and the Notes, and (3) in
the case of a transaction described in clause (ii) above in which the
transferee assumes all of the obligations of the Company under the Indenture
and the Notes, the Company shall be released and shall no longer be considered
an obligor under the Indenture and the Notes; and (G) the Company, and if the
Company is not the Surviving Entity the Surviving Entity, shall have delivered
to the Trustee an Officer's Certificate (attaching the calculations to
demonstrate compliance with (D) and (E) above) and an Opinion of Counsel, each
stating that such merger, consolidation or disposition and any such
supplemental indentures comply with the terms of the Indenture. The Term
"Surviving Entity" shall mean the Person referred to in clauses (i) and (ii)
above (a) formed by or surviving any such merger or consolidation involving the
Company or (b) to which any sale, transfer, assignment, lease, conveyance or
other disposition is made.
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(b) With respect to each transaction or series of transactions
described in subsection (a) above, giving effect to such transaction or series
of transactions on a pro forma basis shall include, without limitation, (i)
treating any Indebtedness not previously the obligation of the Company or any
of its Restricted Subsidiaries which becomes an obligation of the Company or
any of its Restricted Subsidiaries in connection with or as a result of such
transaction or series of transactions as having been incurred at the time of
the transaction or series of transactions and (ii) giving effect to any
Indebtedness incurred or anticipated to be incurred in connection with such
transaction or series of transactions.
SECTION 802. When a Subsidiary Guarantor May Merger or Transfer Assets.
Each Subsidiary Guarantor may merge or consolidate with or dispose of
its assets to the Company or a Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor except to the extent any such transaction is limited by
Section 801. In addition, each Subsidiary Guarantor may merge or consolidate
with or dispose of its assets to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary that is a Subsidiary Guarantor), regardless of
whether such Person is an Affiliate of such Subsidiary Guarantor, if: (i)
immediately after such transaction, and giving effect thereto, no Default or
Event of Default has occurred and is continuing; (ii) such transaction was
subject to, and consummated in compliance with, as appropriate, either Section
801 or Section 1013; and (iii) the Company shall have delivered to the Trustee
an Officer's Certificate and an Opinion of Counsel, each stating that such
transaction complies with the above provisions and that all conditions
precedent relating to such transaction have been complied with.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, the Subsidiary Guarantors, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto,
in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company herein
and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or
(3) to secure the Notes pursuant to the requirements of Section
1011 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act; or
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(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (5) shall not adversely
affect the interests of the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, the Subsidiary Guarantors and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of amending or
supplementing this Indenture or any supplemental indenture or modifying the
rights of the Holders; provided, however, that no such modification may,
without the consent of Holders of at least 66 2/3% in aggregate principal
amount of Notes at the time outstanding, modify the provisions (including the
defined terms used therein) of Section 1015 or the guarantee or subordination
provisions of the Indenture in a manner adverse to the Holders; and provided
that no such modification may, without the consent of each Holder thereby:
(1) change the Stated Maturity on any Note, or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption at the option of
the Company thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or interest (or Liquidated Damages,
if any) thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption at the option of the Company, on or after the Redemption
Date), or reduce the Change of Control Payment or the Prepayment Offer Payment
or alter the provisions (including the defined terms used therein) regarding
the right of the Company to redeem the Notes at its option in a manner adverse
to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Notes, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1021 except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Note affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and each of the Guarantors, as the case may
be, authorizing the execution of any such amended or supplemental Indenture,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of the Holders of Notes as aforesaid, and upon receipt by the
Trustee of the documents described in Section 6.03 hereof, the Trustee shall
join with the Company and the Guarantors in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
SECTION 903. Execution of Supplemental Indentures.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
Neither the Company nor any Guarantor may sign an amendment or supplemental
Indenture until its respective Board of Directors approves it. In executing
any amended or supplemental Indenture, the Trustee shall be entitled to receive
and (subject to Section 6.01) shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture and that there has been compliance with all conditions precedent.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
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ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and any interest (and Liquidated Damages, if any) on the Notes
in accordance with the terms of the Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be presented or surrendered for
payment, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee's agent, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Money for Note Payments to be Held in Trust.
(a) If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (and premium, if any)
or interest (and Liquidated Damages, if any) on any of the Notes, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal (and premium, if any) or interest (and Liquidated Damages,
if any) so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
(b) Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest (and Liquidated Damages, if any) on any Notes, deposit with a Paying
Agent a sum sufficient to pay the principal (and
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premium, if any) or interest (and Liquidated Damages, if any) so becoming due,
such sum to be held in trust for the benefit of the Persons entitled to such
principal, premium, interest or Liquidated Damages, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
(c) The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest (and Liquidated Damages, if any)
on Notes in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any Default by the Company
(or any other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest (and Liquidated Damages, if any); and
(3) at any time during the continuance of any such
Default, upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
(d) The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
(e) Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest (and Liquidated Damages, if any) on any Note and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability and
responsibility of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days
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from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight and Section 1013, the Company and its
Subsidiary Guarantors will do or cause to be done all things necessary to
preserve and keep in full force and effect their existence, rights (charter and
statutory) and franchises; provided, however, that the Company and its
Subsidiary Guarantors shall not be required to preserve any such right or
franchise if the Board of Directors in good faith shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company or its Subsidiaries and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Subsidiary Guarantor of the
Company to be maintained and kept in good condition, repair and working order
(ordinary wear and tear excepted) and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that there is no material adverse effect to the Company and its
subsidiaries, taken as a whole; provided, however, that nothing in this Section
shall prevent the Company from discontinuing the operation or maintenance of
any of such properties if such discontinuance is, in the judgment of the Board
of Directors in good faith, desirable in the conduct of its business or the
business of any of its Subsidiaries taken as a whole and not disadvantageous in
any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiary Guarantors or upon the income, profits or property of the Company or
any of its Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any of its Subsidiaries; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiary Guarantors to, keep
at all times all of their properties which are of an insurable nature insured
against loss or damage with insurers believed by the Company to be responsible
to the extent that property, in the reasonable good
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faith opinion of the Company, of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
customary business practice.
SECTION 1008. Limitation on Incurrence of Additional Indebtedness.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(other than Permitted Indebtedness) unless, after giving pro forma effect to
the incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, (i) no Default or Event of Default would occur as a
consequence of, or be continuing following, such Incurrence and application and
(ii) the Consolidated Interest Coverage Ratio would exceed (i) 2.25 to 1.0 if
such Incurrence is between the Issue Date and July 1, 1999 and (ii) 2.50 to 1.0
if such Incurrence is thereafter.
(b) "Permitted Indebtedness" means any and all of the following:
(i) Indebtedness arising under the Indenture, including without limitation the
Notes and the Subsidiary Guarantees; (ii) Indebtedness under the Senior Credit
Facilities, to the extent that the aggregate principal amount of all
Indebtedness under the Senior Credit Facilities, together with all Indebtedness
Incurred pursuant to clause (ix) of this paragraph in respect of Indebtedness
previously Incurred pursuant to this clause (ii), at any one time outstanding
does not exceed the greater of (a) $35.0 million and (b) $8.0 million, plus 15%
of Adjusted Consolidated Net Tangible Assets determined as of the date of the
Incurrence of such Indebtedness; provided, however, that the maximum amount
available to be outstanding under the Senior Credit Facilities as Permitted
Indebtedness pursuant to this clause (ii) shall be permanently reduced by the
amount of Net Available Cash from Asset Sales used to permanently repay
Indebtedness under the Senior Credit Facilities (with a permanent reduction of
the related commitment to lend or the amount available to be refinanced in the
case of a revolving credit facility) and not subsequently reinvested in
Additional Assets or used to permanently reduce other Indebtedness to the
extent permitted pursuant to Section 1013; provided, however, that the
application of any such Net Available Cash from Asset Sales shall not
permanently reduce the amount of Permitted Indebtedness under this clause (ii)
below $10.0 million in principal amount plus related accrued interest and
costs; (iii) Indebtedness to the Company or any of its Wholly Owned Restricted
Subsidiaries by any of its Restricted Subsidiaries or Indebtedness of the
Company to any of its Wholly Owned Restricted Subsidiaries (but only so long as
such Indebtedness is held by the Company or a Wholly Owned Restricted
Subsidiary); (iv) Indebtedness in respect of bid, performance or surety
obligations issued by or for the account of the Company or any Restricted
Subsidiary in the ordinary course of business, including guarantees and letters
of credit functioning as or supporting such bid, performance or surety
obligations (in each case other than for an obligation for money borrowed); (v)
Indebtedness under Permitted Hedging Agreements; (vi) obligations relating to
oil or gas balancing positions arising in the ordinary course of business that
are customary in the Oil and Gas Business; (vii) Indebtedness outstanding on
the Issue Date (which is not repaid with the proceeds of the Note Offering) not
otherwise permitted in clauses (i) through (vi) above; (viii) Indebtedness not
otherwise permitted to be Incurred pursuant to this paragraph (excluding any
Indebtedness Incurred pursuant to the provisions of the Indenture described in
the immediately preceding paragraph), provided that the aggregate principal
amount of all Indebtedness Incurred
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pursuant to this clause (viii), together with all Indebtedness Incurred
pursuant to clause (ix) of this paragraph in respect of Indebtedness previously
Incurred pursuant to this clause (viii), at any one time outstanding does not
exceed $15.0 million; (ix) Indebtedness Incurred in exchange for, or the
proceeds of which are used to refinance, (a) Indebtedness referred to in
clauses (i) through (viii) of this paragraph (including Indebtedness previously
Incurred pursuant t this clause (ix)) and (b) Indebtedness Incurred pursuant to
Section 1008(a), provided that such Indebtedness is Permitted Refinancing
Indebtedness; and (x) Indebtedness consisting of obligations in respect of
purchase price adjustments, indemnities or Guarantees in connection with the
acquisition or disposition of assets.
SECTION 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment
if, at the time of and after giving effect to the proposed Restricted Payment,
(i) any Default or Event of Default would have occurred and be continuing, (ii)
the Company could not incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 1008 or (iii) the aggregate
amount expended or declared for all Restricted Payments from the Issue Date
would exceed the sum (without duplication) of the following:
(i) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis commencing on the last day of the fiscal
quarter immediately preceding the Issue Date, and ending on the last day of the
fiscal quarter ending on or immediately preceding the date of such proposed
Restricted Payment (or, if such aggregate Consolidated Net Income shall be a
loss, minus 100% of such loss), plus
(ii) the aggregate net cash proceeds, or the Fair Market
Value of Property other than cash, received by the Company on or after the
Issue Date from the issuance or sale (other than to a Subsidiary of the
Company) of Capital Stock of the Company or any options, warrants or rights to
purchase Capital Stock of the Company, plus
(iii) the aggregate net cash proceeds or the Fair Market
Value of Property other than cash received by the Company as capital
contributions to the Company (other than from a Subsidiary of the Company) on
or after the Issue Date, plus
(iv) the aggregate net cash proceeds received by the
Company upon the exercise of any options, warrants or rights to purchase shares
of Capital Stock of the Company (other than from a Subsidiary of the Company)
on or after the Issue Date, plus
(v) the aggregate net cash proceeds received on or after
the Issue Date by the Company from the issuance or sale (other than to any
Subsidiary of the Company) of convertible debt or convertible Redeemable Stock
that has been converted into or exchanged for Capital Stock of the Company,
together with the aggregate cash received by the Company at the time of such
conversion or exchange, plus
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(vi) to the extent not otherwise included in the Company's
Consolidated Net Income, an amount equal to the net reduction in Investments
made by the Company and its Restricted Subsidiaries subsequent to the Issue
Date in any Person resulting from (1) payments of interest on debt, dividends,
repayments of loans or advances or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person other than the Company or a Restricted Subsidiary, and in an amount not
to exceed the book value of such Investments previously made in such Person
that were treated as Restricted Payments, or (2) the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not to
exceed the lesser of (x) the book value of all Investments previously made in
such Unrestricted Subsidiary that were treated as a Restricted Payments and (y)
the Fair Market Value of such Unrestricted Subsidiary.
(b) The limitations set forth in paragraph (a) above will not
prevent the Company or any Restricted Subsidiary from making the following
Restricted Payments so long as, at the time thereof, no Default or Event of
Default shall have occurred and be continuing (except in the case of clause (i)
below under which the payment of a dividend is permitted, so long as the
declaration of such dividend was made in compliance with Section 1009(a)):
(i) the payment of any dividend on Capital Stock of the
Company or any Restricted Subsidiary within 60 days after the declaration
thereof, if at such declaration date such dividend could have been paid in
compliance with Section 1009(a);
(ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate net cash proceeds of, a
substantially concurrent issuance and sale (other than to a Subsidiary of the
Company) of Capital Stock of the Company;
(iii) the making of any principal payment on or the
repurchase, redemption, defeasance or other acquisition or retirement for
value, prior to any scheduled principal payment, scheduled sinking fund payment
or maturity, of any Indebtedness (other than Redeemable Stock) in exchange for,
or out of the aggregate net cash proceeds of, a substantially concurrent
issuance and sale (other than to a Subsidiary of the Company) of Capital Stock
of the Company;
(iv) the making of any principal payment on or the
repurchase, redemption, defeasance or other acquisition or retirement for value
of Indebtedness in exchange for, or out of the aggregate net cash proceeds of,
a substantially concurrent Incurrence (other than a sale to a Subsidiary of the
Company) of Indebtedness so long as such new Indebtedness is Permitted
Refinancing Indebtedness and such new Indebtedness (A) has an Average Life to
Stated Maturity that is longer than the Average Life to Stated Maturity of the
Notes and (B) has a Stated Maturity for its final scheduled principal payment
that is at least 91 days later than the Stated Maturity of the final scheduled
principal payment of the Notes;
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(v) loans made to officers, directors or employees of the
Company or any Restricted Subsidiary approved by the Board of Directors (or a
duly authorized officer), the proceeds of which are used solely (A) to purchase
common stock of the Company in connection with a restricted stock or employee
stock purchase plan, or to exercise stock options received pursuant to an
employee or director stock option plan or other incentive plan, in a principal
amount not to exceed the exercise price of such stock options or (B) to
refinance loans, together with accrued interest thereon, made pursuant to item
(A) of this clause (v); and
(vi) the repurchase, redemption or other acquisition or
retirement for value of the Company's 12% Bonds outstanding on the date hereof.
The actions described in clauses (i), (ii), (iii) and (v) of this
Section 1009(b) shall be Restricted Payments that shall be permitted to be
taken in accordance with this Section 1009(b) but shall reduce the amount that
would otherwise be available for Restricted Payments under paragraph (a)
(provided that any dividend paid pursuant to clause (i) of this Section 1009(b)
shall reduce the amount that would otherwise be available under Section 1009(a)
when declared, but not also when subsequently paid pursuant to such clause
(i)), and the actions described in clause (iv) of this Section 1009(b) shall be
Restricted Payments that shall be permitted to be taken in accordance with this
Section 1009(b) but shall not reduce the amount that would otherwise be
available for Restricted Payments under Section 1009(a).
SECTION 1010. Limitations on Distributions from Restricted Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
suffer to exist or become effective, or enter into any agreement with any
Person that would cause to become effective, any consensual encumbrance or
restriction on the legal right of any Restricted Subsidiary to (i) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or Redeemable Stock held by the Company or a
Subsidiary Guarantor, (ii) pay any Indebtedness or other obligation owed to the
Company or any Subsidiary Guarantor, (iii) make any Investments in the Company
or any Subsidiary Guarantor, or (iv) transfer any of its property or assets to
the Company or any Subsidiary Guarantor. Such limitation will not apply (a)
with respect to clauses (iii) and (iv) only, to encumbrances and restrictions
(1) in existence under or by reason of any agreements in effect on the Issue
Date, (2) required under Senior Credit Facilities that are not more restrictive
than those in effect under the Senior Credit Facilities on the Issue Date, (3)
in existence with respect to a Restricted Subsidiary at the time it became a
Restricted Subsidiary if (A) such encumbrance or restriction was not created in
anticipation of or in connection with the transactions pursuant to which the
Restricted Subsidiary became a Restricted Subsidiary and (B) immediately
following such transaction, on a pro forma basis, the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1008 or (4) which result from the renewal, refinancing,
extension or amendment of an agreement referred to in the immediately preceding
clauses (1), (2) and (3), provided, such replacement or encumbrance or
restriction is no more restrictive to the Company or Restricted Subsidiary and
is not materially less favorable to the Holders of Notes than those under or
pursuant to the
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agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced, and (b) with respect to clause (iv) only, to (1) any restriction on
the sale, transfer or other disposition of assets or Property as a result of a
Lien permitted under Section 1011, (2) any encumbrance or restriction arising
in connection with an acquisition of Property, so long as such encumbrance or
restriction relates solely to the Property so acquired (including future
improvements thereon, accessions thereto and proceeds thereof) and was not
created in anticipation of or in connection with such acquisition, (3)
customary provisions restricting subletting or assignment of leases and
customary provisions in other agreements that restrict assignment of such
agreements or rights thereunder, (4) any encumbrance or restriction due to
applicable law, (5) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale and (6)
restrictions contained in purchase money obligations for Property acquired in
the ordinary course of business with respect to transfers of such Property.
SECTION 1011. Limitation on Liens.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) on or with respect to any
Property of the Company or such Restricted Subsidiary, whether owned on the
Issue Date or acquired after the Issue Date, or any interest therein or any
income or profits therefrom, unless the Notes (and, in the case of a Restricted
Subsidiary which is a Subsidiary Guarantor, the Subsidiary Guaranty of such
Subsidiary) are secured equally and ratably with (or prior to) any and all
other obligations secured by such Lien.
(b) "Permitted Liens" means any and all of the following: (i)
Liens existing as of the Issue Date; (ii) Liens securing the Notes, the
Subsidiary Guarantees and other obligations arising under the Indenture; (iii)
any Lien existing on any Property (including future improvements thereon,
accessions thereto and proceeds thereof) of a Person at the time such Person is
merged or consolidated with or into the Company or a Subsidiary Guarantor or
becomes a Restricted Subsidiary that is a Subsidiary Guarantor (and not
incurred in anticipation of or in connection with such transaction), provided
that such Liens are not extended to other Property of the Company or the
Subsidiary Guarantors; (iv) any Lien existing on any Property (including future
improvements thereon, accessions thereto and proceeds thereof) at the time of
the acquisition thereof (and not incurred in anticipation of or in connection
with such transaction), provided that such Liens are not extended to other
Property of the Company or the Subsidiary Guarantors; (v) any Lien incurred in
the ordinary course of business incidental to the conduct of the business of
the Company or the Subsidiary Guarantors or the ownership of their Property
(including, without limitation, (a) easements, rights of way and similar
encumbrances, (b) rights or title of lessors under leases (other than Capital
Lease Obligations), (c) rights of collecting banks having rights of setoff,
revocation, refund or chargeback with respect to money or instruments of the
Company or the Subsidiary Guarantors or on deposit with or in the possession of
such banks, (d) Liens imposed by law, including without limitation, Liens under
workers' compensation or similar legislation and mechanics', carriers',
warehousemens', materialmens', suppliers' and vendors' Liens, (e) Liens
incurred to secure performance of obligations with respect to statutory or
regulatory requirements, performance or return-of-money bonds, surety bonds or
other obligations of a like
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nature and incurred in a manner consistent with industry practice and (f) Liens
on deposits made in the ordinary course of business), in each case which are
not incurred in connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of Property (other than
Trade Accounts Payable) and which do not in the aggregate impair in any
material respect the use of Property in the operation of the business of the
Company and its Restricted Subsidiaries taken as a whole; (vi) Liens for taxes,
assessments and governmental charges not yet due or the validity of which are
being contested in good faith by appropriate proceedings, promptly instituted
and diligently conducted, and for which adequate reserves have been established
to the extent required by GAAP; (vii) Liens incurred to secure appeal bonds and
judgment and attachment Liens, in each case in connection with litigation or
legal proceedings that are being contested in good faith by appropriate
proceedings so long as reserves have been established to the extent required by
GAAP as in effect at such time and so long as such Liens do not encumber assets
by an amount in excess of $5.0 million; (viii) Liens securing Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (ix) Oil and Gas
Liens Incurred in the ordinary course of the business of the Company and its
Restricted Subsidiaries; (x) purchase money security interests (including,
without limitation, Capital Lease Obligations) granted in connection with the
acquisition of fixed assets in the ordinary course of business of the Company
and its Restricted Subsidiaries, provided, that (a) such Liens attach only to
the Property (including future improvements thereon, accessions thereto and
proceeds thereof) so acquired with the purchase money Indebtedness secured
thereby and (b) the Indebtedness secured by such Liens is not in excess of the
purchase price of such Property; (xi) Liens resulting from the deposit of funds
or evidences of Indebtedness in trust for the purpose of decreasing or
defeasing Indebtedness of the Company or any of its Subsidiaries so long as
such deposit of funds is permitted by the provisions of the Indenture described
under Section 1009 hereof; (xii) Liens resulting from a pledge of Capital Stock
of a Person that is not a Restricted Subsidiary; (xiii) Liens, including liens
resulting from the pledge of Capital Stock of Restricted Subsidiaries, to
secure obligations arising from time to time under the Senior Credit
Facilities; (xiv) Liens to secure any permitted extension, renewal,
refinancing, refunding or exchange (or successive extensions, renewals,
refinancings, refundings or exchanges), in whole or in part, of or for any
Indebtedness secured by Liens referred to in clauses (i), (ii), (iii), (iv),
(x) and (xiii) above; provided, however, that (a) such new Lien shall be
limited to all or part of the same Property (including future improvements
thereon, accessions thereto and proceeds thereof) that secured the original
Lien and (b) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (1) the outstanding principal
amount or, if greater, the committed amount of the Indebtedness secured by such
original Lien immediately prior to such extension, renewal, refinancing,
refunding or exchange and (2) an amount necessary to pay any fees and expenses,
including premiums, related to such refinancing, refunding, extension, renewal
or replacement; (xv) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets; and (xvi) Liens in
favor of the Company or a Subsidiary Guarantor. Notwithstanding anything in
this paragraph to the contrary, the term "Permitted Liens" does not include
Liens resulting from the creation, incurrence, issuance, assumption or
Guarantee of any Production Payment and Reserve Sale other than (a) Production
Payments and Reserve Sales in connection with the acquisition of Properties
after the Issue Date, provided that any such Liens
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created in connection therewith are created, incurred, issued, assumed or
guaranteed in connection with the financing of, and within 90 days after the
acquisition of, the Property that is subject thereto, (b) Production Payments
and Reserve Sales, other than those described in clause (a) of this sentence,
to the extent such Production Payments and Reserve Sales constitute Asset Sales
made pursuant to and in compliance with Section 1013, or (c) Oil and Gas Liens
that are not Dollar-Denominated Production Payments or Volumetric Production
Payments, that are incurred in the ordinary course of business of the Company
and its Restricted Subsidiaries, and that may be deemed under the definition of
Production Payments and Reserve Sales to constitute Production Payments and
Reserve Sales.
SECTION 1012. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, conduct any business or
enter into any transaction or series of transactions (including, but not
limited to, but excluding transactions under those certain agreements in
existence on the Issue Date and more particularly described on Annex D, the
sale, transfer, disposition, purchase, exchange or lease of Property, the
making of any Investment, the giving of any Guarantee or the rendering of any
service) with or for the benefit of any Affiliate of the Company (other than
the Company or a Wholly Owned Restricted Subsidiary), unless (i) such
transaction or series of transactions is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with a Person that is not an Affiliate of
the Company or such Restricted Subsidiary, and (ii) with respect to a
transaction or series of transactions involving aggregate payments by or to the
Company or such Restricted Subsidiary having a Fair Market Value equal to or in
excess of (a) $1.0 million but less than $5.0 million, the Board of Directors
of the Company (including a majority of the disinterested members of the Board
of Directors of the Company) approves such transaction or series of
transactions and, in its good faith judgment, believes that such transaction or
series of transactions complies with clause (i) of this paragraph, as evidenced
by a certified resolution delivered to the Trustee or (b) $5.0 million, (1) the
Company receives from an independent, nationally recognized investment banking
firm or appraisal firm, in either case specializing or having a specialty in
the type and subject matter of the transaction (or series of transactions) at
issue, a written opinion that such transaction (or series of transactions) is
fair, from a financial point of view, to the Company or such Restricted
Subsidiary and (2) the Board of Directors of the Company (including a majority
of the disinterested members of the Board of Directors of the Company) approves
such transaction or series of transactions and, in its good faith judgment,
believes that such transaction or series of transactions complies with clause
(i) of this paragraph, as evidenced by a certified resolution delivered to the
Trustee.
(b) The limitations of Section 1012(a) do not apply to (i) the
payment of reasonable and customary compensation (including pursuant to stock
option and stock purchase plans) to directors of the Company or any of its
Restricted Subsidiaries who are not employees of the Company or any of its
Restricted Subsidiaries, (ii) indemnities of officers and directors of the
Company or any Subsidiary consistent with such Person's bylaws and applicable
statutory provisions, (iii) the Company's and its Restricted Subsidiaries'
employee compensation and other
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benefit arrangements or (iv) Investments in Unrestricted Subsidiaries which are
deemed to be Restricted Payments under Section 1009.
SECTION 1013. Limitation on Asset Sales.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the Fair Market Value of the shares and
assets subject to such Asset Sale and (ii) at least 75% of the consideration
paid to the Company or such Restricted Subsidiary in connection with such Asset
Sale is in the form of cash or Cash Equivalents or Exchanged Properties
("Permitted Consideration").
(b) The Net Available Cash from Asset Sales by the Company or a
Restricted Subsidiary may be applied by the Company or such Restricted
Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or
is required by the terms of any Indebtedness of the Company or such Restricted
Subsidiary), to (i) prepay, repay or purchase Indebtedness of the Company or a
Subsidiary Guarantor or Indebtedness of such Restricted Subsidiary (in each
case excluding Indebtedness owed to the Company or an Affiliate of the Company
(other than pursuant to a Senior Credit Facility) and Indebtedness of the
Company or a Subsidiary Guarantor which is subordinated to the Notes or the
applicable Subsidiary Guaranty), (ii) to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) or (iii) purchase Notes (excluding Notes owned by the
Company or an Affiliate of the Company, other than pursuant to an offer made to
all holders of the Notes).
(c) Any Net Available Cash from an Asset Sale not applied in
accordance with the preceding paragraph within 365 days from the date of such
Asset Sale shall constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to purchase Notes having an aggregate principal amount equal to the
aggregate amount of Excess Proceeds (the "Prepayment Offer") at a purchase
price equal to 100% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages, if any, to the Purchase Date (as
defined) (the "Prepayment Offer Payment") in accordance with the procedures
(including prorating in the event of oversubscription) set forth in this
Section 1013, but, if the terms of any Indebtedness (other than Indebtedness
which is subordinated to the Notes or a Subsidiary Guaranty) require that an
offer to purchase such Indebtedness be made contemporaneously with the
Prepayment Offer, then the Excess Proceeds shall be prorated between the
Prepayment Offer and such other offer in accordance with the aggregate
outstanding principal amounts of the Notes and such other Indebtedness, and the
aggregate principal amount of Notes for which the Prepayment Offer is made
shall be reduced accordingly. If the aggregate principal amount of Notes
tendered by Holders thereof exceeds the amount of available Excess Proceeds,
then such Excess Proceeds will be allocated pro rata according to the principal
amount of the Notes tendered and the Trustee will select the Notes to be
purchased in accordance with the Indenture. To the extent that any portion of
the amount of
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Excess Proceeds remains after compliance with the second sentence of this
paragraph and provided that all Holders of Notes have been given the
opportunity to tender their Notes for purchase as described in the following
paragraph (d), the Company or such Restricted Subsidiary may use such remaining
amount for general corporate purposes and the amount of Excess Proceeds will be
reset to zero.
(d) Within five days after the 365th day following the date of an
Asset Sale, the Company shall, if it is obligated to make an offer to purchase
the Notes pursuant to the preceding paragraph (c), send a written Prepayment
Offer notice, by first-class mail, to the Holders of the Notes (the "Prepayment
Offer Notice"), accompanied by such information regarding the Company and its
Subsidiaries as the Company in good faith believes will enable such Holders of
the Notes to make an informed decision with respect to the Prepayment Offer.
The Prepayment Offer Notice will state, among other things, (i) that the
Company is offering to purchase Notes pursuant to the provisions of the
Indenture, (ii) that any Note (or any portion thereof) accepted for payment
(and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall
cease to accrue interest on the Purchase Date, (iii) that any Notes (or
portions thereof) not properly tendered will continue to accrue interest, (iv)
the purchase price and purchase date, which shall be, subject to any contrary
requirements of applicable law, no less than 30 days nor more than 60 days
after the date the Prepayment Offer Notice is mailed (the "Purchase Date"), (v)
the aggregate principal amount of Notes to be purchased, (vi) a description of
the procedure which Holders of Notes must follow in order to tender their Notes
and the procedures that Holders of Notes must follow in order to withdraw an
election to tender their Notes for payment, and (vii) all other instructions
and materials necessary to enable Holders to tender Notes pursuant to the
Prepayment Offer.
(e) On or before the Purchase Date, the Company will (i) accept
for payment Notes or portions thereof properly tendered pursuant to the
Prepayment Offer, (ii) deposit with the Paying Agent in immediately available
funds an amount equal to the Prepayment Offer Payment in respect of Notes or
portions thereof so tendered and (iii) deliver, or cause to be delivered, to
the Trustee the Notes so accepted together with an Officer's Certificate
listing the Notes or portions thereof tendered to the Company and accepted for
payment. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the Prepayment Offer Payment for such
Notes and the Trustee shall, upon receipt of a written order in the form of an
Officer's Certificate, promptly authenticate and mail to each holder a new
Notes in a principal amount equal to any unpurchased portion of the Notes
surrendered, if any; provided, that each such new Note shall be in a principal
amount of $1,000 or any integral multiple thereof. The Company will announce
publicly the results of a Prepayment Offer on or as soon as practicable after
the Purchase Date.
(f) The Company will comply, to the extent applicable, with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other
securities laws or regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Notes as
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Prepayment Offer, the
Company will comply with the
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applicable securities laws and regulations and will not be deemed to have
breached its obligations described above.
SECTION 1014. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
The Company will not (i) permit any Restricted Subsidiary to sell or
otherwise issue any Capital Stock other than to the Company or one of its
Wholly Owned Restricted Subsidiaries or (ii) permit any Person other than the
Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any
other Restricted Subsidiary, except, in each case, for (a) directors'
qualifying shares, (b) the Capital Stock of a Restricted Subsidiary owned by a
Person at the time such Restricted Subsidiary became a Restricted Subsidiary or
acquired by such Person in connection with the formation of the Restricted
Subsidiary, or transfers thereof or (c) a sale of all of the Capital Stock of a
Restricted Subsidiary owned by the Company or its Subsidiaries effected in
accordance with the provisions of Section 1013.
SECTION 1015. Repurchase of Notes at the Option of the Holder Upon a Change
of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right, at such Holder's option, pursuant to an offer
(subject only to conditions required by applicable law, if any) by the Company
(the "Change of Control Offer"), to require the Company to repurchase all or
any part of such Holder's Notes (provided, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of
Control Payment Date") that is no fewer than 30 days and no later than 60 days
from the date of the Change of Control Offer, at a cash price equal to 101% of
the principal amount thereof (the "Change of Control Payment") plus accrued and
unpaid interest and Liquidated Damages, if any, to the Change of Control
Payment Date. The Change of Control Offer shall be made within 30 days
following a Change of Control and shall state, among other things: (i) that a
Change of Control has occurred and a Change of Control Offer is being made
pursuant to the Indenture and that all Notes (or portions thereof) properly
tendered will be accepted for payment; (ii) the purchase price and the Change
of Control Payment Date; (iii) that any Note (or portion thereof) accepted for
payment (and duly paid on the Change of Control Payment Date) pursuant to the
Change of Control Offer shall cease to accrue interest on the Change of Control
Payment Date; (iv) that any Notes (or portions thereof) not properly tendered
will continue to accrue interest; (v) a description of the transaction or
transactions constituting the Change of Control; (vi) the procedures that
Holders of Notes must follow in order to tender their Notes (or portions
thereof) for payment and the procedures that Holders of Notes must follow in
order to withdraw an election to tender Notes (or portions thereof) for
payment; and (vii) all other instructions and materials necessary to enable
Holders to tender Notes pursuant to the Change of Control Offer.
(b) A "Change of Control" shall be deemed to occur if (i) any
"person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of
the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring,
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holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act), becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of 50% or more of the total voting power of
all classes of the Voting Stock of the Company or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale,
lease, conveyance or transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole (other than to any
Wholly Owned Restricted Subsidiary) shall have occurred, (iii) the stockholders
of the Company shall have approved any plan of liquidation or dissolution of
the Company, (iv) the Company consolidates with or merges into another Person
or any Person merges into the Company in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is
reclassified into or exchanged for cash, securities or other property, other
than any such transaction where (a) the outstanding Voting Stock of the Company
is reclassified into or exchanged for Voting Stock of the surviving corporation
that is Capital Stock and (b) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving corporation immediately
after such transaction in substantially the same proportion as before the
transaction or (v) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office, excluding
directors elected by JEDI II or its affiliates.
(c) On or before the Change of Control Payment Date, the Company
will (i) accept for payment Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
cash sufficient to pay the Change of Control Payment (together with accrued and
unpaid interest and Liquidated Damages, if any) of all Notes so tendered and
(iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent (or the Company, if so acting) promptly will pay the
Holders of Notes so accepted an amount equal to the Change of Control Payment
(together with accrued and unpaid interest and Liquidated Damages, if any), and
the Trustee promptly will authenticate and deliver to such Holders a new Note
equal in principal amount to any unpurchased portion of the Note surrendered.
Any Notes not so accepted will be delivered promptly by the Company to the
Holder thereof. The Company publicly will announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(d) Any Change of Control Offer will be made in compliance with
all applicable laws, rules and regulations, including, if applicable,
Regulation 14E under the Exchange Act and the rules thereunder and all other
applicable Federal and state securities laws and any provisions of the
Indenture which conflict with such laws shall be deemed to be superseded by the
provisions of such laws.
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(e) If the Change of Control Payment Date hereunder is on or after
an interest payment Record Date and on or before the associated Interest
Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any)
due on such Interest Payment Date will be paid to the Person in whose name a
Note is registered at the close of business on such Record Date, and such
interest (and Liquidated Damages, if applicable) will not be payable to Holders
who tender the Notes pursuant to such Change of Control Offer.
(f) Prior to making a Change of Control Offer pursuant to
paragraph (a), but in any event within 90 days following such Change of
Control, the Company will (i) obtain any required consents under the Credit
Agreement and the ECT Credit Agreement to permit the making of the Change of
Control Offer and the purchase of Notes pursuant to this Section 1015, or (ii)
repay all or a portion of the outstanding Indebtedness of the Company and its
Subsidiaries to the extent necessary (including, if necessary, payment in full
of such Indebtedness and payment of any prepayment premiums, fees, expenses or
penalties) to permit the making of the Change of Control Offer and the purchase
of Notes pursuant to this Section 1015 without such consent.
(g) The obligations with respect to Change of Control Offer shall
be satisfied to the extent actually performed by a third party in accordance
with the terms of this Indenture.
SECTION 1016. Investment Company.
The Company will not, and will not permit any of its Subsidiaries to,
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended), or otherwise become subject to
registration under the Investment Company Act.
SECTION 1017. Reports.
Whether or not the Company is subject to the reporting requirement of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder and to prospective purchasers of Notes identified to
the Company by an Initial Purchaser within 15 days after it is or would have
been (if it were subject to such reporting obligations) required to file such
with the Commission, annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the Commission, if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a report thereon by the Company's certified independent
public accountants as such would be required in such reports to the Commission,
and, in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required and,
unless the Commission will not accept such reports, file with the Commission
the annual, quarterly and other reports which it is or would have been required
to file with the Commission.
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SECTION 1018. Restricted and Unrestricted Subsidiaries.
Unless defined or designated as an Unrestricted Subsidiary, any Person
that becomes a Subsidiary of the Company or any of its Restricted Subsidiaries
shall be classified as a Restricted Subsidiary subject to the provisions of the
next paragraph. The Company may designate a Subsidiary (including a newly
formed or newly acquired Subsidiary) of the Company or any of its Restricted
Subsidiaries as an Unrestricted Subsidiary if (i) such Subsidiary does not at
such time own any Capital Stock, Redeemable Stock or Indebtedness of, or own or
hold any Lien on any property of, the Company or any other Restricted
Subsidiary, (ii) such Subsidiary does not at such time have any Indebtedness or
other obligations which, if in default, would result (with the passage of time
or notice or otherwise) in a default on any Indebtedness of the Company or any
Restricted Subsidiary and (iii)(a) such designation is effective immediately
upon such Subsidiary becoming a Subsidiary of the Company or of a Restricted
Subsidiary, (b) the Subsidiary to be so designated has total assets of $1,000
or less or (c) if such Subsidiary has total assets greater than $1,000, then
such redesignation as an Unrestricted Subsidiary is deemed to constitute a
Restricted Payment in an amount equal to the Fair Market Value of the Company's
direct and indirect ownership interest in such Subsidiary, and such Restricted
Payment would be permitted to be made at the time of such designation under
Section 1009 hereof. Except as provided in clauses (iii)(b) and (c) of this
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. The designation of an Unrestricted Subsidiary or removal of such
designation shall be made by the Board of Directors of the Company or a
committee thereof pursuant to a certified resolution delivered to the Trustee
and shall be effective as of the date specified in the applicable certified
resolution, which shall not be prior to the date such certified resolution is
delivered to the Trustee.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition or otherwise, but excluding the creation by the
Company of a new Wholly Owned Restricted Subsidiary) unless, after giving
effect to such action, transaction or series of transactions, on a pro forma
basis, (i) the Company could Incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 1008 hereof and (ii) no
Default or Event of Default would occur or be continuing.
SECTION 1019. Future Guarantors.
The Company shall cause any Subsidiary that becomes a Restricted
Subsidiary (and any Restricted Subsidiary that previously was an Unrestricted
Subsidiary and becomes a Restricted Subsidiary) after the Issue Date to execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary will become a Subsidiary Guarantor and shall enter into a
Subsidiary Guarantee as provided in Section 1308.
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SECTION 1020. Statement by Officers as to Default; Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days after
the end of each fiscal year, and within 60 days after the end of each fiscal
quarter (other than the fourth fiscal quarter), of the Company ending after the
date hereof an Officers' Certificate, stating whether or not to the best
knowledge of the signers thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of Section 801 or
Sections 1004 to 1019, inclusive, and if the Company shall be in default,
specifying all such Defaults and the nature and status thereof of which they
may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible
and in any event within 10 days after the Company becomes aware or should
reasonably become aware of the occurrence of a Default or an Event of Default,
an Officers' Certificate setting forth the details of such Default or Event of
Default, and the action which the Company proposes to take with respect
thereto.
(c) So long as not contrary to the then-current recommendations of
the American Institute of Certified Public Accountants, the Company shall
deliver to the Trustee within 90 days after the end of each fiscal year a
written statement by the Company's independent public accountants stating (A)
that their audit examination has included a review of the terms of this
Indenture and the Notes as they relate to accounting matters, and (B) whether,
in connection with their audit examination, any Default has come to their
attention and, if such a Default has come to their attention, specifying the
nature and period of the existence thereof.
SECTION 1021. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 801 and Sections 1004 to 1019, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Notes shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect; provided, however, with respect to any provision requiring a
supermajority approval to waive, such provision may only be waived by such a
supermajority, and with respect to a covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected, such provision may only be waived by the consent of each and every
Holder of outstanding Note affected.
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ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption.
The Company will not have the right to redeem any Notes prior to July
1, 2003 (other than out of the cash proceeds of an Equity Offering, as
described below). The Notes will be redeemable for cash at the option of the
Company, in whole or in part, at any time on and after July 1, 2003, at the
Redemption Prices specified in the form of Note hereinafter set forth together
with any applicable accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date (subject to the right of Holders of Record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date). Notwithstanding the foregoing, on or prior to
July 1, 2001, the Company may, at any time or from time to time, redeem up to
an aggregate of 20% of the aggregate principal amount of the Notes originally
outstanding at a Redemption Price equal to 112.5% of the principal amount
thereof (subject to the right of Holders of Record on a Record Date to receive
interest due on an Interest Payment Date that is on or prior to such Redemption
Date) plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption, with cash from the cash proceeds to the Company of one or
more Equity Offerings; provided, that at least 80% of the aggregate principal
amount of the Notes originally outstanding remain outstanding immediately after
the occurrence of each such redemption; provided, further, that such notice of
redemption shall be sent within 30 days after the date of closing of any such
Equity Offering, and such redemption shall occur within 60 days after the date
such notice is sent.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company, as permitted by
any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company of less than all the Notes, the Company shall, at
least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Notes to be redeemed.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
(a) If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 45 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
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(equal to $1,000 or any integral multiple thereof) of the principal amount of
Notes of a denomination larger than $1,000.
(b) The Trustee shall promptly notify the Company and each
Securities Registrar in writing of the Notes selected for redemption and, in
the case of any Notes selected for partial redemption, the principal amount
thereof to be redeemed.
(c) For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Notes shall
relate, in the case of any Notes redeemed or to be redeemed only in part, to
the portion of the principal amount of such Notes which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
(a) Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed, at his address
appearing in the Securities Register.
(b) All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Notes are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Notes to be redeemed, and in the case of
partial redemption, a statement as to the effect that upon surrender of such
Notes, a new Note or Notes in a principal amount equal to the unredeemed
portion thereof will be issued,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Note to be redeemed, and
(5) the place or places where such Notes are to be
surrendered for payment of the Redemption Price.
(c) Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company if the Company gives
notice to the Trustee at least 45 days prior to the Redemption Date.
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SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and any applicable accrued
interest and Liquidated Damages on, all the Notes which are to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amount necessary to pay the redemption price of, Liquidated
Damages, if any, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest and Liquidated Damages,
if any, shall cease to accrue on the Notes or the portions of Notes called for
redemption. If a Note is redeemed on or after an interest record date but on
or prior to the related interest payment date, then any accrued and unpaid
interest and Liquidated Damages, if any, shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes.
SECTION 1107. Notes Payable on Redemption Date.
(a) Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price any applicable
accrued interest) such Notes shall not bear interest. Upon surrender of any
such Note for redemption in accordance with said notice, such Note shall be
paid by the Company at the Redemption Price, together with any applicable
accrued interest and Liquidated Damages to the Redemption Date; provided,
however, that installments of interest whose Interest Payment Date is on or
prior to the Redemption Date shall be payable to the Holders of such Notes, or
one or more Predecessor Notes, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of
Section 307.
(b) If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Note.
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SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Note so surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may, at its option, elect to have its obligations and the
obligations of the Subsidiary Guarantors discharged with respect to the
Outstanding Notes upon compliance with the conditions set forth below in this
Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have paid and
discharged the entire indebtedness represented and the Subsidiary Guarantors
shall be deemed to have been discharged from their obligations, and this
Indenture shall cease to be of further effect as to all outstanding Notes and
Subsidiary Guarantees ("Legal Defeasance"), except as to (i) rights of Holders
to receive payments in respect of the principal of, premium, if any, and
interest (and Liquidated Damages, if any) on such Notes when such payments are
due from the trust funds; (ii) the Company's obligations with respect to such
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes, and the maintenance of an office or agency for
payment and money for security payments held in trust; (iii) the rights,
powers, trust, duties, and immunities of the Trustee, and the Company's
obligations in connection therewith; and (iv) the Legal Defeasance provisions
of this Article Twelve, all of which shall survive until otherwise terminated
or discharged hereunder. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Subsidiary Guarantors
released with respect to (i) its obligations under Sections
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<PAGE> 92
1005 through 1019, inclusive, and clauses (D) and (E) of Section 801(a)(ii) and
(ii) the occurrence of an event specified in Sections 501(4), (with respect to
any of Sections 1005 through 1019, inclusive), 501(7) and 501(8) shall not be
deemed to be an Event of Default on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"). For this purpose,
such covenant defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such Section or clause, whether directly or indirectly by reason
of any reference elsewhere herein to any such Section or clause or by reason of
any reference in any such Section or clause to any other provision herein or in
any other document, but the remainder of this Indenture and such Notes shall be
unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the then Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 609 who shall agree to comply with the provisions of this Article
Twelve applicable to it) as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Notes, (A) U.S. legal tender in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the opinion of
a nationally recognized firm of independent public accountants or investment
bankers expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of, premium, if any,
and interest (and Liquidated Damages, if any) on such Notes on the stated date
for payment thereof or on the redemption date of such principal or installment
of principal of, premium, if any, or interest (or Liquidated Damages, if any)
on such Notes. The Holders of Notes must have a valid, perfected, exclusive
security interest in such trust. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the payment of which its full faith and credit is pledged
or (y) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act
of 1933, as amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the custodian
in respect of the U.S. Government
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<PAGE> 93
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) In the case of an election of Legal Defeasance under Section
1202, before the date that is one year prior to the Stated Maturity, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States stating that (x) the Company has received from, or there has been
published by the Internal Revenue Service, a ruling or (y) since the date of
this Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred.
(3) In the case of an election of Covenant Defeasance under
Section 1203, before the date that is one year prior to the Stated Maturity,
the Company shall have delivered to the Trustee an Opinion of Counsel in the
United States, reasonably acceptable to such Trustee, to the effect that the
Holders of the Outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and Covenant Defeasance
and will be subject to Federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit and
covenant defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Notes, if then listed on any Notes exchange,
will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any Notes of the Company.
(6) No Default or Event of Default which with notice or lapse of
time or both would become an Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit).
(7) Such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a Default under any other material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
interest of preferring the Holders of such Notes over any other creditors of
the Company or with the intent of defeating, hindering, or delaying or
defrauding any other creditors of the Company or others.
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<PAGE> 94
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under Section
1202 or the Covenant Defeasance under Section 1203 (as the case may be) have
been complied with.
(10) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company as defined
in the Investment Company Act of 1940, as amended, or such trust shall be
qualified under such act or exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
(a) Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively,
for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes, of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
(b) The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.
(c) Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1204 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
SECTION 1206. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, or if a Default from a bankruptcy or insolvency event occurs
at any time during the period ending on the 91st day after the date of a
deposit by the Company hereunder, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to this Article Twelve until such time as the Trustee or
Paying Agent is permitted to apply all such
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money in accordance with Section 1202 or 1203; provided, however, that if the
Company makes any payment of principal of (and premium, if any) or interest
(and Liquidated Damages, if any) on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or the
Paying Agent.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium or
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
two years after such principal, premium or Liquidated Damages, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
holder of such Notes shall thereafter, as a general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
ARTICLE THIRTEEN
Subsidiary Guarantees
SECTION 1301. Subsidiary Guarantees.
(a) Subject to the provisions of this Article Thirteen, each
Subsidiary Guarantor, jointly and severally, hereby irrevocably and
unconditionally guarantees to each Holder and to the Trustee and its successors
and assigns (the "Subsidiary Guarantee"): (i) the full and punctual payment of
principal of, premium, if any, and interest on the Notes when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Company under this Indenture and the Notes and (ii) the full
and punctual performance within applicable grace periods of all other
obligations of the Company under this Indenture and the Notes (all the
foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article Thirteen notwithstanding any extension or renewal of any
Obligation.
(b) Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives
notice of any default under the Notes or the Obligations. The obligations of
each Subsidiary Guarantor hereunder shall not be affected by (a)
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the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Company or any other Person under this
Indenture, the Notes or any other agreement or otherwise, (b) any extension or
renewal of any thereof, (c) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Indenture, the Notes or any other
agreement, (d) the release of any security held by any Holder or the Trustee
for the Obligations of any of them, (e) the failure of any Holder or the
Trustee to exercise any right or remedy against any other guarantor of the
Obligations, or (f) any change in the ownership of such Subsidiary Guarantor.
(c) Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
(d) Each Subsidiary Guaranty will be a senior unsecured obligation
of the applicable Subsidiary Guarantor and will rank pari passu with any
existing and future unsubordinated indebtedness of such Subsidiary Guarantor,
but will be effectively subordinated to the rights of holders of secured
unsubordinated indebtedness of such Subsidiary Guarantor to the extent of the
value of the collateral securing such indebtedness.
(e) Except as expressly set forth in Sections 1201, 901, 902, 1303
and 1307, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor
herein shall not be discharged or impaired or otherwise affected by the failure
of any Holder or the Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Securities or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other
act or thing or omission or delay to do any other act or thing which may or
might in any manner or to any extent vary the risk of such Subsidiary Guarantor
or would otherwise operate as a discharge of such Subsidiary Guarantor as a
matter of law or equity.
(f) Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of, premium,
if any, or interest on any
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
(g) In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of, premium, if any, or interest on any
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Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
(h) Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any Obligations guaranteed hereby
until payment in full of all Obligations and all obligations to which the
Obligations are subordinated. Each Subsidiary Guarantor further agrees that,
as between it, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article Five for the purposes of such Subsidiary Guarantor's
Subsidiary Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article Five, such Obligations (whether or not
due and payable) shall forthwith become due and payable by such Subsidiary
Guarantor for the purposes of this Section.
(i) Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 1302. Execution and Delivery of Subsidiary Guarantees.
(a) To evidence the Subsidiary Guarantees set forth in Section
1301 hereof, each of the Subsidiary Guarantors agrees that a notation of its
Subsidiary Guarantee substantially in the form of Annex B hereto shall be
endorsed on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Subsidiary Guarantor by its
Chairman of the Board, its President or one of its Vice Presidents, and
attested to by its Secretary or one of its Assistant Secretaries.
(b) Each of the Subsidiary Guarantors agrees that the Subsidiary
Guarantees set forth in this Article Thirteen will remain in full force and
effect and apply to all the Notes notwithstanding any failure to endorse on
each Note a notation of the Subsidiary Guarantees.
(c) If an individual whose manual or facsimile signature is on a
Note shall have ceased to hold such office prior to the authentication and
delivery of the Note on which the Subsidiary Guarantees are endorsed, the
Subsidiary Guarantees shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantees set forth in this Indenture on behalf of the Subsidiary
Guarantors.
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SECTION 1303. Limitation on Liability.
Any term or provision of this indenture to the contrary
notwithstanding, the maximum aggregate amount of the Obligations guaranteed
hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that
can be hereby guaranteed without rendering this Indenture, as it relates to
such Subsidiary Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. To effectuate the foregoing intention, the obligations of
each Subsidiary Guarantor shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations hereunder, result in the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal, state or foreign
law. Each Subsidiary Guarantor that makes a payment or distribution under a
Subsidiary Guarantee shall be entitled to a contribution from each other
Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of
each Subsidiary Guarantor.
SECTION 1304. Successors and Assigns.
This Article Thirteen shall be binding upon each Subsidiary Guarantor
and its successors and assigns and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Notes shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 1305. No Waiver.
Neither a failure nor a delay on the part of either the Trustee or the
Holders in exercising any right, power or privilege under this Article Thirteen
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article Thirteen
at law, in equity, by statute or otherwise.
SECTION 1306. Modification.
No modification, amendment or waiver of any provision of this Article
Thirteen, nor the consent to any departure by any Subsidiary Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice
to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
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SECTION 1307. Release of Subsidiary Guarantor.
Any Subsidiary Guarantor that is no longer a Restricted Subsidiary
may, by execution and delivery to the Trustee of a supplemental indenture
satisfactory to the Trustee, be released from its Subsidiary Guarantee and
cease to be a Subsidiary Guarantor. Any Subsidiary Guarantor that is
designated an Unrestricted Subsidiary in accordance with the terms of this
Indenture shall be released from and relieved of its obligations under its
Subsidiary Guaranty upon execution and delivery of a supplemental indenture
satisfactory to the Trustee. Such supplemental indenture shall be accompanied
by an Officer's Certificate and an Opinion of Counsel, each stating that such
supplemental indenture and release of the Subsidiary Guaranty complies with the
provisions of this Indenture and that all conditions precedent to such
supplemental indenture and release of the Subsidiary Guarantee have been
complied with.
SECTION 1308. Execution of Supplemental Indenture for Future Subsidiary
Guarantors.
Each Subsidiary which is required to become a Subsidiary Guarantor
pursuant to Section 1018 shall, and the Company shall cause each such
Subsidiary to, promptly execute and deliver to the Trustee a supplemental
indenture pursuant to which such Subsidiary shall become a Subsidiary Guarantor
under this Article Thirteen and shall guarantee the Obligations. Concurrently
with the execution and delivery of such supplemental indenture, the Company
shall deliver to the Trustee an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized, executed and delivered by such
Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating
to creditors' rights generally and to principles of equity, whether considered
in a proceeding at law or in equity, the Subsidiary Guarantee of such
Subsidiary Guarantor is a legal, valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms.
SECTION 1309. Application of Certain Terms and Provisions to the Subsidiary
Guarantors.
(a) For purposes of any provision of this Indenture which provides
for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 101 shall apply
to such Subsidiary Guarantor as if references therein to the Company were
references to such Subsidiary Guarantor.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other document which by any provision of this Indenture is
to be made by any Subsidiary Guarantor, shall be sufficient if evidenced as
described in Section 105 as if references therein to the Company were
references to such Subsidiary Guarantor.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document which by any provision of
this Indenture is required or permitted to be given or served by the Trustee or
by any Holder may be given or served as described in
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Section 105 as if references therein to the Company were references to such
Subsidiary Guarantor.
(d) Upon any application or request by any Subsidiary Guarantor to
the Trustee to take any action under any provision of this Indenture, such
Subsidiary Guarantor shall furnish to the Trustee such certificates and
opinions as are required in Section 102 hereof as if all references therein to
the Company were references to such Subsidiary Guarantor.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
QUEEN SAND RESOURCES, INC., a
Delaware corporation
By: /s/ EDWARD J. MUNDEN
-----------------------------------
Name: Edward J. Munden
Title: Chief Executive Officer,
President and Chairman of the
Board
By: /s/ BRUCE I. BENN
-----------------------------------
Name: Bruce I. Benn
Title: Vice President and Secretary
QUEEN SAND RESOURCES, INC., a
Nevada corporation
By: /s/ EDWARD J. MUNDEN
-----------------------------------
Name: Edward J. Munden
Title: President
Attest:
By: /s/ BRUCE I. BENN
-----------------------------------
Name: Bruce I. Benn
Title: Vice President and Secretary
NORTHLAND OPERATING CO., a
Nevada corporation
By: /s/ EDWARD J. MUNDEN
-----------------------------------
Name: Edward J. Munden
Title: President
Attest:
By: /s/ BRUCE I. BENN
-----------------------------------
Name: Bruce I. Benn
Title: Vice President and Secretary
<PAGE> 103
CORRIDA RESOURCES, INC., a
Nevada corporation
By: /s/ EDWARD J. MUNDEN
------------------------------
Name: Edward J. Munden
Title: President
Attest:
By: /s/ BRUCE I. BENN
---------------------------------
Name: Bruce I. Benn
Title: Vice President and Secretary
HARRIS TRUST AND SAVINGS BANK
By: /s/ C. POTTER
-------------------------------
Name: C. Potter
Title: Assistant Vice President
Attest:
By: /s/ D.G. DONOVAN
--------------------------------
Name: D.G. Donovan
Title: Assistant Secretary
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Annex A
FORM OF NOTE
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The Depositary
Trust Company (55 Water Street, New York, New York)(the "Depositary"), to the
Company or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of the Depositary (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE
HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE
OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2) (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM
ATTACHED TO
- ---------------
(1) This paragraph should only be added if the Note is issued in global
form.
96
<PAGE> 105
THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE,
(5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR OR A NON-U.S. PERSON HOLDING THIS
SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES, LEGAL OPINIONS AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION.(2)
THIS NOTE IS A REGULATION S TEMPORARY GLOBAL NOTE AS SPECIFIED IN THE
INDENTURE. EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN SECTION 305 OF THE
INDENTURE, NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS REGULATION S
TEMPORARY GLOBAL NOTE MAY BE MADE FOR AN INTEREST IN A REGULATION S PERMANENT
GLOBAL NOTE OR A RULE 144A GLOBAL NOTE DURING THE 40-DAY RESTRICTED PERIOD.(3)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREOF IS AVAILABLE.(4)
- ---------------
(2) This sentence should be included only for the Transfer Restricted
Notes.
(3) This paragraph should be included only for the Transfer Restricted
Notes.
(4) This paragraph should be included only for Regulation S Permanent
Global Notes.
97
<PAGE> 106
QUEEN SAND RESOURCES, INC.
12 1/2% [SERIES A] [SERIES B] SENIOR NOTES DUE 2008
CUSIP No. [747927 AA 9 Rule 144A] U.S.$125,000,000
[747927 AB 7 Series B]
[747927 AC 5 IAI]
Queen Sand Resources, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to _______, or _________
registered assigns, the principal sum of one hundred twenty-five million
dollars on July 1, 2008, and to pay interest thereon from the Issue Date or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually on January 1 and July 1 in each year,
commencing January 1, 1999, at 12 1/2% until the principal hereof is paid or
made available for payment, and (to the extent that the payment of such
interest shall be legally enforceable) at the rate of 2% per annum on any
overdue principal and premium and on any overdue installment of interest and
Liquidated Damages, if any, until paid as specified on the reverse hereof[;
provided, however, in the event of a Registration Default, the Company shall
pay Liquidated Damages to the holder hereof at a rate of 0.5% per annum during
the 90-day period immediately following the occurrence of any Registration
Default and shall increase by 0.25% per annum at the end of each subsequent
90-day period, but in no event shall such rate exceed 1.50% per annum].(5)
The interest (and Liquidated Damages, if any) so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such payment, which shall be the June 15 or December 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest (and Liquidated Damages, if any) not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes not
less than 10 days prior to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest (and
Liquidated Damages, if any) on this Note will be made at the office or agency
of the Company maintained for that purpose in the Borough of Manhattan, The
City of New York, in such coin or currency of the
- ---------------
(5) This proviso should be included only for the Initial Notes.
98
<PAGE> 107
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Securities
Register.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Indenture or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
QUEEN SAND RESOURCES, INC., a
Delaware corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Attest:
- --------------------------
Name:
---------------------
Title:
--------------------
99
<PAGE> 108
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
Dated:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
---------------------------
Authorized Officer
100
<PAGE> 109
The [Rule 144A] [Regulation S Temporary] [Regulation S Permanent]
[Global] Note is one of a duly authorized issue of Notes of the Company
designated as its 12 1/2% [Series A] [Series B] Senior Notes due 2008 (herein
called the "Notes"), limited in aggregate principal amount to $125,000,000,
issued and to be issued under an Indenture, dated as of July 1, 1998 (herein
called the "Indenture"), among the Company, the Subsidiary Guarantors parties
thereto and Harris Trust and Savings Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties
and immunities thereunder of the Company, the Trustee and the Holders of the
Notes and of the terms upon which the Notes are, and are to be, authenticated
and delivered.
The Notes are subject to redemption upon not less than 30 nor more than
60 days' notice by mail, at any time on and after July 1, 2003, as a whole or
in part, at the option of the Company, at the following Redemption Prices
(expressed as a percent of the principal amount) which, if during the
twelve-month period beginning on July 1 of the years indicated
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.2500%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.6875%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.1250%
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.5625%
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0000%;
</TABLE>
in each case plus interest thereon accruing from the most recent Interest
Payment Date to which interest has been paid or duly provided for, provided
that interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Notes of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to July 1, 2001,
the Company may, at any time or from time to time, redeem up to an aggregate
of 20% of the aggregate principal amount of the Notes originally outstanding at
a Redemption Price equal to 112.5% of the principal amount thereof (subject to
the right of Holders of record on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such Redemption Date) plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of redemption,
with cash from the cash proceeds to the Company of one or more Equity
Offerings; provided, that at least 80% of the aggregate principal amount of the
Notes originally outstanding remain outstanding immediately after the
occurrence of each such redemption; provided, further, that such notice of
101
<PAGE> 110
redemption shall be sent within 30 days after the date of closing of any such
Equity Offering, and such redemption shall occur within 60 days after the date
such notice is sent.
The Notes do not have the benefit of any sinking fund obligations.
In the event of redemption or purchase pursuant to a Prepayment Offer or
Change of Control Offer of this Note in part only, a new Note or Notes for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal amount of the Notes, in the manner and
with the effect provided in the Indenture. Upon any acceleration of maturity of
the Notes, all principal of and accrued interest and Liquidated Damages, if
any, on the Notes shall be due and payable immediately.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Available Cash is available to the Company as a result of Asset
Sales or (ii) a Change of Control occurs, the Company shall be required to make
a Prepayment Offer or Change of Control Offer, respectively, for all of the
Notes.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Note or (ii) certain restrictive covenants and
Events of Default with respect to this Note, in each case upon compliance with
certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain past Defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest (and Liquidated Damages, if any) on this Note at the times, place and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Securities Register,
upon surrender of this Note for registration
102
<PAGE> 111
of transfer at the office or agency of the Company in the Borough of Manhattan,
The City of New York and at any other office or agency maintained by the
Company for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Securities
Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Notes, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Note shall be computed on the basis of a 360-day year of
twelve 30-day months.
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Note solely by
reason of his or its status as such stockholder, employee, officer or director.
Each Holder by accepting this Note waives and releases all such liability and
further acknowledges the waiver and release are part of the consideration for
the issuance of this Note.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture. In addition to the rights
provided to Holders of the Notes under the Indenture, Holders of Notes shall
have all the rights set forth in the Registration Rights Agreement.(6)
The Indenture and this Note shall be governed by and construed in
accordance with the laws of the State of New York.
- -----------------------
(6) This sentence should be included only for the Initial Notes.
103
<PAGE> 112
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety by the
Company pursuant to Section 1013 or 1015 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Note purchased by the
Company pursuant to Section 1013 or 1015 of the Indenture, state the amount: $
Dated: Your Signature:
--------------------
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
104
<PAGE> 113
SCHEDULE OF EXCHANGES(7)
The following exchanges relating to this Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of
Amount of decrease Amount of increase this Global Note Signature of authorized
in Principal Amount in Principal Amount following such officer of Trustee or
Date of Exchange of this Global Note of this Global Note decrease (or increase) Notes Custodian
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------
(7) This schedule should only be added if the Note is issued in global
form.
105
<PAGE> 114
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED NOTES(8)
Re: 12 1/2% SERIES A SENIOR NOTES DUE 2008 OF QUEEN SAND RESOURCES, INC.
This Certificate relates to $ __________ principal amount of Notes held
in (check applicable space) _____ book-entry or _____ definitive form by
___________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the Depositary
a Note or Notes in definitive, registered form of authorized denominations and
an aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above-captioned Notes and as provided in Section 305 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 305(a)(ii)(A) or Section
305(d)(ii)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A promulgated under the Securities Act) that is
aware that any sale of Notes to it will be made in reliance on Rule 144A under
the Securities Act and that is acquiring such Transfer Restricted Note for its
own account, or for the account of another such "qualified institutional buyer"
(in satisfaction of Section 305(a)(ii)(B) or Section 305(d)(ii)(B) of the
Indenture).
[ ] Such Note is being transferred pursuant to an exemption from
registration in accordance with Rule 144, or outside the United States in an
Offshore Transaction in compliance with Rule 904 under the Securities Act, or
pursuant to an effective registration statement under the Securities Act (in
satisfaction of Section 305(a)(ii)(C) or Section 305(d)(ii)(C) of the
Indenture).
[ ] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act and in accordance with applicable securities laws of the states
of the United States, other than as provided in the immediately
- ---------------
(8) This Certificate shall be included only for Initial Notes.
106
<PAGE> 115
preceding paragraph. An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
Certificate (in satisfaction of Section 305(a)(ii)(D) or Section 305(d)(ii)(D)
of the Indenture).
--------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-----------------------------
Date:
----------------------------
107
<PAGE> 116
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
NOTES(9)
Re: 12 1/2% SENIOR NOTES DUE 2008 OF QUEEN SAND RESOURCES, INC.
This Certificate relates to $ __________ principal amount of Notes held
in (check applicable space) _____ book-entry or _____ definitive form by
___________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the Depositary
a Note or Notes in definitive, registered form of authorized denominations and
an aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
-----------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------
Date:
----------------------------
- ---------------
(9) This certificate shall be included only for the Exchange Notes.
108
<PAGE> 117
Annex B
SUBSIDIARY GUARANTEE
The Subsidiary Guarantors listed below (hereinafter referred to as the
"Subsidiary Guarantors," which term includes any successors or assigns under
the Indenture, dated as of July 1, 1998 (the "Indenture"), among the Company,
the Subsidiary Guarantors and Harris Trust and Savings Bank, as Trustee, and
any additional Subsidiary Guarantors), have irrevocably and unconditionally
guaranteed (i) the due and punctual payment of the principal of, premium, if
any, and interest (and Liquidated Damages, if any) on the 12 1/2% Senior Notes
due 2008 (the "Notes") of Queen Sand Resources, Inc., a Delaware corporation
(the "Company"), whether at stated maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal, and premium if
any, and (to the extent permitted by law) interest on any interest and
Liquidated Damages, if any, on the Notes, and the due and punctual performance
of all other obligations of the Company, to the Holders or the Trustee all in
accordance with the terms set forth in Article Thirteen of the Indenture, (ii)
in case of any extension of time of payment or renewal of any Notes or any such
other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise, and (iii) the payment of any and
all costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article Thirteen of the Indenture and reference is hereby made to
such Indenture for the precise terms of this Subsidiary Guarantee.
No stockholder, officer, director, employee or incorporator, as such,
past, present or future of each Subsidiary Guarantor shall have any liability
by reason of his or its status as such stockholder, officer, director, employee
or incorporator for any obligations of any Subsidiary Guarantor under the
Notes, the Indenture or its Subsidiary Guarantee or for any claim based on, in
respect of, or by reason of, such obligations or their creation.
This is a continuing guarantee and shall remain in full force and effect
and shall be binding upon each Subsidiary Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders, and, in the event of any transfer of
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not of collectibility.
109
<PAGE> 118
The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent transfer or conveyance under applicable law.
The obligation evidenced by this Subsidiary Guarantee is, to the extent
provided in the Indenture, and this Subsidiary Guarantee is subject to the
provisions of the Indenture with respect thereto. Each Holder of this
Subsidiary Guarantee, by accepting the same, (a) agrees to and shall be bound
by such provisions, and (b) authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes.
THE TERMS OF ARTICLE THIRTEEN OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
All terms used in this Subsidiary Guarantee which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
[Subsidiary Guarantor]
By
-----------------------------
Name
---------------------------
Title
--------------------------
110
<PAGE> 119
Annex C
[FORM OF REGULATION S CERTIFICATE FOR HOLDER]
CERTIFICATE TO BE DELIVERED UPON RECEIPT OF PAYMENT OF PRINCIPAL OR INTEREST
WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL NOTE OR THE EXCHANGE OF A
REGULATION S TEMPORARY GLOBAL NOTE FOR REGULATION S PERMANENT GLOBAL NOTE
Re: 12 1/2% SENIOR NOTES DUE 2008 OF QUEEN SAND RESOURCES, INC.
The undersigned as the Holder of a beneficial interest in a Regulation S
Temporary Global Note is delivering this certificate concurrently with (check
one):
[ ] the receipt of a payment of interest or principal with respect
to a Regulation S Temporary Global Note; or
[ ] its written order to Euroclear or CEDEL, as the case may be,
to exchange its beneficial interest in the Regulation S Temporary Global Note
for beneficial interest in a Regulation S Permanent Global Note.
In connection with the above, the undersigned hereby certifies that:
[ ] the undersigned as the Holder of the beneficial interest in
the Regulation S Temporary Global Note is not a U.S. Person (as defined in
Section 305); or
[ ] the undersigned has purchased its interest in the Regulation S
Temporary Global Note in a transaction that is exempt from the registration
requirements under the Securities Act.
------------------------------------
[INSERT NAME OF HOLDER]
By:
---------------------------------
Date
-----------------------------
111
<PAGE> 120
[FORM OF REGULATION S CERTIFICATE FOR EUROCLEAR AND CEDEL]
CERTIFICATE TO BE DELIVERED UPON RECEIPT OF PAYMENT OF PRINCIPAL OR INTEREST
WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL NOTE OR THE EXCHANGE OF A
REGULATION S TEMPORARY GLOBAL NOTE FOR REGULATION S PERMANENT GLOBAL NOTE
Re: 12 1/2% SENIOR NOTES DUE 2008 OF QUEEN SAND RESOURCES, INC.
The undersigned is delivering this certificate concurrently with (check
one):
[ ] the receipt of a payment of interest or principal with respect
to a Regulation S Temporary Global Note; or
[ ] the exchange of a Regulation S Temporary Global Note for a
Regulation S Permanent Global Note.
In connection with the above, the undersigned hereby certifies that:
[ ] None of the holders of beneficial interests in the Regulation
S Temporary Global Note is a U.S. Person (as defined in Section 305); or
[ ] Each of the holders of beneficial interests in the Regulation
S Temporary Global Note has purchased its interest in a transaction that is
exempt from the registration requirements under the Securities Act.
[MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, BRUSSELS OFFICE, AS
OPERATOR OF THE EUROCLEAR CLEARANCE
SYSTEM] [CEDEL BANK, SOCIETE ANONYME]
By:
------------------------------------
Date:
----------------------------
112
<PAGE> 121
Annex D
Existing Agreements
1. 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.
2. 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.
3. Letter Agreement by and between Queen Sand Resources, Inc., a Delaware
corporation, and ECT Securities Corp., a Delaware corporation, dated
May 6, 1997.
4. 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.
5. Common Stock Purchase Warrant Representing Right to Purchase 495,215
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, on January 6, 1998.
6. Common Stock Purchase Warrant Representing Right to Purchase 49,522
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, on January 6, 1998.
7. Common Stock Purchase Warrant Representing Right to Purchase 99,043
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, on January 6, 1998.
8. Common Stock Purchase Warrant Representing Right to Purchase 74,282
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, on January 6, 1998.
9. Common Stock Purchase Warrant Representing Right to Purchase 123,804
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued
113
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to Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership, on January 6, 1998.
10. Common Stock Purchase Warrant Representing Right to Purchase 167,135
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, to be issued to Joint Energy Development Investments
Limited Partnership, a Delaware limited partnership.
11. ECT Hedge Agreements described in the Offering Memorandum.
12. Subordinated Revolving Credit Loan Agreement dated as of December 29,
1997, executed by Queen Sand Resources, Inc., certain lenders now or
hereafter parties thereto, and Enron Capital & Trade Resources Corp.,
as agent ("ECT Agent") for the lenders ("ECT Lenders"), as amended by
First Amendment to Loan Agreement among Queen Sand Resources, Inc. as
borrower, ECT Agent, and ECT Lenders, effective as of July 1, 1998.
13. Promissory Note, executed by Queen Sand Resources, Inc. and payable to
the order of Enron Capital & Trade Resources Corp. in the original
principal amount of $10,000,000.
14. Guaranty, executed by Queen Sand Resources, Inc., a Delaware
corporation, in favor of ECT Agent and the ECT Lenders.
15. Guaranty, executed by Corrida Resources, Inc., a Nevada corporation,
and Northland Operating Co., a Nevada corporation, in favor of ECT
Agent and the ECT Lenders.
16. Subordination Agreement, executed by the Agent in favor of the Bank of
Montreal as agent for the senior lenders, Queen Sand Resources, Inc.
and the Guarantors.
17. Registration Rights Agreement among Queen Sand Resources, Inc., a
Delaware corporation, the ECT Agent and Joint Energy Development
Investments Limited Partnership.
18. Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement, dated
effective as of December 29, 1997, executed by Queen Sand Resources,
Inc. to Gray H. Muzzy, Trustee, for the benefit of ECT Agent and the
ECT Lenders, which is to be recorded in the Real Property Records of
Anderson, Harrison, Limestone, Panola, Crockett, Ector, Borden,
Howard, Ward, Dawson, Sterling, Martin, Reagan, Irion, Midland,
Glasscock, Archer, Nolan, Baylor and Tyler Counties, Texas; Eddy, Lea
and Chaves Counties, New Mexico; Beckham, Cimarron, Oklahoma and
Washita
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<PAGE> 123
Counties, Oklahoma; St. Mary, St. Martin, Vermilion and Calcasieu
Parishes, Louisiana; and Amite, Clark, Jasper, Scott, and Smith
Counties, Mississippi.
19. Amended and Restated Credit Agreement, dated as of April 17, 1998,
among Queen Sand Resources, Inc., a Delaware corporation, Queen Sand
Resources, Inc., a Nevada corporation, the Bank of Montreal and the
Lenders signatory thereto, as amended by First Amendment to Amended
and Restated Credit Agreement executed effective as of July 1, 1998,
among Queen Sand Resources, Inc., a Delaware corporation, Queen Sand
Resources, Inc., a Nevada corporation, the Bank of Montreal and the
Lenders signatory thereto.
20. Amended and Restated Guaranty Agreement executed by Queen Sand
Resources, Inc., a Delaware corporation, in favor of the Bank of
Montreal, as agent, dated as of April 17, 1998.
21. Amended and Restated Guaranty Agreement executed by Northland
Operating Co. in favor of the Bank of Montreal, as agent, dated as of
April 17, 1998.
22. Promissory Note in the original principal amount of $20,833,333.25
dated as of April 17, 1998 payable to ECT.
23. Promissory Note in the original principal amount of $20,833,333.25
dated as of April 17, 1998 payable to JEDI.
24. Guaranty Agreement dated as of August 1, 1997 executed by Corrida
Resources, Inc., a Nevada corporation, in favor of the Bank of
Montreal, as agent, as amended.
25. Amended and Restated Security Agreement dated as of April 17, 1998
executed by Queen Sand Resources, Inc., a Nevada corporation, in favor
of the Bank of Montreal.
26. Mortgage, Deed of Trust, Assignment of Production, Security Agreement,
Fixture Filing and Financing Statement, dated as of April 17, 1998,
executed by Queen Sand Resources, Inc., a Nevada corporation, to James
A. Whitmore, Trustee, for the benefit of the Bank of Montreal, as
collateral agent, for JEDI, the Bank of Montreal and ECT, which is to
be recorded in, among other places, the Real Property Records of
certain counties in Texas in which a portion of the Mortgaged Property
described therein is located.
27. Fee letter agreement dated April 17, 1998 between Queen Sand
Resources, Inc., a Nevada corporation, and the Bank of Montreal.
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<PAGE> 124
28. Note Purchase Agreement (Variable Rate Senior Second Secured Notes due
2003) dated April 17, 1998 between Queen Sand Resources, Inc., a
Delaware corporation, Queen Sand Resources, Inc., a Nevada
corporation, and the Bank of Montreal.
29. Note Purchase Agreement (Variable Rate Senior Second Secured Notes due
2003) dated April 17, 1998 between Queen Sand Resources, Inc., a
Delaware corporation, Queen Sand Resources, Inc., a Nevada
corporation, and ECT.
30. Note Purchase Agreement (Variable Rate Senior Second Secured Notes due
2003) dated April 17, 1998 between Queen Sand Resources, Inc., a
Delaware corporation, Queen Sand Resources, Inc., a Nevada
corporation, and JEDI.
31. Promissory Notes, executed by Queen Sand Resources, Inc., a Nevada
corporation, and payable to the order of (i) the Bank of Montreal in
the original principal amount of $20,000,000, (ii) ECT in the original
principal amount of $5,000,000, and (iii) JEDI in the original
principal amount of $5,000,000.
32. Fee Letters executed by Queen Sand Resources, Inc., a Nevada
corporation, in favor of JEDI, the Bank of Montreal and ECT.
33. Mortgage, Deed of Trust, Assignment of Production, Security Agreement,
Fixture Filing and Financing Statement executed by Queen Sand
Resources, Inc., a Nevada corporation, to James A. Whitmore, Trustee,
for the benefit of the Bank of Montreal, as collateral agent, for
JEDI, the Bank of Montreal and ECT, which is to be recorded in, among
other places, the Real Property Records of certain counties in Texas
in which a portion of the Mortgaged Property described therein is
located.
34. Note Purchase Agreement (Variable Rate Senior Third Secured Equity
Bridge Notes due 2003) dated April 17, 1998 between Queen Sand
Resources, Inc., a Delaware corporation, Queen Sand Resources, Inc., a
Nevada corporation, and the Bank of Montreal.
35. Note Purchase Agreement (Variable Rate Senior Third Secured Equity
Bridge Notes due 2003) dated April 17, 1998 between Queen Sand
Resources, Inc., a Delaware corporation, Queen Sand Resources, Inc., a
Nevada corporation, and ECT.
36. Note Purchase Agreement (Variable Rate Senior Third Secured Equity
Bridge Notes due 2003) dated April 17, 1998 between Queen Sand
Resources, Inc., a Delaware corporation, Queen Sand Resources, Inc., a
Nevada corporation, and JEDI.
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<PAGE> 125
37. Promissory Notes executed by Queen Sand Resources, Inc., a Nevada
corporation, and payable to the order of (i) the Bank of Montreal in
the original principal amount of $20,000,000, (ii) ECT in the original
principal amount of $5,000,000, and (iii) JEDI in the original
principal amount of $5,000,000.
38. Fee Letters executed by Queen Sand Resources, Inc., a Nevada
corporation, in favor of JEDI, the Bank of Montreal and ECT.
39. Mortgage, Deed of Trust, Assignment of Production, Security Agreement,
Fixture Filing and Financing Statement executed by Queen Sand
Resources, Inc., a Nevada corporation, to James A. Whitmore, Trustee,
for the benefit of the Bank of Montreal, as collateral agent, for
JEDI, the Bank of Montreal and ECT, which is to be recorded in, among
other places, the Real Property Records of certain counties in Texas
in which a portion of the Mortgaged Property described therein is
located.
40. Warrant Agreement dated April 17, 1998 by Queen Sand Resources, Inc.,
a Delaware corporation, in favor of JEDI, the Bank of Montreal and ECT
(the "Warrant Agreement").
41. Warrant dated April 17, 1998 issued by Queen Sand Resources, Inc., a
Delaware corporation, to ECT pursuant to the Warrant Agreement.
42. Warrant dated April 17, 1998 issued by Queen Sand Resources, Inc., a
Delaware corporation, to JEDI pursuant to the Warrant Agreement.
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<PAGE> 1
EXHIBIT 4.2
NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE SECURITIES INTO
WHICH THIS WARRANT ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
QUEEN SAND RESOURCES, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:
--------------- ---------
Date of Issuance: July 8, 1998
Queen Sand Resources, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, ____________________, or its registered
assigns, is entitled, subject to the terms set forth below, to purchase from
the Company upon surrender of this Warrant, at any time or times on or after
the date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date
(as defined herein) ____________________ (_______________) fully paid
nonassessable shares of Common Stock (as defined in Section 1(b)) of the
Company (the "WARRANT SHARES") at the purchase price per share provided in
Section 1(b) below (the "WARRANT EXERCISE PRICE"); provided, however, that in
no event shall the holder be entitled to exercise this Warrant for a number of
Warrant Shares in excess of that number of Warrant Shares which, upon giving
effect to such exercise, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed 4.99% of
the outstanding shares of the Common Stock following such exercise. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such proviso is being made, but shall
exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised Warrants beneficially owned by the holder and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by the holder
and its affiliates (including, without limitation, any convertible notes,
convertible preferred stock, warrants or rights to receive shares of Common
Stock) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence,
for purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section
<PAGE> 2
13(d) of the Securities Exchange Act of 1934, as amended. The holder may waive
the foregoing limitations by written notice to the Company upon not less than
61 days prior notice (with such waiver taking effect only upon the expiration
of such 61 day notice period).
Section 1.
(a) Securities Purchase Agreement. This Warrant is one
of the warrants (the "COMMON STOCK WARRANTS") issued pursuant to Section 1 of
that certain Securities Purchase Agreement, dated as of June 25, 1998, among
the Company and the Buyers party thereto, as amended and restated by the
Amended and Restated Securities Purchase Agreement, dated as of July 6, 1998
among the Company and the Buyers party thereto (as amended and restated, the
"PURCHASE AGREEMENT").
(b) Definitions. The following words and terms as used
in this Warrant shall have the following meanings:
"APPROVED STOCK PLAN" shall mean any plan which has
been approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant for services provided to the Company.
"BUSINESS DAY" means any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government action to close.
"CLOSING BID PRICE" means, for any security as of
any date, the last closing bid price for such security on The Nasdaq SmallCap
Market as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if The
Nasdaq SmallCap Market is not the principal trading market for such security,
the last closing bid price of such security on a Subsequent Market (as defined
below) on which such security is listed or traded as reported by Bloomberg, or
if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such security
on such date on any of the foregoing bases, the Closing Bid Price of such
security on such date shall be the fair market value as mutually determined by
the Company and the holders the Common Stock Warrants. If the Company and the
holders of the Common Stock Warrants are unable to agree upon the fair market
value of the Common Stock, then such dispute shall be resolved pursuant to
Section 2(a) of this Warrant with the term "Closing Bid Price" being
substituted for the term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
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<PAGE> 3
"COMMON STOCK" means (I) the Company's common stock,
par value $.0015 per share, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 8(b)(i) and 8(b)(ii) hereof regardless of whether the Options (as
defined in Section 8(b)(i) below) or Convertible Securities (as defined in
Section 8(b)(i) below) are actually exercisable or convertible at such time,
but excluding any shares of Common Stock issuable upon exercise of the Common
Stock Warrants.
"EXPIRATION DATE" means the date three (3) years from
the date of this Warrant or, if such date is not a Business Day, the next
preceding Business Day.
"MARKET PRICE" means, with respect to any security
for any date, the average of the Closing Bid Prices for such security during
the five (5) consecutive trading days immediately preceding such date.
"OTHER SECURITIES" means (i) those convertible
securities, options and warrants of the Company issued prior to, and
outstanding on, the date of issuance of this Warrant, (ii) the Initial Common
Shares (as defined in the Securities Purchase Agreement), (iii) the Repricing
Common Shares (as defined in the Securities Purchase Agreement), (iv) the
Repricing Rights (as defined in the Securities Purchase Agreement), (v) shares
of Common Stock, and warrants or other securities that are convertible into or
exchangeable for shares of Common Stock, issuable in connection with the
acquisition by the Company of oil and natural gas companies (whether by merger,
purchase of shares or exchange) or properties, and (vi) rights of JEDI (as
defined in the Purchase Agreement) under Section 7.01 of the Securities
Purchase Agreement, dated as of March 27, 1997, between the Company and JEDI
(as such agreement is in effect on the date of the issuance of this Warrant)
arising from any issuances described in clause (v) above in this definition.
"PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a government or any department or agency thereof,
or any other entity or organization.
"REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated the date hereof, among the Company and the
Buyers party thereto entered into in connection with the Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SUBSEQUENT MARKET" means any of the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market.
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<PAGE> 4
"TRADING DAY" means (a) a day on which the Common
Stock is listed for trading on the Nasdaq SmallCap Market or on a Subsequent
Market or (b) if the Common Stock is not listed on the Nasdaq SmallCap Market
or a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then a Trading Day shall be a Business Day.
"WARRANT" means this Warrant and all Warrants issued
in exchange, transfer or replacement thereof.
"WARRANT EXERCISE PRICE" shall be $7.70, subject to
adjustment as hereinafter provided.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the Company's
successors and (B) to any applicable law defined or referred to herein, shall
be deemed references to such applicable law as the same may have been or may be
amended or supplemented from time to time.
(ii) When used in this Warrant, the words
"HEREIN," "HEREOF," and "HEREUNDER," and words of similar import, shall refer
to this Warrant as a whole and not to any provision of this Warrant, and the
words "SECTION," "SCHEDULE," and "EXHIBIT" shall refer to Sections of, and
Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, and the singular number includes the
plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this
Warrant may be exercised by the holder hereof then registered on the books of
the Company, in whole or in part, at any time during normal business hours on
any business day on or after the opening of business on the date hereof and
prior to 11:59 P.M. Eastern Time on the Expiration Date by (I) delivery of a
written notice, in the form of the subscription notice attached as Exhibit A
hereto, of such holder's election to exercise this Warrant, which notice shall
specify the number of Warrant Shares to be purchased, (ii) payment to the
Company of an amount equal to the Warrant Exercise Price multiplied by the
number of Warrant Shares as to which the Warrant is being exercised (the
"AGGREGATE EXERCISE PRICE") in cash or by check or wire transfer, and (iii) the
surrender of this Warrant, at the principal office of the Company; provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 7 shall be applicable. In the event of any
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<PAGE> 5
exercise of the rights represented by this Warrant in compliance with this
Section 2(a), a certificate or certificates for the Warrant Shares so
purchased, in such denominations as may be requested by the holder hereof and
registered in the name of, or as directed by, the holder, shall be delivered at
the Company's expense to, or as directed by, such holder as soon as practicable
after such rights shall have been so exercised, and in any event no later than
three business days after such exercise. In the case of a dispute as to the
determination of the Warrant Exercise Price of a security or the arithmetic
calculation of the Warrant Shares, the Company shall promptly issue to the
holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one business day of receipt of the holder's subscription
notice. If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within one day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via facsimile (I) the disputed determination of the Warrant Exercise
Price to an independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than two (2)
Business Days from receipt of the disputed determinations or calculations.
Such investment banking firm's or accountant's determination or calculation, as
the case may be, shall be deemed conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall
have expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five business days after any exercise
and at its own expense, issue a new Warrant identical in all respects to the
Warrant exercised except (I) it shall represent rights to purchase the number
of Warrant Shares purchasable immediately prior to such exercise under the
Warrant exercised, less the number of Warrant Shares with respect to which such
Warrant is exercised, and (ii) the holder thereof shall be deemed for all
corporate purposes to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of certificates
evidencing such Warrant Shares, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the
stock transfer books are open.
(c) No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of Common
Stock issued upon exercise of this Warrant shall be rounded up or down to the
nearest whole number.
(d) If the Company shall fail for any reason or for no
reason to issue to the holder on a timely basis as described in this Section 2,
a certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant or a new Warrant for the
number of shares of Common Stock to which such holder is entitled pursuant to
Section 2(b) hereof, the Company shall, in addition to any other remedies under
this Warrant or the Securities Purchase Agreement or otherwise available to
such holder, including
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<PAGE> 6
any indemnification under Section 11 of the Securities Purchase Agreement, pay
as additional damages in cash to such holder on each date after the fifth
business day following receipt by the Company of the exercise notice that such
exercise is not timely effected in an amount equal to 0.5% of the product of
(A) the sum of the number of shares of Common Stock not issued to the holder on
a timely basis and to which the holder is entitled and, in the event the
Company has failed to timely deliver a new Warrant, the number of shares
represented by the portion of this Warrant which is not being converted, as the
case may be, and (B) the average of the Closing Bid Prices for the three
consecutive trading days immediately preceding the last possible date which the
Company could have issued such Common Stock to the holder without violating
this Section 2.
(e) Notwithstanding anything contained herein to the
contrary, the holder of this Warrant may, at its election exercised in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula:
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number shares with respect to which this
Warrant is then being exercised.
B= the Market Price immediately prior to the date of
the subscription notice.
C= the Warrant Exercise Price then in effect at the
time of such exercise.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the holder
hereof, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date.
Section 3. Covenants as to Common Stock; Certain Registrations.
The Company hereby covenants and agrees as follows:
(a) This Warrant is, and any Common Stock Warrants issued
in substitution for or replacement of this Warrant will upon issuance be, duly
authorized and validly issued.
(b) All Warrant Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
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<PAGE> 7
(c) During the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved at least 100% of the number of shares of Common Stock needed to
provide for the exercise of the rights then represented by this Warrant and the
par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
(d) The Company shall list the Warrant Shares within 10
days of the date of this Warrant on the Nasdaq SmallCap Market and each other
Subsequent Market on which the Common Stock is then listed or traded and shall
maintain such listing for so long as any other shares of Common Stock shall be
so listed.
(e) The Company will not, by amendment of its charter or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Warrant Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on such holder to purchase any securities
or as a stockholder of the Company, whether such liabilities are asserted by
the Company or by creditors of the Company. Notwithstanding this Section 5,
the Company will provide the holder of this Warrant with copies of the same
notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account
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<PAGE> 8
for investment and not with a view to, or for sale in connection with, any
distribution hereof or of any of the shares of Common Stock or other securities
issuable upon the exercise thereof, and not with any present intention of
distributing any of the same. The holder of this Warrant further represents,
by acceptance hereof, that, as of this date, such holder is an accredited
investor as such term is defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act (an "ACCREDITED
INVESTOR"). Upon exercise of this Warrant, the holder shall, if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that
the Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with
a view toward distribution or resale other than pursuant to an effective
registration statement or an exemption under the Securities Act and that such
holder is an Accredited Investor. Notwithstanding the foregoing, by making the
representations herein, the holder does not agree to hold the Warrant or the
Warrant Shares for any minimum or other specified term and reserves the right
to dispose of the Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. If such holder cannot make such representations because they would be
factually incorrect, it shall be a condition to such holder's exercise of the
Warrant that the Company receive such other representations as the Company
considers reasonably necessary to assure the Company that the issuance of its
securities upon exercise of the Warrant shall not violate any United States or
state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company
may treat the person in whose name any Warrant is registered on the register as
the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, but in all events recognizing any transfers made in accordance
with the terms of this Warrant.
(b) This Warrant and the rights granted to the holder
hereof are transferable to affiliates of the holder hereof and to any
investment funds that are under common management with such holder, without the
written consent of the Company, and to other Persons, with the consent of the
Company, which consent shall not be unreasonably withheld, in whole or in part,
upon surrender of this Warrant, together with a properly executed warrant power
in the form of Exhibit B attached hereto; provided, however, that any transfer
or assignment shall be subject to the conditions set forth in Section 7(c)
below.
(c) The holder of this Warrant understands that this
Warrant has not been and is not expected to be, registered under the Securities
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (a) subsequently registered thereunder, or (b)
such holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration;
provided that (i) any sale of such securities made in reliance on Rule 144
-8-
<PAGE> 9
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Securities and
Exchange Commission thereunder; and (ii) neither the Company nor any other
person is under any obligation to register the Common Stock Warrants under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(d) The Company is obligated to register the Warrant
Shares for resale under the Securities Act pursuant to the Registration Rights
Agreement and the initial holder of this Warrant (and certain assignees
thereof) is entitled to the registration rights in respect of the Warrant
Shares as set forth in the Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. In order to prevent dilution of the rights granted under this Warrant,
the Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of
Shares upon Issuance of Common Stock. If and whenever on or after the date of
issuance of this Warrant, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock or rights, warrants or options
exercisable into or exchangeable for shares of Common Stock (other than shares
of Common Stock deemed to have been issued by the Company in connection with an
Approved Stock Plan or upon exercise of the Other Securities) for a
consideration per share less than a price (the "APPLICABLE PRICE") equal to the
Warrant Exercise Price in effect immediately prior to such issuance or sale,
then immediately after such issue or sale the Warrant Exercise Price shall be
reduced to an amount determined by multiplying the Warrant Exercise Price in
effect immediately prior to such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, and (ii) the number of
shares of Common Stock which the aggregate consideration received (or to be
received, assuming exercise or conversion in full of such rights, warrants or
convertible securities) for the issuance of such additional shares of Common
Stock would purchase at the Warrant Exercise Price, and the denominator of
which shall be the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale. Upon each such adjustment of the Warrant
Exercise Price hereunder, the number of shares of Common Stock acquirable upon
exercise of this Warrant shall be adjusted to the number of shares determined
by multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Warrant Exercise Price resulting from such adjustment. However,
upon the expiration of any right, warrant or option to purchase shares of
Common Stock the issuance of which resulted in an adjustment in the Warrant
Exercise Price pursuant to this Section, if any such right, warrant or option
shall expire without having been exercised, the Warrant Exercise Price shall,
immediately upon such expiration, be recomputed and effective immediately upon
such expiration shall be increased to the price which it would have been (but
reflecting any other adjustments in the Warrant Exercise
-9-
<PAGE> 10
Price made pursuant to this Warrant upon the issuance of other rights, warrants
or options) had the adjustment of the Warrant Exercise Price made the issuance
of such rights, options or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights, options or warrants actually
exercised.
(b) Effect on Warrant Exercise Price of Certain Events.
For purposes of determining the adjusted Warrant Exercise Price under Section
8(a), the following shall be applicable:
(i) Issuance of Options. If the Company in any
manner grants any rights or options to subscribe for or to purchase Common
Stock (other than pursuant to an Approved Stock Plan or Other Securities) or
any stock or other securities convertible into or exchangeable for, directly or
indirectly, Common Stock (such rights or options being herein called "OPTIONS"
and such convertible or exchangeable stock or securities being herein called
"CONVERTIBLE SECURITIES") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Applicable Price, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this Section 8(b)(i), the "price per
share for which Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by
dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options. No adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or exchange
is less than the Applicable Price, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of this Section 8(b)(ii), the "price
per share for which Common Stock is issuable upon such conversion or exchange"
is determined by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such
-10-
<PAGE> 11
Convertible Securities. No adjustment of the Warrant Exercise Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion.
If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock change at any time, the
Warrant Exercise Price in effect at the time of such change shall be readjusted
to the Warrant Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the number
of shares of Common Stock acquirable hereunder shall be correspondingly
readjusted; provided that no adjustment shall be made if such adjustment would
result in an increase of the Warrant Exercise Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events.
For purposes of determining the adjusted Warrant Exercise Price under Sections
8(a) and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. If
any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company therefor.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Market Price of
such securities on the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non- surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined by the Company's Board of Directors, provided, that, if the
Holder disagrees with such determination, such dispute shall be resolved
promptly by the independent certified public accountants that regularly
examines the financial statements of the Company.
(ii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares owned or
held by or for the account of the Company, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock.
-11-
<PAGE> 12
(iii) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(iv) Calculations. All calculations under this
Warrant shall be made to the nearest cent or the nearest 1/100th of a share, as
the case may be.
(d) Adjustment of Warrant Exercise Price upon Subdivision
or Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced
and the number of shares of Common Stock obtainable upon exercise of this
Warrant will be proportionately increased. If the Company at any time after
the date of issuance of this Warrant combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of shares of Common Stock obtainable upon exercise of this Warrant will
be proportionately decreased.
(e) Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person (as defined below) or other transaction which is effected in
such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock is referred to herein as "ORGANIC
CHANGE." Prior to the consummation of any Organic Change, the Company will
make appropriate provision (in form and substance satisfactory to the holders
of the Common Stock Warrants representing a majority of the shares of Common
Stock issuable upon exercise of such Common Stock Warrants then outstanding) to
ensure that each of the holders of the Common Stock Warrants will thereafter
have the right to acquire and receive in lieu of or addition to (as the case
may be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Common Stock Warrants, such
shares of stock, securities or assets as may be issued or payable in the
Organic Change with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon the
exercise of such holder's Common Stock Warrants had such Organic Change not
taken place (without taking into account any limitations or restrictions on
exercise). In any such case, the Company will make appropriate provision (in
form and substance satisfactory to the holders of the Common Stock Warrants
representing a majority of the shares of Common Stock issuable upon exercise of
such Common Stock Warrants then outstanding) with respect to such holders'
rights and interests to insure that the provisions of this Section 8 and
Section 9 will thereafter be applicable to the Common Stock Warrants
(including, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Company, an immediate
adjustment of the Warrant
-12-
<PAGE> 13
Exercise Price to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate adjustment in the
number of shares of shares of Common Stock acquirable and receivable upon
exercise of the Common Stock Warrants, if the value so reflected is less than
the Warrant Exercise Price in effect immediately prior to such consolidation,
merger or sale). The terms of any documents evidencing an Organic Change shall
include such terms as to give effect to the tenor of this provision and
evidencing the obligation to deliver to each holder of Common Stock Warrants
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) Distribution of Assets. If the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way or return of
capital or otherwise (including any dividend or distribution to the Company's
stockholders of cash or shares (or rights to acquire shares) of capital stock
of a subsidiary) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then the holder of this Warrant shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, after the record date for determining shareholders entitled to
receive such Distribution, to receive the amount of such assets (or rights)
which would have been payable to the holder had such holder been the holder of
such shares of Common Stock on the record date for determination of
stockholders entitled to such Distribution.
(g) Notices.
(i) Immediately upon any adjustment of the
Warrant Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation and in no
event shall such notice be provided to such holder prior to such information
being made known to the public.
(iii) The Company will also give written notice to
the holder of this Warrant at least twenty (20) days prior to the date on which
any Organic Change, dissolution or liquidation will take place and in no event
shall such notice be provided to such holder prior to such information being
made known to the public.
Section 9. Purchase Rights. In addition to any adjustments
pursuant to Section 8 above, if at any time the Company grants, issues or sells
any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of Common Stock
(the "PURCHASE RIGHTS"), then the holder of this Warrant will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
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<PAGE> 14
the date as of which the record holders of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on
receipt of an indemnification undertaking, issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered (I) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) upon receipt, when
delivered by a delivery service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, LB#31
Dallas, Texas 75219
Telephone: 214-521-9955
Facsimile: 214-521-9960
Attention: Robert P. Lindsay
and
Queen Sand Resources, Inc.
30 Metcalfe Street, Suite 620
Ottawa, Ontario, Canada K1P 5L4
Telephone: 613-230-7211
Facsimile: 613-230-6055
Attention: Edward J. Munden
With copy to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Telephone: (214) 651-5553
Facsimile: (214) 651-5940
Attention: William L. Boeing, Esq.
If to a holder of this Warrant, to it at the address set forth
below such holder's signature on the signature page hereof.
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<PAGE> 15
Each party shall provide five days' prior written notice to the other party of
any change in address or facsimile number.
Section 12. Miscellaneous. This Warrant and any term hereof may
be changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of New York without regard to principles of conflicts of law
thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE> 16
IN WITNESS WHEREOF, the Company has cause this Warrant to be
duly executed by its duly authorized officer as of the date first indicated
above.
QUEEN SAND RESOURCES, INC.
By:
-----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 17
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
QUEEN SAND RESOURCES, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Queen
Sand Resources, Inc., a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant (the "WARRANT"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment
of the Warrant Exercise Price shall be made as:
a "Cash Exercise" with respect to ____________
---------- Warrant Shares; and/or
a "Cashless Exercise" with respect to ___________
---------- Warrant Shares (to the extent permitted by the
terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder
has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the Warrant.
Date: ,
-------------------- ------ ---------
- -------------------------------------------
Name of Registered Holder
By:
----------------------------------
Name:
Title:
<PAGE> 18
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Queen Sand Resources, Inc., a
Delaware corporation, represented by warrant certificate no. _____, standing in
the name of the undersigned on the books of said corporation. The undersigned
does hereby irrevocably constitute and appoint ______________, attorney to
transfer the warrants of said corporation, with full power of substitution in
the premises.
Dated:
---------------------
-------------------------------
By:
--------------------------
Its:
--------------------------
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
Name Number of Warrants
- ---- ------------------
<S> <C>
JNC Opportunity Fund, Ltd. 121,500
JNC Opportunity Fund, Ltd. 243,000
Jesup & Lamont Securities Corporation
and other placement agents 400,000
Diversified Strategies Fund 7,000
Diversified Strategies Fund 3,500
Canadian Advantages, L.P. 10,000
Sovereign Partners L.P. 80,000
Dominion Capital Fund, Ltd. 50,000
Advantage (Bermuda) Fund, Ltd. 10,000
CSM GmbH 80,000
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the
"AGREEMENT"), dated as of July 8, 1998, by and among Queen Sand Resources, Inc.,
a Delaware corporation (the "COMPANY"), and the investors listed on the Schedule
of Buyers attached hereto (individually, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. The Company and certain of the Buyers are parties to that certain
Securities Purchase Agreement, dated as of June 25, 1998 (the "ORIGINAL
AGREEMENT"), pertaining to the purchase of the Securities (as defined below);
B. The parties hereto desire to amend, supersede and restate in its
entirety the Original Agreement in order to amend certain terms and conditions
therein and to substitute certain Buyers;
C. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT"); and
D. The Buyers wish, severally and not jointly, to purchase, upon the
terms and conditions stated in this Agreement, (i) initially an aggregate of
that number of shares of the Company's common stock, par value $.0015 per share
(the "COMMON STOCK"), equal to $25,000,000 (U.S.) divided by the Purchase Price
(as defined below) (the "INITIAL COMMON SHARES") in the respective amounts set
forth opposite each Buyer's name on the Schedule of Buyers attached hereto, (ii)
the right with respect to each Initial Common Share (the "REPRICING RIGHT") to
require the Company, subject to the terms and conditions set forth herein, to
issue the Buyers additional shares of Common Stock (the "REPRICING COMMON
SHARES") as described in Section 5 and (iii) warrants in the form of Exhibit C
attached hereto (the "WARRANTS"), entitling the holders thereof to acquire from
time to time from the Closing Date through the third anniversary thereof an
aggregate of 500,000 shares of Common Stock at an exercise price (subject to
adjustment as provided therein) equal to 110% of the Purchase Price (the
"WARRANT SHARES"). The Initial Common Shares, the Warrants, the Warrant Shares,
the Repricing Rights, the Repricing Common Shares and any shares of common stock
issued as payment of Registration Delay Payments (as defined in the Registration
Rights Agreement, as defined below) collectively are referred to in this
Agreement as the "SECURITIES"). The aggregate purchase price for the Securities
shall be up to $25,000,000 (U.S.).
<PAGE> 2
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES.
a. The Closing. Subject to the satisfaction (or waiver) of the
conditions set forth in Section 9 and Section 10, the date and time of the
issuance and sale of the Initial Common Shares, Repricing Rights and Warrants
pursuant to this Agreement (the "CLOSING DATE") shall be 9:00 a.m. (New York
City time) on the date of the closing of the High Yield Offering (as defined
below), but not later than July 8, 1998, or such other date and time as mutually
agreed by the Buyers and the Company. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall occur on the Closing Date
at the offices of Robinson Silverman Pearce Aronsohn & Berman, 1290 Avenue of
the Americas, New York, New York 10104, or at such other location as may be
agreed to the by parties.
b. Purchase of Securities. Subject to satisfaction (or waiver)
of the conditions set forth in Sections 9 and 10 and to any escrow agreement
mutually agreeable to the parties governing the release of the items referenced
in this Section, at the Closing (1) the Company shall deliver to or as directed
by each Buyer (i) a stock certificate, registered in the name of such Buyer or
such Buyer's designee (all such certificates are collectively, the "STOCK
CERTIFICATES") representing the number of Initial Common Shares to be acquired
at the Closing by such Buyer (which shall equal the dollar amount of Initial
Common Shares to be acquired at the Closing by each Buyer, as set forth on the
Schedule of Buyers attached hereto, divided by the lesser of (x) $7.00 (U.S.)
and (y) the average Closing Bid Price of the Common Stock during the five
consecutive Trading Days immediately preceding the Closing Date (such price per
share being the "PURCHASE PRICE")), (ii) a Warrant entitling such Buyer to
acquire such Buyer's pro rata portion of the Warrant Shares (determined by
reference to such Buyer's pro rata portion of the aggregate Purchase Price being
paid at Closing), (iii) one Repricing Right for each Initial Common Share issued
at the Closing to such Buyer (which shall be deemed incorporated and part of
each Initial Common Share issued), and (iv) all other instruments and writings
required to have been delivered at or prior to the Closing by the Company
pursuant to this Agreement, including without limitation, an executed
Registration Rights Agreement, dated as of the Closing Date, between the Company
and the Buyers in the form of Exhibit D attached hereto (the "REGISTRATION
RIGHTS AGREEMENT"); and (2) each Buyer shall deliver or cause to be delivered to
the Company (i) by wire transfer of immediately available funds in accordance
with the Company's written wire instructions, the Purchase Price for the
Securities being acquired by it at the Closing (determined by reference to the
Schedule of Buyers attached hereto); and (ii) all documents, instruments and
writings required to have been delivered at or prior to the Closing by such
Buyer pursuant to this Agreement, including, without limitation, an executed
Registration Rights Agreement.
c. Closing Bid Price. For purposes of this Agreement, "CLOSING
BID PRICE" means, for any security as of any date, the last closing bid price
for such security on The Nasdaq SmallCap Market as reported by Bloomberg
Financial Markets ("BLOOMBERG"), or, if The Nasdaq SmallCap Market is not the
principal trading market for such security, the last closing bid price
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<PAGE> 3
of such security on a Subsequent Market (as defined below) on which such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
of a majority of the outstanding Common Shares and Repricing Rights (on an as
exercised basis), including for purposes of this determination any Common Shares
and Repricing Rights (on an as exercised basis) with respect to which the
Purchase Price is being determined. If the Company and the holders of Common
Shares and Repricing Rights are unable to agree upon the fair market value of
the Common Stock, then such dispute shall be resolved pursuant to Section
5(c)(iii) with the term "Closing Bid Price" being substituted for the term
"Market Price." (All such determinations to be appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period).
d. Trading Day. For purposes of this Agreement, "TRADING DAY"
shall mean (a) a day on which the Common Stock is listed for trading on the
Nasdaq SmallCap Market or on the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market (each a "SUBSEQUENT MARKET") or (b) if the
Common Stock is not listed on the Nasdaq SmallCap Market or a Subsequent Market,
a day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a), (b) and (c) hereof, then a Trading Day
shall be a Business Day.
f. Business Day. For purposes of this Agreement, "BUSINESS
DAY" shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to close.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer is acquiring the Securities
to be issued or issuable to it hereunder for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum
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or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the completeness and accuracy of the materials provided
to such Buyer by or on behalf of the Company with respect to the transactions
contemplated hereby or on the Company's representations and warranties contained
in this Agreement. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that, except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that the Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (C) such Buyer
provides the Company with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or
a successor rule thereto) ("RULE 144"); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances
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in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder, or (D) such transferee or assignee is an affiliate
controlled by Buyer. Notwithstanding anything to the contrary contained in the
Transaction Documents (as defined below), each Buyer shall be entitled to pledge
the Securities in connection with a bona fide margin account. Notwithstanding
anything to the contrary contained herein, the Company agrees that a Buyer may
transfer Securities to an affiliate thereof or to an investment fund that is
under common management with such Buyer or affiliate.
g. Authorization; Enforcement. This Agreement has been, and
upon the Closing the Registration Rights Agreement will have been, duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms.
h. Residency. Such Buyer is a resident of that country or
jurisdiction specified on the Schedule of Buyers.
The Company acknowledges and agrees that the Buyers make no
representations and warranties with respect to the transaction contemplated by
this Agreement except for those specifically set forth in this Section 2.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest representing 50% or more of the outstanding equity or similar
interests (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have or result in a Material Adverse Effect. As used
in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect
on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to
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be entered into in connection herewith or on the authority or ability of the
Company to perform its obligations in a timely manner under the Transaction
Documents (as defined below).
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Warrants, the Registration Rights
Agreement, and the Irrevocable Transfer Agent Instructions (as defined in
Section 8) (collectively, the "TRANSACTION DOCUMENTS"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Common Shares, the Repricing Rights and the
Warrants and the reservation for issuance and the issuance of the Warrant Shares
and the Repricing Common Shares issuable upon exercise of the Warrants and the
Repricing Rights, respectively, have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders generally (other than the consent of
the stockholders that may be required by the applicable rules of the Nasdaq
Stock Market, Inc., (iii) this Agreement has been, and upon execution by the
Company and delivery of the other Transaction Documents, such other Transaction
Documents will have been duly executed and delivered by the Company, and (iv)
this Agreement constitutes, and upon execution and delivery by the Company of
the other Transaction Documents, such other Transaction Documents will
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which as of the date hereof, 24,323,718 shares were issued and outstanding,
3,000,000 shares are issuable and reserved for issuance pursuant to the
Company's stock option and purchase plan and 16,971,836 shares are currently
issuable pursuant to securities (other than the Repricing Rights and the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock; and (ii) 50,000,000 shares of preferred stock, par value $0.01 per share,
of which as of the date hereof, 9,610,400 shares were issued and outstanding and
9,600,00 shares are reserved for issuance. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding debt securities; (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) there are no outstanding securities of the
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<PAGE> 7
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement; and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement.
d. Issuance of Securities. The Common Shares, the Repricing
Rights and the Warrants are duly authorized and, upon issuance in accordance
with the terms hereof, shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the
issue thereof and (iii) entitled to the rights set forth herein and the
Warrants. 5,857,144 shares of Common Stock (subject to adjustment pursuant to
the Company's covenant set forth in Section 4(f) below) have been duly
authorized and reserved for issuance upon exercise of the Warrants and the
Repricing Rights. Upon exercise in accordance with the Warrants or this
Agreement, as the case may be, the Warrant Shares and the Repricing Common
Shares, will be validly reserved and issued, duly listed, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Warrant Shares and the Repricing Common Shares) do not and will
not (i) result in a violation of its Restated Certificate of Incorporation, as
amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the Company's Amended
and Restated By-laws, as in effect on the date hereof (the "BY-LAWS"); (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party (except for such conflicts or defaults that individually or in the
aggregate would not reasonably be expected to have or result in a Material
Adverse Effect); or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such violations that individually
or in the aggregate would not reasonably be expected to have or result in a
Material Adverse Effect). Neither the Company nor its Subsidiaries is in
violation of any term of or in default under (x) its Certificate of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock or By-laws or their organizational charter
or by-laws, respectively, or (y) any contract, agreement, mortgage,
indebtedness, indenture, instrument,
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judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for defaults that individually or in the
aggregate would not have Material Adverse Effect. The business of the Company
and its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance or regulation of any governmental entity other
than violations that would not have a Material Adverse Effect. Except as
specifically required by this Agreement and, the filing of a registration
statement in accordance with the Registration Rights Agreement, the filing of a
Form D with the Securities and Exchange Commission, filings required under
applicable state securities or "blue sky" laws and filings and approvals
required by The Nasdaq SmallCap Market, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. Since May 27, 1997,
the Company has not received notice (written or oral) from The Nasdaq SmallCap
Market that the Company was not in compliance with the listing or maintenance
requirements thereof. The Company is not in violation of the listing
requirements of The Nasdaq SmallCap Market as in effect on the date hereof and
on each of the Closing Dates and is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by The Nasdaq
SmallCap Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since October 12,
1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated
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financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
immaterial audit adjustments). No other written information provided by or on
behalf of the Company to the Buyers which is not included in the SEC Documents,
including, without limitation, information referred to in Section 2(d) of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Buyers with any material,
nonpublic information. The Company understands and confirms that the Buyers will
be relying upon the foregoing representation in effecting transactions in the
securities of the Company. The Company is, and at the Closing Date will be,
eligible to register securities for resale with the Commission under Form S-3
promulgated under the Securities Act.
g. Absence of Certain Changes. Except as disclosed in the SEC
Documents and except for general economic and industry conditions, since June
30, 1997, there has been no event, occurrence or development that has had or
that could reasonably be expected to have or result in a Material Adverse
Effect. The Company has not taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to any bankruptcy law nor does the
Company or any of its Subsidiaries have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, that could reasonably be expected to have or result in
a Material Adverse Effect.
i. Acknowledgment Regarding Buyers' Purchase of Securities.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
each Buyer is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any of the Buyers or
any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general
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advertising (within the meaning of Regulation D under the 1933 Act) in
connection with the offer or sale of the Securities.
k. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of The Nasdaq Stock Market, Inc., nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
l. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
m. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secret or
technical information by others and, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding trademarks, trade name
rights, patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other infringement;
and the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
n. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS") other than violations
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which, individually or in the aggregate, would not have or result in a Material
Adverse Effect, (ii) have received all material permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in material compliance with all terms and
conditions of any such permit, license or approval.
o. Title. The Company and its Subsidiaries have good and
marketable (or if applicable, defensible) title in fee simple to all real
property and good and marketable (or if applicable, defensible) title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(p) or such as are customary
in the oil and gas industry or such as would not have or result in a Material
Adverse Effect. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are customary in the oil and gas
industry or such as would not have or result in a Material Adverse Effect.
p. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary for similarly-situated and sized companies in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
q. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
r. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) access to assets is permitted only in accordance with
management's general or specific authorization.
s. Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
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t. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required to be filed by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) or in respect of tax obligations which are not
material in amount and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
u. Certain Transactions. Except as set forth on Schedule 3(u)
and in the SEC Documents filed at least ten days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
v. Dilutive Effect. The Company understands and acknowledges
that the number of Repricing Common Shares issuable upon exercise of the
Repricing Rights will increase in certain circumstances and could result in
substantial dilution of the outstanding shares of Common Stock. The Company
further acknowledges that its obligation to issue Repricing Common Shares upon
exercise of the Repricing Rights in accordance with this Agreement is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.
w. Absence of Rights Agreement. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
4. COVENANTS AND CERTAIN AGREEMENTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
9 and 10 of this Agreement.
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b. Form D; Blue Sky Filings. The Company agrees to file a Form
D with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall take
such action and make such filings as the Company shall reasonably determine is
necessary and as required by applicable law to qualify the Securities for, or
obtain exemption for the Securities for, sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Buyers.
c. Furnishing of Information. So long as any Buyer owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the 1934 Act. So long as any Buyer owns Securities, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the 1934 Act, it will prepare and furnish to the Buyers and make publicly
available in accordance with Rule 144(c) promulgated under the 1933 Act annual
and quarterly financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially similar to those
that would otherwise be required to be included in reports required by Section
13(a) or 15(d) of the 1934 Act, as well as any other information required
thereby, in the time period that such filings would have been required to have
been made under the 1934 Act. The Company further covenants that it will take
such further action as any holder of the Securities may reasonably request, all
to the extent required from time to time to enable such holder to sell Initial
Common Shares, Warrant Shares and Repricing Shares without registration under
the 1934 Act under Rule 144 promulgated under the Securities Act. Upon the
request of any such holder, the Company shall deliver thereto a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Securities for general working capital purposes or to repay
indebtedness outstanding under the Company's Variable Rate Senior Third Secured
Equity Bridge Notes due 2004.
e. Certain Information. The Company agrees to send the
following to each Buyer during the Effectiveness Period (as defined in the
Registration Rights Agreement): (i) within one Business Day of the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (ii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Repricing Common Shares; provided, however, that
the above requirement shall expire as to each Buyer on the Date of Repurchase at
the Company's Election (as defined herein) to the extent of a Repurchase at the
Company's Election, and the Warrant Shares (without regard to any limitations on
the exercise of the Repricing Rights or Warrants).
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g. Right of First Refusal. Subject to the exceptions described
below, the Company and its Subsidiaries shall not negotiate or contract with any
party for any equity financing (including any debt financing with an equity
component) or issue any equity securities of the Company or any Subsidiary or
securities convertible or exchangeable into or for equity securities of the
Company or any Subsidiary (including debt securities with an equity component)
in any form ("FUTURE OFFERING") during the period beginning on the date hereof
and ending on and including the date which is 365 days after the Closing Date
unless it shall have first delivered to each Buyer or a designee appointed by
such Buyer written notice (the "FUTURE OFFERING NOTICE") describing the proposed
Future Offering, including the terms and conditions thereof, and providing each
Buyer an option to purchase up to its Aggregate Percentage (as defined below),
as of the date of delivery of the Future Offering Notice, in the Future Offering
(the limitation referred to in this sentence is referred to as the "CAPITAL
RAISING LIMITATION"); provided, however, that the prohibition above shall expire
as to a Buyer on the Date of Repurchase at the Company's Election of all of the
Securities then held by such Buyer in respect of a Repurchase at the Company's
Election as to such Buyer. For purposes of this Section 4(g), "AGGREGATE
PERCENTAGE" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of Common Shares purchased by such
Buyer at the Closings by (ii) the aggregate number of Common Shares purchased by
all Buyers at the Closings. A Buyer can exercise its option to participate in a
Future Offering by delivering written notice thereof to participate to the
Company within ten Business Days of receipt of a Future Offering Notice, which
notice shall state the quantity of securities being offered in the Future
Offering that such Buyer will purchase, up to its Aggregate Percentage, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage. In the event that one or more Buyers fail to elect to purchase up to
each such Buyer's Aggregate Percentage then each Buyer which has indicated that
it is willing to purchase a number of securities in excess of its Aggregate
Percentage shall be entitled to purchase its pro rata portion (determined in the
same manner as described in the preceding sentence) of the securities in the
Future Offering which one or more Buyers have not elected to purchase. In the
event the Buyers fail to elect to fully participate in the Future Offering
within the periods described in this Section 4(g), the Company shall have 45
days thereafter to sell securities in the Future Offering to the extent that the
Buyers' rights under this paragraph were not exercised, upon terms and
conditions specified in the Future Offering Notice. In the event the Company has
not sold such securities of the Future Offering within such 45 day period, the
Company shall not thereafter issue or sell such securities without first
offering such securities to the Buyers in the manner provided in this Section
4(g). The Capital Raising Limitation shall not apply to (i) a loan from a
commercial bank or any affiliate of Enron Corp., a Delaware corporation,
provided such loan does not have an equity component valued (as determined by a
national investment bank mutually agreed upon by the Company and the holders of
a majority of the outstanding Common Shares and Repricing Rights (on an as
exercised basis)) in excess of 15% of the proceeds of such loan; (ii) any
transaction involving the Company's issuances of securities (A) as consideration
in a merger or consolidation with nonaffiliated entities, (B) in connection with
any strategic partnership or joint venture (the primary purpose of which is not
to raise equity capital), or (C) as consideration for the acquisition of a
business, product or license or other assets or any share in an oil or gas
company by the Company; (iii) the issuance of Common Stock in a firm commitment,
underwritten public
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<PAGE> 15
offering with net proceeds to the Company of at least $35,000,000 (U.S.), (iv)
the issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof, (v)
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option plan, restricted stock plan, stock
purchase plan or other plan or written compensation contract for the benefit of
the Company's employees or directors, (vi) any bridge financing, provided such
financing does not have an equity component valued (as determined by a national
investment bank mutually agreed upon by the Company and the holders of a
majority of the outstanding Common Shares and Repricing Rights (on an as
exercised basis)) in excess of 15% of the proceeds of such bridge financing or
(vii) issuances of securities under any rights (a) pursuant to that certain
Securities Purchase Agreement dated March 27, 1997 between the Company and Joint
Energy Development Investments L.P. ("JEDI"), or (b) pursuant to the
Subordinated Revolving Credit Loan Agreement, dated as of December 29, 1997,
between the Company and Enron Capital & Trade Resources Corp., as agent. The
Buyers shall not be required to participate or exercise their right of first
refusal with respect to a particular Future Offering in order to exercise their
right of first refusal with respect to later Future Offerings.
h. Listing. The Company shall list 9,428,573 shares of Common
Stock in respect of the Securities within 10 days of the Closing Date and shall
promptly secure the listing of all additional Registrable Securities not
previously listed as such shares are issued (as defined in the Registration
Rights Agreement) on the Nasdaq SmallCap Market and each other Subsequent Market
on which the Common Stock is then listed or traded and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for listing on The Nasdaq SmallCap Market and any other Subsequent
Market on which the Common Stock is then listed or traded or in connection with
a Major Transaction (as defined below)). Neither the Company nor any of its
Subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on the Nasdaq SmallCap Market or on any
Subsequent Market on which the Common Stock is then listed or traded (other than
to switch listings from The Nasdaq SmallCap Market to a Subsequent Market). The
Company shall promptly provide to each Buyer copies of any notices it receives
from The Nasdaq SmallCap Market or any other Subsequent Market on which the
Common Stock is then listed or traded regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
i. Filing of Form 8-K. On or before the tenth (10th) Business
Day following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
j. Proxy Statement. On or before the 120th day after the
Closing Date (the "PROXY STATEMENT TRIGGER DATE"), the Company shall provide
each stockholder entitled to vote
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<PAGE> 16
at the next meeting of stockholders of the Company, which meeting shall not be
later than 60 days after the Proxy Statement Trigger Date (the "STOCKHOLDER
MEETING DEADLINE"), a proxy statement, which has been previously submitted for
reviewed by the Buyers and a counsel of their choice, soliciting each such
stockholder's affirmative vote at such stockholder meeting for approval of the
Company's issuance of all of the Securities as described in this Agreement
(including the approval of issuances at a discount to market as may be required
by the Rules of the Nasdaq Stock Market, Inc.), and the Company shall use its
best efforts to solicit its stockholders' approval of such issuance of the
Securities and cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal. Such proxy statement shall not
seek approval of any matters other than the approval described in the preceding
sentence and the election of directors. If the Company fails to hold a meeting
of its stockholders by the Stockholder Meeting Deadline, then, as partial relief
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Buyer an amount in cash equal to the
product of (i) the aggregate Purchase Price paid by such Buyer multiplied by
(ii) .025; multiplied by (iii) the quotient of (x) the number of days after the
Stockholder Meeting Deadline that a meeting of the Company's stockholders is not
held, divided by (y) 30. The Company shall make the payments referred to in the
immediately preceding sentence within five days of the earlier of (I) the
holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments, and (II) the last day of each
30-day period beginning on the Stockholder Meeting deadline. In the event the
Company fails to make such payments in a timely manner, such payments shall bear
interest at the lesser of (i) the rate of 2.0% per month or (ii) the highest
lawful rate (pro rated for partial months) until paid in full.
k. Exclusivity. The Company shall not offer, issue or sell
Initial Common Shares, Repricing Rights or Warrants except to the Buyers who
have executed this Agreement on the date hereof, except upon the prior written
consent of the Buyers representing a majority of the aggregate Purchase Price
set forth on the Schedule of Buyers attached hereto on the date hereof.
l. Limitation on Filing Registration Statements. The Company
shall not file a registration statement (other than the Registration Statement
(as defined in the Registration Rights Agreement), any registration statement
required to be filed by the Company pursuant to any "demand registration right"
outstanding as of the date of this Agreement or a registration statement on Form
S-8) covering the sale or resale of shares of Common Stock with the SEC during
the period beginning on the date hereof and ending on the 60th Trading Day after
the date that the Registration Statement has been declared effective by the SEC,
other than registration statements pertaining to securities issued in connection
with acquisitions of or from unaffiliated parties or pursuant to a bona fide,
firm commitment underwritten public offering.
m. Legends. The parties agree that the certificates or other
instruments representing the Warrants and, until such time as the sale of the
Common Shares, the Repricing Common Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the
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<PAGE> 17
Common Shares, the Repricing Common Shares and the Warrant Shares, except as set
forth below, shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without any legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in form acceptable to the Company, to the effect
that a public sale, assignment or transfer of such Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that such Securities can be sold without
restriction pursuant to Rule 144(k). Any Repricing Shares and Warrant Shares
issued at such time as when there is an effective registration statement
covering such shares will not bear any restrictive legend. Each Buyer
acknowledges, covenants and agrees to sell the Securities represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act.
5. REPRICING COMMON SHARES.
a. Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "REPRICING PRICE" means, as of any date, (A) during the
period beginning on and including the date which is 121 days after the
Closing Date and ending on and including the date which is 150 days
after the Closing Date, 124% of the Purchase Price, (B) during the
period beginning on and including the date which is 151 days after the
Closing Date and ending on and including the date which is 180 days
after the Closing Date, 125% of the Purchase Price, (C) during the
period beginning on and including the
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<PAGE> 18
date which is 181 days after the Closing Date and ending on and
including the date which is 210 days after the Closing Date, 126% of
the Purchase Price, (D) during the period beginning on and including
the date which is 211 days after the Closing Date and ending on and
including the date which is 240 days after the Closing Date, 127% of
the Purchase Price and (E) after the date which is 240 days after the
Closing Date, 128% of the Purchase Price.
(ii) "MARKET PRICE" means, as of any date of determination,
the lowest Closing Bid Price during the 15 consecutive Trading Days
immediately preceding such date of determination. (All such
determinations to be appropriately adjusted for any stock dividend,
stock split, combination, recapitalization, reclassification or other
similar transaction during such period.)
(iii) "REPRICING RATE" means the number of shares of Common
Stock issuable upon exercise of each Repricing Right pursuant to
Section 5(b) determined according to the following formula; provided
that if the result of such formula is less than zero, then the result
shall be deemed to be zero:
(Repricing Price - Market Price)
----------------------------------
Market Price
b. Repricing Right. Subject to the provisions of Sections 5(d)
and 5(e) below, at any time or times on or after the Closing Date, any holder of
Repricing Rights shall be entitled to exercise any whole number of Repricing
Rights for fully paid and nonassessable shares of Common Stock in accordance
with Section 5(c), at the Repricing Rate. The Company shall not issue any
fraction of a share of Common Stock upon any exercise of Repricing Rights. All
shares of Common Stock (including fractions thereof) issuable upon exercise of
more than one Repricing Right by a holder thereof shall be aggregated for
purposes of determining whether the exercise would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned aggregation,
the issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole share.
c. Mechanics of Exercise of Repricing Right. A holder of
Repricing Rights shall exercise such rights in accordance with the following
terms:
(i) Holder's Delivery Requirements. To exercise Repricing
Rights for full shares of Common Stock on any date (the "EXERCISE
DATE"), the holder thereof shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 p.m. Eastern Time,
on such date, a copy of a fully executed notice of exercise in the form
attached hereto as Exhibit B (the "EXERCISE NOTICE") to the Company,
and (B) surrender to a common carrier, for delivery to the Company as
soon as practicable following such date, the originally executed
Exercise Notice.
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<PAGE> 19
(ii) Company's Response. Upon receipt by the Company of a
facsimile copy of an Exercise Notice, the Company shall promptly, but
in no event later than one Trading Day after receipt, send, via
facsimile, a confirmation of receipt of such Exercise Notice to such
holder. Upon receipt by the Company of the originally executed Exercise
Notice, the Company or the transfer agent for the Common Stock (the
"TRANSFER AGENT") (as applicable) shall, two (2) Trading Days following
the date of receipt, (I) issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder or its designee, for
the number of shares of Common Stock to which the holder shall be
entitled, or (II) credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its
designee's balance account with The Depository Trust Company.
(iii) Dispute Resolution. In the case of a dispute as to the
determination of the Market Price or the Repricing Price or the
arithmetic calculation of the Repricing Rate, the Company shall
promptly issue to the holder the number of shares of Common Stock that
is not disputed and shall submit the disputed determinations or
arithmetic calculations to the holder via facsimile within one Trading
Day of receipt of such holder's Exercise Notice. If such holder and the
Company are unable to agree upon the determination of the Market Price
or the Repricing Price or arithmetic calculation of the Repricing Rate
within one Business Day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall
within one Trading Day submit via facsimile (A) the disputed
determination of the Market Price or Repricing Price to an independent,
reputable investment bank, or (B) the disputed arithmetic calculation
of the Repricing Rate to its independent, outside accountant. The
Company shall cause the investment bank or the accountant, as the case
may be, to perform the determinations or calculations and notify the
Company and the holder of the results no later than two Trading Days
from the time it receives the disputed determinations or calculations.
Such investment bank's or accountant's determination or calculation, as
the case may be, shall be binding upon all parties absent manifest
error.
(iv) Record Holder. The person or persons entitled to receive
the shares of Common Stock issuable upon an exercise of Repricing
Rights shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Exercise Date.
(v) Company's Failure to Timely Deliver Repricing Common
Shares. If within three (3) Trading Days after the Company's receipt of
the Exercise Notice the Company shall fail to issue a certificate
(which shall be free of all restrictive legends other than those
required by Section 4(m)) for the number of shares of Common Stock to
which a holder is entitled or to credit the holder's balance account
with The Depository Trust Company for such number of shares of Common
Stock to which the holder is entitled upon such holder's exercise of
the Repricing Rights, in addition to all other available remedies which
such holder may pursue hereunder (including indemnification pursuant to
Section 11 hereof), the Company shall pay additional damages to such
holder on each
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<PAGE> 20
date after such third (3rd) Trading Day that such exercise is not
timely effected in an amount equal to 0.5% of the product of (A) the
sum of the number of shares of Common Stock not issued to the holder on
a timely basis pursuant to Section 5(c)(ii) and to which such holder is
entitled and (B) the Closing Bid Price of the Common Stock on the last
possible date which the Company could have issued such Common Stock to
such holder without violating Section 5(c)(ii). In addition, if the
Buyer to whom the Company has failed to timely deliver the shares is
forced to purchase (a "BUY-IN") other outstanding shares of Common
Stock of the Company in order to cover a sale order by such Buyer, then
the Company will be required to pay to such Buyer the positive
difference between the price at which the Buyer bought its covering
shares (inclusive of brokerage commissions, if any) and the sale price
in respect of the shares sold by it.
d. Exercise Restrictions. In addition to the termination provisions set
forth in Section 5(e), the right of a holder of Repricing Rights to exercise
such Repricing Rights to this Section 5 shall be limited as set forth below.
(i) Without the prior consent of the Company, a holder of
Repricing Rights shall not be entitled to exercise an aggregate number
of Repricing Rights from the Closing Date through the date of this
determination in excess of the number of Repricing Rights which when
divided by the number of Repricing Rights purchased by such holder
would exceed (i) 0.00 for the period beginning on the Closing Date and
ending on and including the date which is 120 days thereafter, (ii)
0.25 for the period beginning on the date which is 121 days after the
Closing Date and ending on and including the date which is 150 days
after the Closing Date, (iii) 0.50 for the period beginning on and
including the date which is 151 days after the Closing Date and ending
on and including the date which is 180 days after the Closing Date,
(iv) 0.75 for the period beginning on the date which is 181 days after
the Closing Date and ending on and including the date which is 210 days
after the Closing Date, and (v) 1.00 for the period beginning on and
including the date which is 211 days after the Closing Date. All such
periods shall be considered on a cumulative basis. Notwithstanding the
foregoing, the exercise restriction set forth in this Section 5(d)
shall cease to apply if an event constituting a Major Transaction or a
Triggering Event (as defined in Section 8 below) shall have occurred or
been publicly announced or if a Registration Statement shall not have
been declared effective by the 120th day after the Closing Date.
(ii) Notwithstanding anything to the contrary in this
Agreement, in no event shall any holder of Repricing Rights be entitled
to exercise Repricing Rights in excess of that number of Repricing
Rights which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of
the Common Stock following such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of the Repricing Rights
with respect to which the determination of the foregoing sentence is
being made, but shall
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<PAGE> 21
exclude the number of shares of Common Stock which would be issuable
upon (A) exercise of the remaining, unexercised Repricing Rights
beneficially owned by the holder and its affiliates, and (ii) exercise
or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the holder and its
affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 5(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended. A holder may, as to itself only, waive the foregoing
limitations by written notice to the Company upon not less than 61 days
prior notice (with such waiver taking effect only upon the expiration
of such 61 day notice period).
(iii) Notwithstanding anything to the contrary in this
Agreement, in no event shall any holder of Repricing Rights be entitled
to exercise Repricing Rights in excess of that number of Repricing
Rights which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 9.99% of the outstanding shares of
the Common Stock following such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of the Repricing Rights
with respect to which the determination of the foregoing sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining, unexercised
Repricing Rights beneficially owned by the holder and its affiliates,
and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without
limitation, any warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 5(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. A holder may, as to itself
only, waive the foregoing limitations by written notice to the Company
upon not less than 61 days prior notice (with such waiver taking effect
only upon the expiration of such 61 day notice period).
e. Termination of Repricing Rights. Notwithstanding anything to the
contrary herein, the right of a holder of Repricing Rights to exercise such
Repricing Right shall terminate automatically and such holder shall have no
further rights with respect to such Repricing Right (provided that the Company
has complied with its obligations set forth in this Section 5 and Section 8)
upon the earlier of the following:
(i) The date of the sale of the Common Share with respect to
which such Repricing Right was acquired at any time prior to the date
which is 120 days after the Closing Date on which such Repricing Right
was acquired;
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<PAGE> 22
(ii) The date of the sale of the Common Share with respect to
which such Repricing Right was acquired at any time on or after the
date which is 120 days after the Closing Date on which such Repricing
Right was acquired at a price equal to or greater than the Repricing
Price in effect on the date of such sale;
(iii) The date immediately following the date which is one
year after the date of the sale of the Initial Common Share with
respect to which such Repricing Right was acquired; and
(iv) The date on which a holder of such Repricing Rights
delivers written notice to the Company pursuant to Section 6(c) of such
holder's election to terminate Repricing Rights selected by the Company
for repurchase in lieu of the Company repurchasing such holder's
related Initial Common Shares.
f. Taxes. The Company shall pay any and all transfer taxes which may be
imposed with respect to the issuance and delivery of shares of Common Stock upon
the exercise of the Repricing Rights.
g. Company's Right to Repurchase in Lieu of Issuing Repricing Common
Shares. (i) Notwithstanding anything herein to the contrary, but subject to
Section 5(g)(v), at any time after the Closing Date on which a Repricing Right
is acquired, the Company may elect to repurchase Repricing Rights exercised in
lieu of issuing shares of Common Stock upon such exercise, provided that the
average of the Closing Bid Prices on the five consecutive Trading Days
immediately preceding the Exercise Date is not greater than $5.30 (U.S.)
(subject to adjustment for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and other similar events) (a "COMPANY
REPURCHASE IN LIEU OF EXERCISE"). If the Company is unable to repurchase all of
the Repricing Rights submitted for exercise on a given date, the Company shall
repurchase that number of Repricing Rights, from each holder of Repricing Rights
submitted for exercise on such date, equal to such holder's pro-rata amount
(based on the number of Repricing Rights held by such holder relative to the
number of Repricing Rights outstanding) of all Repricing Rights submitted for
exercise on such date.
(ii) Repurchase Price of Company Repurchase in Lieu of
Exercise. The "REPURCHASE PRICE OF COMPANY REPURCHASE IN LIEU OF
EXERCISE" shall be an amount per Repricing Right equal to the product
of (A) the Repricing Rate of the Repricing Right on the Exercise Date
and (B) the last reported sale price of the Common Stock (as reported
by Bloomberg) on the Exercise Date.
(iii) Mechanics of Company Repurchase in Lieu of Exercise. The
Company shall exercise its right to repurchase by delivering written
notice by facsimile and overnight courier ("NOTICE OF COMPANY
REPURCHASE IN LIEU OF EXERCISE") to (A) each holder of the Repricing
Rights and (ii) the Transfer Agent. Such Notice of Company Repurchase
in Lieu of Exercise shall confirm the time period during which the
Company may effect Company Repurchase in Lieu of Exercise, which period
shall begin on and
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include the date which is five Business Days after the date of receipt
by all of the holders' of the Notice of Repurchase in Lieu of Exercise
and shall end on and include the date which is 30 calendar days after
the fifth Business Day following the date of receipt by all of the
holders of the Notice of Repurchase in Lieu of Exercise (the
"REPURCHASE IN LIEU OF EXERCISE PERIOD"). The Company may terminate a
Repurchase in Lieu of Exercise Period at any time with respect to
Repricing Rights which have not been submitted for exercise by
delivering written notice of such termination to each holder of
Repricing Rights by facsimile and overnight courier at least five days
Business Days prior to the date of such termination. Any Repricing
Rights submitted for exercise after the termination of the Repurchase
in Lieu of Exercise Period shall be exercised in accordance with this
Section 5.
(iv) Payment of Repurchase Price. The Company shall pay the
applicable Repurchase Price of Company Repurchase in Lieu of Exercise
to the holder of the Repricing Right being repurchased in cash within
five Business Days after the Exercise Date. If the Company shall fail
to pay the applicable Repurchase Price of Company Repurchase in Lieu of
Exercise to such holder on a timely basis as described in this Section
5(g)(iv), in addition to any remedy such holder of Repricing Rights may
have under this Agreement, such unpaid amount shall bear interest at
the rate of the lesser of 2.0% per month or the maximum rate permitted
by law, pro rated for partial months, until paid in full. Until the
Company pays such unpaid applicable Repurchase Price of Company
Repurchase in Lieu of Exercise in full to each holder, each holder of
Repricing Rights submitted for exercise pursuant to this Section 5(g)
and for which the applicable Repurchase Price of Company Repurchase in
Lieu of Exercise has not been paid, shall have the option (the "VOID
COMPANY REPURCHASE OPTION") to, in lieu of repurchase, to void such
exercise of Repricing Rights for which the applicable Repurchase Price
of Company Repurchase in Lieu of Exercise has not been paid, by sending
written notice thereof to the Company via facsimile (the "VOID COMPANY
REPURCHASE NOTICE"). Upon the Company's receipt of such Void Company
Repurchase Notice(s) prior to payment of the full applicable repurchase
price to each holder, (x) the Company's Repurchase in Lieu of Exercise
shall be null and void with respect to those Repricing Rights submitted
for exercise and for which the applicable repurchase price has not been
paid and (y) the holder of such Repricing Rights shall the rights of
unexercised Repricing Rights as set forth in this Section 5. If the
Company fails to timely effect a Company Repurchase in Lieu of Exercise
in accordance with this Section 5(g), the Company shall not be allowed
to submit another Notice of Company Repurchase in Lieu of Exercise
without the prior written consent of the holders of at least two-thirds
(2/3) of the Repricing Rights then outstanding.
(v) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Notice of
Company Repurchase in Lieu of Exercise pursuant to Section 5(g)(ii)
above and begin the repurchase procedure under this Section 5(g),
unless it has:
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(A) the full amount of the Repurchase Price of
Company Repurchase in Lieu of Exercise in cash, available in a demand
or other immediately available account in a bank or similar financial
institution;
(B) credit facilities, with a bank or similar
financial institutions that are immediately available and unrestricted
for use in repurchasing the Repricing Rights, in the full amount of the
Repurchase Price of Company Repurchase in Lieu of Exercise;
(C) a written agreement with a standby underwriter or
qualified buyer ready, willing and able to purchase from the Company a
sufficient number of shares of stock to provide proceeds necessary to
repurchase any Repricing Right that is not exercised prior to a Company
Repurchase in Lieu of Exercise; or
(D) a combination of the items set forth in the
preceding clauses (A), (B) and (C), aggregating the full amount of the
Repurchase Price of Company Repurchase in Lieu of Exercise.
6. COMPANY'S RIGHT TO REPURCHASE AT ITS ELECTION.
a. Repurchase Rights. Notwithstanding anything herein to the contrary
but subject to Sections 6(d) and 6(e) and the last sentence of Section 6(c)
below, the Company shall have the right, in its sole discretion, to repurchase
("REPURCHASE AT THE COMPANY'S ELECTION"), from time to time, any or all of the
Initial Common Shares and the Repricing Rights associated with such Initial
Common Shares at the Repurchase Price at the Company's Election (as defined
below). If the Company elects to repurchase some, but not all, of the Initial
Common Shares and the associated Repricing Rights, the Company shall repurchase
an amount from each holder equal to such holder's pro-rata amount (based on the
number of Initial Common Shares with associated Repricing Rights held by such
holder relative to the number of Initial Common Shares with associated Repricing
Rights outstanding) of all Initial Common Shares and associated Repricing Rights
being repurchased. Notwithstanding the foregoing, the Company shall be entitled
to repurchase Initial Common Shares and the associated Repricing Rights pursuant
to this Section 6 only as single units. Accordingly, the Company shall not be
entitled to repurchase any Common Share pursuant to this Section 6 if the
associated Repricing Right has been exercised and shall not be entitled to
repurchase any Repricing Right pursuant to this Section 6 if the associated
Common Share has been sold.
b. Repurchase Price at the Company's Election. The "REPURCHASE PRICE AT
THE COMPANY'S ELECTION" shall be an amount per Common Share and associated
Repricing Right equal to (i) with respect to any Date of Repurchase at the
Company's Election prior to the date which is 120 days after the Closing Date,
119% of the Purchase Price and (ii) with respect to any Date of Repurchase at
the Company's Election on or after the date which is 120 days after the Closing
Date, 128% of the Purchase Price.
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<PAGE> 25
c. Mechanics of Repurchase at the Company's Election. The Company shall
effect each such repurchase no sooner than 10 Trading Days nor later than 20
Trading Days after delivering written notice of its Repurchase at the Company's
Election via facsimile and overnight courier ("NOTICE OF REPURCHASE AT THE
COMPANY'S ELECTION") to (i) each holder of the Initial Common Shares and the
associated Repricing Rights and (ii) the Transfer Agent. Such Notice of
Repurchase at the Company's Election shall indicate (A) the number of Initial
Common Shares and associated Repricing Rights that have been selected for
repurchase, (B) the date that such repurchase is to become effective (the "DATE
OF REPURCHASE AT THE COMPANY'S ELECTION") and (C) the applicable Repurchase
Price at the Company's Election. Notwithstanding the above, any holder may sell
any Initial Common Shares and exercise any Repricing Rights that such holder is
otherwise entitled to exercise for shares of Common Stock pursuant to Section 5
above, on or prior to the date immediately preceding the Date of Repurchase at
the Company's Election, including Initial Common Shares and Repricing Rights
that have been selected for Repurchase at the Company's Election pursuant to
this Section 6. Notwithstanding anything to the contrary in this Section 6, any
holder of Initial Common Shares and Repricing Rights selected for repurchase by
the Company may elect, at such holder's sole discretion, at any time prior to
the Date of Repurchase at the Company's Election, to terminate such holder's
Repricing Rights selected for repurchase by the Company in lieu of the Company
having the right to repurchase such holder's related Initial Common Shares, by
delivering written notice of such election to the Company.
d. Payment of Repurchase Price. Each holder submitting Initial Common
Shares being repurchased under this Section 6 shall send such holder's Stock
Certificates so repurchased to the Company within five (5) Business Days after
the Date of Repurchase at the Company's Election, and the Company shall pay the
applicable Repurchase Price at the Company's Election to that holder in cash
within three Business Days after such holder's Stock Certificates are so
delivered to the Company. If the Company shall fail to pay the applicable
Repurchase Price at the Company's Election to such holder on a timely basis as
described in this Section 6(d), in addition to any remedy such holder of Initial
Common Shares may have under this Agreement, such unpaid amount shall either (a)
bear interest at lesser of (i) the rate of 2.0% per month or (ii) the highest
lawful rate (prorated for partial months) until paid in full or (b) demand the
return of such holder's Stock Certificates.
e. Company Must Have Immediately Available Funds or Credit Facilities.
The Company shall not be entitled to send any Notice of Repurchase at the
Company's Election pursuant to Section 6(c) above and begin the repurchase
procedure under this Section 6, unless it has:
(i) the full amount of the Repurchase Price at the Company's
Election in cash, available in a demand or other immediately available
account in a bank or similar financial institution;
(ii) credit facilities, with a bank or similar financial
institutions that are immediately available and unrestricted for use in
repurchasing the Initial Common Shares
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<PAGE> 26
and associated Repricing Rights, in the full amount of the Repurchase
Price at the Company's Election;
(iii) a written agreement with a standby underwriter or
qualified buyer ready, willing and able to purchase from the Company a
sufficient number of shares of stock to provide proceeds necessary to
repurchase any Initial Common Shares and associated Repricing Rights
that have not been sold or exercised, respectively, prior to a
Repurchase at the Company's Election; or
(iv) a combination of the items set forth in the preceding
clauses (i), (ii) and (iii), aggregating the full amount of the
Repurchase Price at the Company's Election.
f. Certain Conditions During Notice Period. The Company shall not be
entitled to repurchase the Initial Common Shares and associated Repricing Rights
on a Date of Repurchase at the Election of the Company, unless each of the
following conditions are satisfied as of the date of the Notice of Repurchase at
the Company's Election and on each day from such date until and including the
later of the Date of Repurchase at the Company's Election and the date on which
the Company pays the applicable Repurchase Price:
(i) The Company's stockholders shall have approved the
issuance of the Securities on or prior to the date of the Notice of
Repurchase at the Company's Election;
(ii) The Registration Statement shall be effective and
available for the sale of no less than 125% of the sum of (A) the
number of Repricing Common Shares then issuable upon exercise of all
outstanding Repricing Rights, (B) the number of Warrant Shares then
issuable upon exercise of all outstanding Warrants and (C) the number
of Initial Common Shares, Repricing Common Shares and Warrant Shares
that are then held by the Buyers;
(iii) The Common Stock is listed for trading on The Nasdaq
SmallCap or on a Subsequent Market and is not then suspended from
trading thereon;
(iv) During the period beginning on and including the Closing
Date and ending on and including the Date of Repurchase at the
Company's Election, no event constituting a Major Transaction,
including an agreement to consummate a Major Transaction, shall have
occurred nor shall any pending event which would constitute a Major
Transaction have been publicly disclosed;
(v) During the period beginning on the Closing Date and ending
on and including the Date of Repurchase at the Company's Election, the
Company shall have delivered Repricing Common Shares on a timely basis
in accordance with Section 5 and the Company shall have delivered
Warrant Shares upon exercise of the Warrants to the Buyers on a timely
basis as set forth in Sections 2(a) and 2(b) of the Warrants and
otherwise the Company shall have been in compliance with and shall not
have breached
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<PAGE> 27
in any material respect the provisions of this Agreement, the Warrants,
the Registration Rights Agreement or the Irrevocable Transfer Agent
Instructions; and
(vi) A Repurchase at the Company's Election shall not have
occurred previously.
7. REPURCHASE AT OPTION OF HOLDERS.
a. Repurchase Option Upon Major Transaction or Triggering
Event. In addition to all other rights of the holders of the Securities
contained herein, simultaneous with or after the occurrence of a Major
Transaction (as defined below) or a Triggering Event (as defined below), each
holder of Initial Common Shares or Repricing Rights shall have the right, at
such holder's option, to require the Company to repurchase all or a portion of
such holder's Initial Common Shares or Repricing Rights at a price equal to (i)
for each Common Share with an associated Repricing Right, the greater of (A)
130% of the Purchase Price and (B) the sum of (I) the Purchase Price and (II)
the product of (x) the Repricing Rate of the Repricing Right on the date of such
holder's delivery of a notice of repurchase and (y) the last reported sale price
of the Common Stock (as reported by Bloomberg) on the date of such holder's
delivery of a notice of repurchase, (ii) for each Repricing Right without the
associated Common Share, the product of (x) the Repricing Rate of the Repricing
Right on the date such holder's delivery of a notice of repurchase and (y) the
last reported sale price of the Common Stock (as reported by Bloomberg) on the
date of such holder's delivery of a notice of repurchase and (iii) for each
Common Share without an associated Repricing Right, 130% of the Purchase Price
(the "REPURCHASE PRICE").
b. "Major Transaction". A "MAJOR TRANSACTION" shall be deemed
to have occurred at such time as any of the following events:
(i) the consolidation, merger or other business combination of
the Company with or into another person (other than (A) a
consolidation, merger or other business combination in which holders of
the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the
voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent
if other than a corporation) of such surviving entity or entities, or
(B) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or substantially all of
the Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 40% of the outstanding shares of
Common Stock.
c. "Triggering Event". A "TRIGGERING EVENT" shall be deemed to
have occurred at such time as any of the following events:
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(i) the failure of the Registration Statement to be declared
effective by the SEC on or prior to the 210th day after the Closing
Date;
(ii) during the Effectiveness Period, the effectiveness of the
Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the
holder of the Securities for sale of the Registrable Securities (as
defined in the Registration Rights Agreement) in accordance with the
terms of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of ten Trading Days in aggregate
(excluding any "blackout" periods permitted by the terms of the
Registration Rights Agreement);
(iii) suspension from listing or delisting of the Common Stock
from The Nasdaq SmallCap Market or on any Subsequent Market for a
period of five consecutive days, unless such delisting is due to the
Company having the Common Stock relisted on a Subsequent Market within
such five day period;
(iv) the Company's notice to any holder of Repricing Rights,
including by way of public announcement, at any time, of its intention
not to comply or inability to comply with proper requests for exercise
of any Repricing Rights into shares of Common Stock;
(v) the Company's failure to deliver Repricing Common Shares
within ten days of an Exercise Date or to pay the amount due in respect
of a Buy-In within ten days after notice of such Buy-In is delivered to
the Company;
(vi) the Company is not required to issue any Repricing Common
Shares due to the provisions of Section 12(n) or the Company is
otherwise unable to issue Repricing Common Shares upon delivery of an
Exercise Notice for any reason;
(vii) if the Company is required to obtain stockholder
approval of the issuance of the Securities pursuant to Section 4(j),
the Company's stockholders fail to approve the issuance of the
Repricing Common Shares within 135 days of a Proxy Statement Trigger
Date;
(viii) the Company breaches any representation, warranty,
covenant or other material term or condition of any Transaction
Document or the Irrevocable Transfer Agent Instructions or any other
agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated thereby or hereby, and
such breach, if curable, continues for a period of at least ten days
after written notice thereof to the Company; or
(ix) the commencement by or against the Company or a
Subsidiary of voluntary or involuntary (which involuntary proceeding is
not dismissed within 30 days of the filing thereof) case or proceeding
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar proceeding.
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<PAGE> 29
d. Mechanics of Repurchase at Option of Buyer Upon Major Transaction.
No sooner than 15 days nor later than 10 days prior to the consummation of a
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice thereof via facsimile and
overnight courier (a "NOTICE OF MAJOR TRANSACTION") to each holder of Initial
Common Shares, the Repricing Common Shares and the Repricing Rights. At any time
after receipt of a Notice of Major Transaction (or, in the event a Notice of
Major Transaction is not delivered at least 10 days prior to a Major
Transaction, at any time on or after the date which is 10 days prior to a Major
Transaction), any holder of the Securities then outstanding may require the
Company to repurchase all or a portion of the holder's Initial Common Shares,
Repricing Common Shares or Repricing Rights then outstanding by delivering
written notice thereof via facsimile and overnight courier (a "NOTICE OF
REPURCHASE AT OPTION OF BUYER UPON MAJOR TRANSACTION") to the Company, which
Notice of Repurchase at Option of Buyer Upon Major Transaction shall indicate
(i) the number of such securities that such holder is submitting for repurchase,
and (ii) the applicable Repurchase Price, as calculated pursuant to Section
7(a).
e. Mechanics of Repurchase at Option of Buyer Upon Triggering Event.
Within one (1) day after the occurrence of a Triggering Event, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "NOTICE OF
TRIGGERING EVENT") to each holder of Initial Common Shares, Repricing Common
Shares or Repricing Rights. At any time after the earlier of a holder's receipt
of a Notice of Triggering Event and such holder becoming aware of a Triggering
Event, but in no event later than fifteen (15) Business Days after a holder's
receipt of a Notice of Triggering Event, any holder of such securities then
outstanding may require the Company to repurchase all or a portion of the
holder's Initial Common Shares, Repricing Common Shares or Repricing Rights then
outstanding by delivering written notice thereof via facsimile and overnight
courier (a "NOTICE OF REPURCHASE AT OPTION OF BUYER UPON TRIGGERING EVENT") to
the Company, which Notice of Repurchase at Option of Buyer Upon Triggering Event
shall indicate (i) the number of such securities that such holder is submitting
for repurchase, and (ii) the applicable Repurchase Price, as calculated pursuant
to Section 7(a).
f. Payment of Repurchase Price. Upon the Company's receipt of a
Notice(s) of Repurchase at Option of Buyer Upon Triggering Event or a Notice(s)
of Repurchase at Option of Buyer Upon Major Transaction from any holder of
Initial Common Shares, Repricing Common Shares or Repricing Rights, the Company
shall immediately notify each holder of Initial Common Shares, Repricing Common
Shares or Repricing Rights by facsimile of the Company's receipt of such
Notice(s) of Repurchase at Option of Buyer Upon Triggering Event or Notice(s) of
Repurchase at Option of Buyer Upon Major Transaction and each holder which has
sent such a notice shall promptly submit to the Company such holder's Stock
Certificates which such holder has elected to have repurchased. The Company
shall deliver the applicable Repurchase Price, in the case of a repurchase
pursuant to Section 7(e), to such holder within five (5) Business Days after the
Company's receipt of a Notice of Repurchase at Option of Buyer Upon Triggering
Event and, in the case of a repurchase pursuant to Section 7(d), the Company
shall deliver the applicable Repurchase Price immediately prior to the
consummation of the Major Transaction; provided that a holder's Stock
Certificates, if Initial Common Shares are being repurchased, shall
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<PAGE> 30
have been so delivered to the Company; provided further that if the Company is
unable to repurchase all of the Initial Common Shares or the Repricing Rights to
be repurchased, the Company shall repurchase an amount from each holder of such
securities being repurchased equal to such holder's pro-rata amount (based on
the number of such securities held by such holder relative to the total number
of such securities outstanding) of all such securities being repurchased. If the
Company shall fail to repurchase all of the Initial Common Shares or the
Repricing Rights submitted for repurchase, in addition to any remedy such holder
of such securities may have under this Agreement, the Warrants and the
Registration Rights Agreement, the applicable Repurchase Price payable in
respect of such unrepurchased Initial Common Shares or Repricing Rights, as the
case may be, shall bear interest at the lesser of (i) rate of 2.0% per month or
(ii) the highest lawful rate (prorated for partial months) until paid in full.
Until the Company pays such unpaid applicable Repurchase Price in full to a
holder of Initial Common Shares or Repricing Rights submitted for repurchase,
such holder shall have the option (the "VOID OPTIONAL REPURCHASE OPTION") to, in
lieu of repurchase, require the Company to promptly return to such holder(s) all
of such securities that were submitted for repurchase by such holder(s) under
this Section 7 and for which the applicable Repurchase Price has not been paid,
by sending written notice thereof to the Company via facsimile (the "VOID
OPTIONAL REPURCHASE NOTICE"). Upon the Company's receipt of such Void Optional
Repurchase Notice(s) prior to payment of the full applicable Repurchase Price to
such holder, (i) the Notice(s) of Repurchase at Option of Buyer Upon Triggering
Event or the Notice(s) of Repurchase at Option of Buyer Upon Major Transaction,
as the case may be, shall be null and void with respect to those securities
submitted for repurchase and for which the applicable Repurchase Price has not
been paid and (ii) the Company shall immediately return any Initial Common
Shares submitted to the Company by each holder for repurchase under this Section
7 and for which the applicable Repurchase Price has not been paid.
8. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Repricing Common Shares and the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon exercise of the Warrants or the
Repricing Right, as the case may be (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Initial Common Shares, the
Repricing Common Shares and the Warrant Shares for sale under the 1933 Act, all
such certificates shall bear the restrictive legend specified in Section 4(m) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section , and stop
transfer instructions to give effect to Section 2(f) (in the case of the Initial
Common Shares, the Repricing Common Shares and the Warrant Shares, prior to
registration of the Initial Common Shares, the Repricing Common Shares and the
Warrant Shares under the 1933 Act) will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way each Buyer's obligations and agreements set forth herein to comply with
all applicable
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<PAGE> 31
prospectus delivery requirements, if any, upon resale of the Securities. Unless
otherwise directed by a Buyer, within five Business Days after the Registration
Statement has been declared effective by the SEC, the Company shall cause its
transfer agent to deliver one or more certificates to each Buyer representing
the Initial Common Shares, the Repricing Common Shares and the Warrant Shares,
if any, held by such Buyer against delivery of the certificates then held by
such Buyer, which certificates shall be in such name and in such denominations
as specified by such Buyer and shall not bear any legends, and all other shares
of Common Stock issuable in respect of the Securities during such time as a
Registration Statement is effective shall be issued free of all restrictive
legends. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 8 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 8, that the Buyers shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
9. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Closing Date. The obligation of the Company hereunder to issue
and sell the Initial Common Shares and the related Repricing Rights and Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement (in a form mutually agreeable to the
Company and the Buyers) and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Initial Common Shares and the related Repricing
Rights and Warrants being purchased by such Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall
be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date, which need only be true and correct
as at such date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants and agreements
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Closing Date.
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<PAGE> 32
(iv) The Company shall have consummated its offering of
$125,000,000 (U.S.) principal amount of high yield notes at a yield not
in excess of 12 1/2 % per annum pursuant to Rule 144A under the 1933
Act, without any accompanying offering of Common Stock warrants (the
"HIGH YIELD OFFERING").
(v) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents relating to the
issuance of any of the Securities.
10. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Common Shares and the related Repricing Rights and Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(i) The Company shall have executed and delivered each of the
Transaction Documents to such Buyer.
(ii) The Common Stock shall be authorized for quotation on The
Nasdaq SmallCap Market or on a Subsequent Market, trading in the Common
Stock shall not have been suspended by the SEC, The Nasdaq Stock Market
or any Subsequent Market, and all of the Initial Common Shares and the
Warrant Shares issuable upon exercise of the Warrants to be purchased
at the Closing shall be listed for trading on The Nasdaq SmallCap
Market or on a Subsequent Market.
(iii) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date, which need only be true and correct
as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants and agreements
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of
the Closing Date regarding the representation contained in Section 3(c)
above.
(iv) Such Buyer shall have received the opinion of Haynes and
Boone, LLP dated as of the Closing Date, in form, scope and substance
customary for a transaction of this type and satisfactory to such
Buyer.
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(v) The Company shall have executed and delivered to such
Buyer (i) the Stock Certificates (in such denominations as such Buyer
shall request) for the Initial Common Shares, and (ii) the Warrants
being purchased by such Buyer at the Initial Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "RESOLUTIONS").
(vii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the exercise of the Repricing Rights and
exercise of the Warrants, at least 5,857,144 shares of Common Stock.
(viii) The Irrevocable Transfer Agent Instructions, in the
form of Exhibit A attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing (or similar
instrument) of the Company and each Subsidiary in such corporation's
jurisdiction of incorporation issued by the Secretary of State (or
similarly authority) of such jurisdiction of incorporation as of a date
within ten days of the Closing Date.
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B)
certified copies of its Certificate of Incorporation and (C) By-laws,
each as in effect at the Closing.
(xi) The Company shall have delivered to such Buyer a
certified copy of its Certificate of Incorporation as certified by the
Secretary of State of the Company's jurisdiction of incorporation
within ten days of the Closing Date.
(xii) The Company shall have delivered to such Buyer copies of
proxy agreements, in a form reasonably acceptable to such Buyer,
executed by each executive officer and director of the Company pursuant
to which such persons agree to vote in favor of the matters described
in Section 4(j).
(xiii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by the
Transaction Documents as such Buyer or its counsel may reasonably
request.
(xiv) The Company shall have consummated the High Yield
Offering.
-33-
<PAGE> 34
(xv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents relating to the
issuance of any of the Securities.
11. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
forgoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), as incurred by any Indemnitee as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance, breach or enforcement of the Transaction
Documents, (d) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(e) the status of such Buyer or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
12. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives
-34-
<PAGE> 35
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein (including the Original Agreement), and the Transaction
Documents (inclusive of the schedules and exhibits thereto) contain the entire
understanding of the parties with respect to the matters covered herein and
therein. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the holders of at least one-half
(1/2) of the Securities (determined on an as exercised into Common Stock basis
at the time of such determination) held by holders or former holders of the
Initial Common Shares then outstanding, and no provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Securities then outstanding.
No consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents or holders of the Initial Common Shares, as the case may
be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:00 p.m. (New York time) on a
Business Day, (iii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 6:00 p.m. (New
-35-
<PAGE> 36
York time) on any date and earlier than 11:59 p.m. (New York time) on such date;
or (iv) upon receipt, when delivered by a reputable overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, LB#31
Dallas, Texas 75219
Telephone: 214-521-9955
Facsimile: 214-521-9960
Attention: President
and
Queen Sand Resources, Inc.
30 Metcalfe Street, Suite 620
Ottawa, Ontario, Canada K1P 5L4
Telephone: 613-230-7211
Facsimile: 613-230-6055
Attention: President
With a copy to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Telephone: 214-651-5553
Facsimile: 214-651-5940
Attention: William L. Boeing, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five days' prior written notice to the other
party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Initial Common Shares. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least two-thirds (2/3) of the
Initial Common Shares, Repricing Common Shares, Warrants, Warrant Shares and
-36-
<PAGE> 37
Repricing Rights (determined on an as exercised into Common Stock basis at the
time of such determination) held by holders or former holders of the Initial
Common Shares then outstanding, including by merger or consolidation. A Buyer
may not assign some or all of its rights hereunder without the consent of the
Company; provided, however, that a Buyer may assign some on all of its rights
hereunder to an affiliate or a fund under its common management, but any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
12(l), the representations, warranties, covenants and agreements of the parties
hereto, shall survive the Closings and issuances of the Repricing Common Shares.
Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this the Transaction Documents and the
consummation of the transactions contemplated thereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before July 7, 1998 due to a failure to
occur of a High Yield Offering or the Company's or such Buyer's failure to
satisfy the conditions set forth in Sections 9 and 10 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), any party
(with respect to a failure to occur of a High Yield Offering) or the
nonbreaching party (with respect to other Closing conditions) shall have the
option to terminate this Agreement on the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 12(l), the Company shall be
obligated to reimburse the non-breaching Buyers for such Buyers' expenses
(including attorneys' fees and expenses) in connection with negotiating and
preparing the Transaction Documents and consummating the transactions
contemplated thereby.
-37-
<PAGE> 38
m. Placement Agent. The Company acknowledges that it has
engaged Jesup & Lamont Securities Corporation as placement agent in connection
with the sale of the Securities, which placement agent may have formally or
informally engaged other agents on its behalf. The Company shall be responsible
for the payment of any placement agent's fees or brokers commissions relating to
or arising out of the transactions contemplated hereby. The Company shall pay,
and hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses), as incurred,
arising in connection with any such claim.
n. Limitation on Number of Common Shares. Notwithstanding any
other provision herein, the Company shall not be obligated to issue any shares
of Common Stock upon exercise of the Repricing Rights if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon exercise of the Repricing Rights (the "EXCHANGE CAP")
without breaching the Company's obligations under the rules or regulations of
The Nasdaq Stock Market, Inc. (taking into account the number of Initial Common
Shares issued on the Closing Date, the Repricing Rights, Repricing Common Shares
previously issued, Warrants and Warrant Shares previously issued), except that
such limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by applicable rules and regulations of
The Nasdaq Stock Market, Inc. for issuances of Common Stock in excess of such
amount or (ii) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably
satisfactory to the holders of a majority of the Repricing Rights then
outstanding. Until such approval or written opinion is obtained, no holder of
Repricing Rights shall be issued, upon exercise of Repricing Rights, shares of
Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
Repricing Rights initially acquired by such Buyer pursuant to this Agreement and
the denominator of which is the aggregate amount of all the Repricing Rights
acquired by all Buyers pursuant to this Agreement (the "CAP ALLOCATION AMOUNT").
In the event that any Buyer shall sell or otherwise transfer any of such Buyer's
Repricing Rights, the transferee shall be allocated a pro rata portion of such
Buyer's Cap Allocation Amount. In the event that any holder of Repricing Rights
shall exercise all of such holder's Repricing Rights into a number of shares of
Common Stock which, in the aggregate, is less than such holder's Cap Allocation
Amount, then the difference between such holder's Cap Allocation Amount and the
number of shares of Common Stock actually issued to such holder pursuant to the
exercise of Repricing Rights shall be allocated to the respective Cap Allocation
Amounts of the remaining holders of Repricing Rights on a pro rata basis in
proportion to the number of Repricing Rights then held by each such holder.
Nothing contained in this Section shall relieve any obligations of the Company
pursuant to Section 4(j) and 7(c)(vii).
o. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
-38-
<PAGE> 39
p. Remedies. Each Buyer and each holder of Initial Common
Shares, Repricing Common Shares or Repricing Rights shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
q. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers pursuant to the Transaction Documents or the
Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
* * * * * *
-39-
<PAGE> 40
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
QUEEN SAND RESOURCES, INC.
By: /s/ BRUCE I. BENN
---------------------------------
Name: Bruce I. Benn
Its: Executive Vice
President
JNC OPPORTUNITY FUND LTD.
By: /s/ NEIL CHAU
---------------------------------
Name: Neil Chau
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, LLC
By: /s/ NEIL CHAU
--------------------------
Name: Neil Chau
Title:
CSM GMBH
By: /s/ MARTIN HUFF
---------------------------------
Its: Managing Director
Name: Martin Huff
<PAGE> 41
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
AGGREGATE PURCHASE PRICE OF SUCH COMMON STOCK: $
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 8th day of July, 1998.
THOMSON KERNAGHAN & CO., LTD., as Agent
for the entities listed on the annexed
schedule
---------------------------------------
365 Bay Street
Toronto, Ontario M5H 2V2
- ------------------------------
Address Printed Name of Subscriber
THOMSON KERNAGHAN & CO., LTD.
By: /s/ MARK VALENTINE
-----------------------------------
Telecopier No.: (410) 307-8055 (Signature of Authorized Person)
Mark Valentine, Vice President and
Director
---------------------------------------
Toronto, Ontario Printed Name and Title
- ------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its
behalf.
QUEEN SAND RESOURCES, INC.
By: /s/ BRUCE I. BENN
----------------------------
Title: Executive Vice President
Date: July 8, 1998
<PAGE> 42
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
PURCHASE PRICE OF
INVESTOR NAME ADDRESS INITIAL COMMON SHARES
- ----------------------------- ----------------------------------------- ------------------------------------
<S> <C> <C>
JNC Opportunity Fund Ltd. c/o Encore Capital Management, LLC $12,150,000 (U.S.)
12007 Sunrise Valley Drive, Suite 460
Reston, Virginia 20191
Attn: Managing Member
Facsimile: (703) 476-7711
Robinson Silverman Pearce Aronsohn
& Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Eric L. Cohen
Facsimile: (212) 541-1432
Diversified Strategies Fun c/o.Encore Capital Management, LLC $350,000 (U.S.)
12007 Sunrise Valley Drive, Suite 460
Reston, Virginia 20191
Attn: Managing Member
Facsimile: (703) 476-7711
Robinson Silverman Pearce Aronsohn
& Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Eric L. Cohen
Facsimile: (212) 541-1432
CSM GmbH Kaiser Friedrich Promenade 93-95 $4,000,000 (U.S.)
B61348 Bad Homburg
Germany
Attn:: Martin Huff, Managing
Director
Facsimile (011) 49 6172-924925
Sovereign Partners L.P. c/o Thomson Kernaghan & Co. $4,000,000 (U.S.)
365 Bay Street
Toronto, Ontario
Canada M5H 2V2
Attn: Mark Valentine
Facsimile: (416) 860-6140
Krieger & Prager
319 Fifth Avenue, 3rd Floor
New York, New York 10016
Attn: Samuel M. Krieger
Facsimile: (212) 213-2077
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
PURCHASE PRICE OF
INVESTOR NAME ADDRESS INITIAL COMMON SHARES
<S> <C> <C>
- --------------------------- --------------------------------- -----------------------
Dominion Capital Fund Ltd. c/o Thomson Kernaghan & Co. $2,500,000 (U.S.)
365 Bay Street
Toronto, Ontario
Canada M5H 2V2
Attn: Mark Valentine
Facsimile: (416) 860-6140
Krieger & Prager
319 Fifth Avenue, 3rd Floor
New York, New York 10016
Attn: Samuel M. Krieger
Facsimile: (212) 213-2077
Canadian Advantage, L.P. c/o Thomson Kernaghan & Co. $500,000 (U.S.)
365 Bay Street
Toronto, Ontario
Canada M5H 2V2
Attn: Mark Valentine
Facsimile: (416) 860-6140
Krieger & Prager
319 Fifth Avenue, 3rd Floor
New York, New York 10016
Attn: Samuel M. Krieger
Facsimile: (212) 213-2077
Advantage (Bermuda) Fund, c/o Thomson Kernaghan & Co. $500,000 (U.S.)
Ltd. 365 Bay Street
Toronto, Ontario
Canada M5H 2V2
Attn: Mark Valentine
Facsimile: (416) 860-6140
Krieger & Prager
319 Fifth Avenue, 3rd Floor
New York, New York 10016
Attn: Samuel M. Krieger
Facsimile: (212) 213-2077
LIST OF SCHEDULES
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(o) Liens
SCHEDULE 3(u) Certain Transactions
</TABLE>
<PAGE> 44
LIST OF EXHIBITS
EXHIBIT A Form of Irrevocable Transfer Agent Instructions
EXHIBIT B Form of Exercise Notice
EXHIBIT C Form of Warrant
EXHIBIT D Form of Registration Rights Agreement
<PAGE> 45
EXHIBIT B
QUEEN SAND RESOURCES, INC.
REPRICING RIGHT EXERCISE NOTICE
Reference is made to the Amended and Restated Securities Purchase Agreement,
dated as of July 8, 1998, by and among Queen Sand Resources, Inc. (the
"COMPANY") and the buyers named therein (the "SECURITIES PURCHASE AGREEMENT").
In accordance with and pursuant to the Securities Purchase Agreement, the
undersigned hereby elects to exercise the number of Repricing Rights (as defined
in the Securities Purchase Agreement) of the Company, indicated below for shares
of Common Stock, par value $.0015 per share (the "COMMON STOCK"), of the
Company, by tendering this Repricing Right Exercise Notice. Capitalized terms
used and not otherwise defined in this Notice that are defined in the Securities
Purchase Agreement shall have the respective meanings set forth in the
Securities Purchase Agreement.
<TABLE>
<CAPTION>
<S> <C>
Date of Exercise: ----------------------------------------------
Number of Repricing Rights to be exercised: ----------------------------------------------
PLEASE CONFIRM THE FOLLOWING INFORMATION:
Repricing Price: ----------------------------------------------
Market Price: ----------------------------------------------
Number of shares of Common Stock to be issued: ----------------------------------------------
PLEASE ISSUE THE COMMON STOCK FOR WHICH THE REPRICING RIGHTS ARE BEING EXERCISED
IN THE FOLLOWING NAME AND TO THE FOLLOWING ADDRESS:
Issue to: ----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Facsimile Number: ----------------------------------------------
Authorization: ----------------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
Dated: ----------------------------------------------
Account Number:
(if electronic book entry transfer): ----------------------------------------------
Transaction Code Number
(if electronic book entry transfer): ----------------------------------------------
</TABLE>
<PAGE> 46
Thomson Kernaghan & Co., Ltd. is executing this Agreement as Agent for
the following investors:
<TABLE>
<S> <C>
Sovereign Partners, LP $ 4,000,000
c/o Southridge Capital Management LLC
Executive Pavilion - Suite 01
90 Grove Street
Ridgefield, Connecticut 06877
Dominion Capital Fund Ltd. $ 2,500,000
c/o Citco Fund Service Ltd.
Bahamas Financial Center
P.O.B. CB 13146
Nassau, Bahamas
Canadian Advantage L.P. $ 500,000
c/o Thomson Kernaghan & Co., Ltd.
365 Bay Street
Suite 1000 - 10th Floor
Toronto, Ontario M5H 2V2
Advantage (Bermuda) Fund, Ltd. $ 500,000
Washington Mall
3rd Floor
Church Street
Hamilton, Bermuda
</TABLE>
Each investor expressly disclaims beneficial ownership in any
securities owned by any other investor for whom Thomson Kernaghan & Co., Ltd.
is acting as agent.
<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of July 8, 1998, among Queen Sand Resources, Inc., a Delaware
corporation (the "Company"), the subsidiary guarantors set forth on the
signature page hereof (the "Subsidiary Guarantors") and Nesbitt Burns Securities
Inc., CIBC Oppenheimer Corp. and Societe Generale Securities Corp.
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated June
30, 1998, among the Company, the Subsidiary Guarantors and the Initial
Purchasers (the "Purchase Agreement"), which provides for the issuance and sale
by the Company to the Initial Purchasers of $125,000,000 aggregate principal
amount of 12 1/2% Senior Notes due 2008 (the "Securities") (the "Initial
Placement"). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company and the Subsidiary Guarantors have agreed to
provide to the Initial Purchasers and their respective direct and indirect
transferees, among other things, the registration rights for the Securities set
forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following defined terms shall have the
following meanings:
"Affiliate" of any specified person means any other person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blocking Notice" means written notice from the Company that
(i) an amendment or supplement to the Exchange Offer Registration Statement, or
a distribution of Securities under a Shelf Registration Statement, as
applicable, would require the public disclosure of material non-public
information concerning any transaction or negotiation involving the Company or
any of its affiliates that, in the Company's judgment, exercised reasonably and
in good faith, would materially interfere with such transaction or negotiations,
or (ii) such amendment or supplement would otherwise require premature
disclosure of non-public information that, in the Company's judgment, exercised
reasonably and in good faith, would adversely affect or otherwise be detrimental
to the Company.
"Blocking Period" means the period of time beginning with the
receipt by the Holders of a Blocking Notice and ending on the earliest to occur
of (x) 30 days from the receipt by the Holders of a Blocking Notice, (y) the
date upon which the transactions or negotiations that
<PAGE> 2
are the subject of the Blocking Notice have been publicly disclosed or
terminated and (z) the receipt by the Holders of a Blocking Termination Notice
or a Shelf Blocking Termination Notice, as applicable.
"Blocking Termination Notice" is defined in Section 2(e)
hereof.
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 1 year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement or any Blocking
Period.
"Exchange Offer Registration Statement" means a registration
statement on an appropriate form under the Securities Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Initial Purchasers) which is a broker-dealer, electing to exchange Securities
acquired for its own account as a result of market-making activities or other
trading activities, for New Securities.
"Holder" means any holder of the Transfer Restricted
Securities.
"Indenture" means the Indenture relating to the Securities
dated as of July 1, 1998, among the Company, the Subsidiary Guarantors and the
Trustee, pursuant to which the Securities and the New Securities are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering.
2
<PAGE> 3
"New Securities" means the 12 1/2% Series B Senior Notes due
2008 of the Company, to be issued pursuant to the Exchange Offer.
"Offering Memorandum" has the meaning set forth in the
Purchase Agreement.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like principal amount of the New Securities, including the Subsidiary Guarantees
of the Subsidiary Guarantors.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Transfer
Restricted Securities, in each case including the subsidiary guarantees of the
Subsidiary Guarantors, pursuant to the provisions of this Agreement, amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Shelf Blocking Termination Notice" has the meaning set forth
in Section 3(d).
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Transfer Restricted Securities on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference or
deemed to be incorporated by reference therein.
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"Transfer Restricted Security" means a Security or a New
Security until the earlier to occur of (i) the date on which such Security has
been exchanged by a person other than a broker-dealer for a New Security in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of a Security for a New Security, the date on which such New Security is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Security has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Securities Act.
"Trustee" means the trustee with respect to the Securities
under the Indenture.
"Underwriter" means any underwriter of Securities in
connection with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange.
(a) Unless the Registered Exchange Offer shall not be
permissible under applicable law or Commission policy, the Company and the
Subsidiary Guarantors shall use their best efforts to (i) file with the
Commission, within 60 days following the Closing Date, the Exchange Offer
Registration Statement and (ii) to use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be declared effective by the Commission
as soon as practicable thereafter, but in no event later than 135 days after the
Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall promptly commence the
Registered Exchange Offer, it being the objective of such Registered Exchange
Offer to enable each Holder electing to exchange Securities for New Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of the Securities Act, acquires the New Securities in the ordinary course of
such Holder's business and has no arrangements with any person to participate in
the distribution of the New Securities) to trade such New Securities from and
after their receipt without any limitations or restrictions under the Securities
Act and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the
Company and the Subsidiary Guarantors shall:
(i) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and
related documents as may be necessary;
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<PAGE> 5
(ii) keep the Registered Exchange Offer open for not less than
30 days and not more than 45 days after the date notice thereof is
mailed to the Holders (or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an office or agency located in the Borough of
Manhattan, The City of New York; and
(iv) comply in all material respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company and the Subsidiary Guarantors shall:
(i) accept for exchange all Securities properly tendered and
not validly withdrawn pursuant to and in accordance with the Registered
Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
to each Holder of Securities, New Securities equal in principal amount
to the Securities of such Holder so accepted for exchange.
(e) The Initial Purchasers and the Company and the Subsidiary
Guarantors acknowledge that, pursuant to interpretations by the Commission's
staff of Section 5 of the Securities Act, and in the absence of an applicable
exemption therefrom, each Exchanging Dealer is required to deliver a Prospectus
in connection with a sale of any New Securities received by such Exchanging
Dealer pursuant to the Registered Exchange Offer in exchange for Securities
acquired for its own account as a result of market-making activities or other
trading activities. Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, and in Annex C
hereto in the underwriting or plan of distribution section of the
Prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Securities Act
during the Exchange Offer Registration Period for delivery by
Exchanging Dealers in connection with sales of New Securities received
pursuant to the Registered Exchange Offer, as contemplated by Section
5(h) below; provided, that following the thirtieth day after the
consummation of the Exchange Offer, the Company shall not be required
to amend or supplement the Exchange Offer
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<PAGE> 6
Registration Statement during the occurrence of a Blocking Period. The
Company shall promptly send each Holder written notice (a "Blocking
Termination Notice") at the earliest of such times as (x) the
transactions or negotiations that are the subject of the Blocking
Period Notice that triggered the Blocking Period have been publicly
disclosed or terminated, (y) such non-public information has been
publicly disclosed or (z) counsel to the Company has determined that
such disclosure is not required due to subsequent events.
(f) In the event that any Initial Purchaser determines that it
is not eligible to participate in the Registered Exchange Offer with respect to
the exchange of Securities constituting any portion of an unsold allotment, at
the request of such Initial Purchaser, the Company shall issue and deliver to
such Initial Purchaser, or the party purchasing New Securities registered under
a Shelf Registration Statement as contemplated by Section 3 hereof from such
Initial Purchaser, in exchange for such Securities, a like principal amount of
New Securities registered for resale under the Shelf Registration Statement. The
Company shall seek to cause the CUSIP Service Bureau to issue the same CUSIP
number for such New Securities as for New Securities issued pursuant to the
Registered Exchange Offer.
3. Shelf Registration. If, (i) any change in law or applicable
interpretations thereof by the Commission's staff do not permit the Company and
the Subsidiary Guarantors to effect the Registered Exchange Offer as
contemplated by Section 2 hereof, or (ii) for any other reason the Exchange
Offer Registration Statement has not been filed with the Commission within 60
days of the Closing Date, or (iii) for any other reason the Registered Exchange
Offer is not consummated within 175 days of the Closing Date, or (iv) if any
Holder of Transfer Restricted Securities shall notify the Company on or prior to
the 20th business day following the consummation of the Exchange Offer (A) that
such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
New Securities acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Securities
acquired directly from the Company or one of its affiliates (it being understood
that, for purposes of this Section 3, (x) the requirement that a Initial
Purchaser deliver a Prospectus containing the information required by Items 507
and/or 508 of Regulation S-B (or Regulation S-K, if then applicable) under the
Securities Act in connection with sales of New Securities acquired in exchange
for such Securities shall result in such New Securities being not "freely
tradeable" but (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of New Securities acquired in the Registered
Exchange Offer in exchange for Securities acquired as a result of market-making
activities or other trading activities shall not result in such New Securities
being not "freely tradeable"), the following provisions shall apply:
(a) The Company and the Subsidiary Guarantors shall as
promptly as practicable (but in no event more than 30 days after so required
pursuant to this Section 3 or after the Company receives notice under (iv)
above), file with the Commission and thereafter shall use its reasonable best
efforts to cause to be declared effective by the Commission under
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<PAGE> 7
the Securities Act a Shelf Registration Statement relating to the offer and sale
of Transfer Restricted Securities by the Holders from time to time in accordance
with the methods of distribution elected by such Holders and set forth in such
Shelf Registration Statement; provided, that with respect to New Securities
received by a Initial Purchaser in exchange for Securities constituting any
portion of an unsold allotment, the Company may, if permitted by current
interpretations by the Commission's staff, file a post-effective amendment to
the Exchange Offer Registration Statement containing the information required by
Regulation S-B (or Regulation S-K, if then applicable) Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) Each of the Company and the Subsidiary Guarantors shall
use its reasonable best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Transfer Restricted Securities covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period").
(c) No Holder may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement unless
such Holder furnishes to the Company in writing, within 10 days after receipt of
a request therefor, such information as the Company may reasonably request for
use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein, and each such Holder agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading. No Holder shall be entitled to Liquidated Damages
pursuant to this Agreement unless and until such Holder shall have provided all
such reasonably requested information.
(d) Upon the receipt by the Holders of a Blocking Notice from
the Company, the Holders shall cease any distribution of Transfer Restricted
Securities under a Shelf Registration Statement for the Blocking Period. The
Company shall promptly send each Holder written notice (a "Shelf Blocking
Termination Notice") at the earliest such time as (x) the transactions or
negotiations that are the subject of the Blocking Notice have been publicly
disclosed or terminated, (y) such non-public information has been publicly
disclosed or (a) counsel to the Company has determined that such disclosure is
not required due to subsequent events. In no event may a Blocking Notice be
delivered (i) prior to the consummation of the Exchange Offer or (ii) within the
first 60 days after the effectiveness of the Exchange Offer Registration
Statement or Shelf Registration Statement and, thereafter, only two Blocking
Notices may be delivered pursuant to this Agreement during any period of 360
consecutive days.
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<PAGE> 8
4. Liquidated Damages.
(a) The Company, the Subsidiary Guarantors and the Initial
Purchasers agree that the Holders of Securities will suffer damages if the
Company and the Subsidiary Guarantors fail to fulfill their obligations pursuant
to Section 2 or Section 3 hereof and that it would not be possible to ascertain
the extent of such damages. Accordingly, in the event of such failure by the
Company and the Subsidiary Guarantors to fulfill such obligations, each of the
Company and the Subsidiary Guarantors hereby agrees to pay liquidated damages
("Liquidated Damages") to each Holder of Securities under the circumstances and
to the extent set forth below:
(i) if either the Exchange Offer Registration Statement or, if
applicable, the Shelf Registration Statement has not been filed with
the Commission on or prior to the applicable date specified for such
filing; or
(ii) if either the Exchange Offer Registration Statement or,
if applicable, the Shelf Registration Statement is not declared
effective by the Commission on or prior to the applicable date
specified for such effectiveness; or
(iii) if an Exchange Offer Registration Statement becomes
effective, but the Company fails to consummate the Exchange Offer
within 60 days of the date specified for effectiveness of such
registration statement; or
(iv) if the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective by the Commission but
thereafter ceases to be effective or usable in connection with resales
of Securities during the Effectiveness Period without being succeeded
within 15 business days by a post-effective amendment or supplement to
such Registration Statement that cures such failure and that has been
declared effective;
(any of the foregoing, a "Registration Default"), then the Company (which
obligation is guaranteed by the Subsidiary Guarantors pursuant to the Indenture)
shall pay Liquidated Damages to each Holder from and including the date on which
any such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. Liquidated Damages will accrue at a rate
of 0.5% per annum during the 90-day period immediately following the occurrence
of any Registration Default and shall increase by 0.25% per annum at the end of
each subsequent 90-day period, but in no event shall such rate exceed 1.50% per
annum. Following the cure of any Registration Default relating to any
Securities, the accrual of Liquidated Damages with respect to such Registration
Default will cease. A Registration Default under clause (i) above shall be cured
on the date that the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, is filed with the Commission, a
Registration Default under clause (ii) above shall be cured on the date that the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
applicable, is declared effective by the Commission; a Registration Default
under clause (iii) above shall be cured on the earlier of the date (A) the
Exchange Offer is consummated or (B) the Company delivers a notice to the
Holders that it will file a Shelf Registration Statement Securities; and a
Registration Default
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<PAGE> 9
under clause (iv) above shall be cured on the earlier (A) the date the Shelf
Registration Statement is declared effective and is usable or (B) the
Effectiveness Period expires.
(b) The Company shall notify the Trustee within one business
day after each and every date on which a Registration Default first occurs.
Accrued and unpaid Liquidated Damages shall be paid by the Company to the
Holders by wire transfer of immediately available funds to the accounts
specified by them or by mailing checks to their registered addresses if no such
accounts have been specified on each interest payment date provided in the
Indenture (whether or not any interest is then payable on the Securities) and on
each payment date provided in the Indenture, including, without limitation,
whether upon redemption, maturity (by acceleration or otherwise), purchase upon
a change of control or purchase upon a sale of assets. Each obligation to pay
Liquidated Damages with respect to any Registration Default shall be deemed to
commence accruing on the date of such Registration Default and to cease accruing
when such Registration Default has been cured. In no event shall the Company pay
Liquidated Damages in excess of the applicable maximum weekly amount set forth
above, regardless of whether one or multiple Registration Defaults exist.
(c) The parties hereto agree that the Liquidated Damages
provided for in this Section 4 constitute a reasonable estimate of the damages
that will be suffered by Holders by reason of the failure to file the Exchange
Offer Registration Statement or the Shelf Registration Statement, the failure of
the Exchange Offer Registration Statement or the Shelf Registration Statement to
be declared effective, the failure to consummate the Exchange Offer or the
failure of the Shelf Registration Statement to remain effective, as the case may
be, in accordance with this Agreement.
5. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to the Initial Purchasers, prior
to the filing thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each amendment
thereof and each amendment or supplement, if any, to the Prospectus included
therein and shall use its best efforts to reflect in each such document, when so
filed with the Commission, such comments as the Initial Purchasers and counsel
for the Initial Purchasers reasonably may propose.
(b) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part thereof and
any amendment or supplement thereto complies in all material respects with the
Securities Act and the rules and regulations thereunder, (ii) any Registration
Statement and any amendment thereto does not, when it becomes effective, contain
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
and (iii) any Prospectus forming part of any Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a
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<PAGE> 10
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchasers and,
in the case of a Shelf Registration Statement, the Holders of Transfer
Restricted Securities covered thereby, and, if requested by the Initial
Purchasers or any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective; and
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the Prospectus
included therein or for additional information.
(2) The Company shall advise the Initial Purchasers and, in
the case of a Shelf Registration Statement, the Holders of Transfer
Restricted Securities covered thereby, and, in the case of an Exchange
Offer Registration Statement, any Exchanging Dealer which has provided
in writing to the Company a telephone or facsimile number and address
for notices, and, if requested by you or any such Holder or Exchanging
Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the securities included therein for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that requires the
making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein
are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes
have been made).
(d) The Company shall use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one
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<PAGE> 11
copy of such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offering and sale of the securities
covered by the Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer which
so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein, and, if the Exchanging Dealer so requests in writing, all exhibits
(including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus included in such Exchange Offer Registration Statement
and any amendment or supplement thereto as such Exchanging Dealer may reasonably
request for delivery by such Exchanging Dealer in connection with a sale of New
Securities received by it pursuant to the Registered Exchange Offer; and the
Company consents to the use of the Prospectus or any amendment or supplement
thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the Company shall
register or qualify or cooperate with the Holders of Transfer Restricted
Securities included therein and their respective counsel in connection with the
registration or qualification of such securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holders reasonably
request in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the securities
covered by such Registration Statement; provided, however, that the Company will
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
(j) The Company shall cooperate with the Holders of Transfer
Restricted Securities to facilitate the timely preparation and delivery of
certificates representing Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as Holders may request prior to sales of securities
pursuant to such Registration Statement.
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(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective amendment
to any Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that, as thereafter delivered
to Initial Purchasers of the securities included therein, the Prospectus will
not include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Securities
or New Securities, as the case may be, registered under such Registration
Statement, and provide the trustee with printed certificates for such Securities
or New Securities, in a form eligible for deposit with The Depository Trust
Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act.
(n) The Company shall cause the Indenture or the New
Securities Indenture, as the case may be, to be qualified under the Trust
Indenture Act in a timely manner.
(o) The Company may require each Holder of securities to be
sold pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the holder and the distribution of such securities as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters and Majority Holders
reasonably agree should be included therein and shall make all required filings
of such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Securities, and in connection therewith,
if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable than those set forth
in Section 7 (or such other provisions and procedures acceptable to the Majority
Holders and the Managing Underwriters, if any) with respect to all parties to be
indemnified pursuant to Section 7 from Holders of Securities to the Company.
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(r) In the case of any Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by the Holders of
securities to be registered thereunder, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter such
financial and other books and records of the Company reasonably requested by any
such Holder in connection with such Registration Statement subsequent to the
filing thereof and prior to its effectiveness; (ii) cause the Company's
officers, directors and employees to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant or agent
in connection with any such Registration Statement as is customary for similar
due diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the time
of delivery of such information shall be kept confidential by the Holders or any
such underwriter, attorney, accountant or agent, unless such disclosure is made
in connection with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party without an
accompanying obligation of confidentiality; (iii) make such representations and
warranties to the Holders of securities registered thereunder and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement; (iv)
obtain opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters; (v) obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement), registered thereunder and the
underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings; and (vi) deliver such documents and certificates as may
be reasonably requested by the Majority Holders and the Managing Underwriters,
if any, including those to evidence compliance with Section 5(k) and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company. The foregoing actions set forth in clauses (iii),
(iv), (v) and (vi) of this Section 5(r) shall be performed at (A) the
effectiveness of such Registration Statement and each post-effective amendment
thereto and (B) each closing under any underwriting or similar agreement as and
to the extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement,
the Company shall (i) make reasonably available for inspection by such Initial
Purchaser, and any attorney, accountant or other agent retained by such Initial
Purchaser, such financial and other information and books and records of the
Company reasonably requested by any such Holder in connection with such
Registration Statement subsequent to the filing thereof and prior to its
effectiveness; and (ii) cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by such Initial Purchaser
or any such attorney, accountant or agent in
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<PAGE> 14
connection with any such Registration Statement as is customary for similar due
diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the time
of delivery of such information shall be kept confidential by such Initial
Purchaser or any such attorney, accountant or agent, unless such disclosure is
made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality.
(t) Each Holder shall (i) furnish each broker through whom it
offers the Securities such number of copies of the Prospectus included in the
Shelf Registration Statement and any supplements thereto or amendments thereof
which such broker may require and (ii) inform such broker (a) as to the
aggregate principal amount of Securities offered through such broker; (b) that
such Securities are part of a distribution and (c) that such broker may,
therefore, be subject to the provisions of Regulation M under the Exchange Act
until such time as such broker has completed the sale of all such Securities
pursuant to the Shelf Registration Statement.
(u) Each Holder shall promptly furnish to each person
(including each broker) to who such Holder has delivered copies of the
Prospectus included in a Shelf Registration Statement an equivalent number of
copies of any amendment thereof or supplement thereto.
(v) Each Holder shall, promptly upon completion of the
distribution of the Securities pursuant to the Shelf Registration Statement,
report to the Company such completion.
(w) Upon request from the Company, each Holder shall advise
the Company of such information as the Company may reasonably request in order
to supplement the Prospectus included in a Shelf Registration Statement in
accordance with the rules and regulations of the Commission.
(x) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 2(e) or 3(d) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 2(e) or 3(d)
thereof, or until it is advised in writing (the "Advice") by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Securities
that was current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period, regarding the effectiveness of such
Registration Statement set forth in Section 2 or 3 hereof, as applicable, shall
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 2(e) or 3(d) hereof to and
including the date when each selling Holder covered by such Registration
Statement shall
14
<PAGE> 15
have received the copies of the supplemented or amended Prospectus contemplated
by Section 2(e) or 3(d) hereof or shall have received the Advice.
(y) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
consummation thereof, a written representation to the Company and the Guarantors
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Securities to be issued in the
Exchange Offer and (C) it is acquiring the New Securities in its ordinary course
of business. In addition, all such Holders of Transfer Restricted Securities
shall otherwise cooperate in the Company's preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any broker-dealer and any such
Holder using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in
the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction should be covered by an effective registration statement containing
the selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-B (or Regulation S-K, if then applicable) if the
resales are of New Securities obtained by such Holder in exchange for Securities
acquired by such Holder directly from the Company.
6. Registration Expenses. The Company and the Subsidiary
Guarantors shall bear all fees and expenses incurred in connection with the
performance of or compliance with their obligations under this Agreement and, in
the event of any Shelf Registration Statement, will reimburse the Holders for
the reasonable fees and disbursements (but not to exceed $10,000 in the
aggregate) of one firm or counsel designated by the Majority Holders to act as
counsel for the Holders in connection therewith, and, in the case of any
Exchange Offer Registration Statement, will reimburse the Initial Purchasers for
the reasonable fees and disbursements (but not to exceed $10,000 in the
aggregate) of counsel acting in connection therewith. Notwithstanding the
foregoing, the Holders of any Securities or New Securities being registered on
the Shelf Registration Statement shall pay all agency or brokerage fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Securities or New Securities and the fees and disbursements of any
counsel retained by such Holders other that counsel referred to above.
15
<PAGE> 16
7. Indemnification and Contribution.
(a) In connection with any Registration Statement, the Company
and the Subsidiary Guarantors agree to indemnify and hold harmless each Holder
of securities covered thereby (including each Initial Purchaser and, with
respect to any Prospectus delivery as contemplated in Section 5(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of either
the Securities Act or the Exchange Act from and against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, or in any
Prospectus, or in any amendment thereof or supplement thereto, 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 agree to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company and the Subsidiary Guarantors will not be
liable in any case to the extent that any such loss, claim, damage or liability
arises out of or any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company or any underwriter by or on
behalf of any such Holder specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
The Company and the Subsidiary Guarantors also agree to
indemnify or contribute to Losses of, as provided in Section 7(d), any
underwriters of Securities registered under a Shelf Registration Statement,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Initial
Purchaser and the selling Holders provided in this Section 7(a) and shall, if
requested by any Holder, enter into an underwriting agreement reflecting such
agreement, as provided in Section 5(q) hereof.
(b) Each Holder of securities covered by any Registration
Statement (including each Initial Purchaser and, with respect to any Prospectus
delivery as contemplated in Section 5(h) hereof, each Exchanging Dealer)
severally agrees to indemnify and hold harmless (i) the Company and the
Subsidiary Guarantors, their respective directors, officers, employees and
agents each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company and the Subsidiary Guarantors to each such Holder, but only
with reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
16
<PAGE> 17
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying person") in writing; but the failure so to notify the indemnifying
party (i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice and reasonably satisfactory to the indemnified party at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below).
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party shall
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding. An indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
person agrees to indemnify any indemnified party from and against any loss or
liability by reason of such settlement or judgment to the extent of such
indemnifying party's indemnification obligation hereunder.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating
17
<PAGE> 18
or defending same) (collectively "Losses") to which such indemnified party may
be subject in such proportion as is appropriate to reflect the relative benefits
received by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Initial Placement and the Registration
Statement which resulted in such Losses; provided, however, that in no case
shall any Initial Purchaser or any subsequent Holder of any Security or New
Security be responsible, in the aggregate, for any amount in excess of the
purchase discount or commission applicable to such Security, or in the case of a
New Security, applicable to the Security which was exchangeable into such New
Security, as set forth on the cover page of the Final Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Registration Statement which resulted in such Losses. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Subsidiary Guarantors
shall be deemed to be equal to the sum of (x) the total net proceeds from the
Initial Placement (before deducting expenses) as set forth on the cover page of
the Offering Memorandum and (y) the total amount of additional interest which
the Company was not required to pay as a result of registering the securities
covered by the Registration Statement which resulted in such Losses. Benefits
received by the Initial Purchasers shall be deemed to be equal to the total
purchase discounts and commissions as set forth on the cover page of the
Offering Memorandum, and benefits received by any other Holders shall be deemed
to be equal to the value of receiving Securities or New Securities, as
applicable, registered under the Securities Act. Benefits received by any
underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person who controls a Holder within the meaning of either
the Securities Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such Holder,
and each person who controls the Company within the meaning of either the Act or
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 7 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or the
18
<PAGE> 19
Subsidiary Guarantors or any of their respective officers, directors or
controlling persons referred to in Section 7 hereof, and will survive the sale
by a Holder of securities covered by a Registration Statement.
8. Underwritten Offerings. No Holder may participate in any
underwritten registration hereunder unless such Holder (i) agrees to sell such
Holder's Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangement entered
into in connection therewith and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements. The
investment bankers and managers selected for such underwriting must be
reasonably satisfactory to the Company.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company and the Subsidiary
Guarantors have not entered into, as of the date hereof, and the Company and the
Subsidiary Guarantors shall not, after the date of this Agreement, enter into,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Transfer Restricted Securities; provided, that, with respect
to any matter that directly or indirectly affects the rights of any Initial
Purchaser hereunder, the Company shall obtain the written consent of each such
Initial Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the provisions hereof
with respect to a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of securities being sold rather than
registered under such Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given
by such holder to the Company in accordance with the
provisions of this Section 9(c), which address initially is,
with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy
in like manner to Salomon Brothers Inc;
19
<PAGE> 20
(2) if to you, the Initial Purchasers initially at
the respective addresses set forth in the Purchase Agreement;
and
(3) if to the Company, or any Subsidiary Guarantor
initially at its address set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered, five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
The Initial Purchasers or the Company or any Subsidiary Guarantor by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
(d) Successors 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 the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Securities and/or New Securities;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Securities from a Holder.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State, without regard to principles
of conflicts of law.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its
20
<PAGE> 21
Affiliates (other than subsequent Holders of Securities or New Securities if
such subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Securities or New Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
10. Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect tot he registration rights granted by the Company with
respect to the Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signatures appear on next page]
21
<PAGE> 22
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
QUEEN SAND RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
-------------------------------------
Name: Edward J. Munden
Title: Chief Executive Officer, President
and Chairman of the Board
QUEEN SAND RESOURCES, INC.,
a Nevada corporation
By: /s/ EDWARD J. MUNDEN
-------------------------------------
Name: Edward J. Munden
Title: President
CORRIDA RESOURCES, INC.
By: /s/ EDWARD J. MUNDEN
-------------------------------------
Name: Edward J. Munden
Title: President
NORTHLAND OPERATING CO.
By: /s/ EDWARD J. MUNDEN
-------------------------------------
Name: Edward J. Munden
Title: President
22
<PAGE> 23
Accepted in New York, New York
July 8, 1998
NESBITT BURNS SECURITIES INC.
CIBC OPPENHEIMER CORP.
SOCIETE GENERALE SECURITIES CORP.
BY: NESBITT BURNS SECURITIES INC.
By: /s/ MARK A. ROCHE
-------------------------------------
Name: Mark A. Roche
Title: Managing Director
23
<PAGE> 24
[FORM OF OFFERING MEMORANDUM DESCRIPTION OF
REGISTRATION AGREEMENT]
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company, the Subsidiary Guarantors and the Initial Purchasers have
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") pursuant to which the Company and the Subsidiary Guarantors have
agreed, for the benefit of the holders of the Notes, (i) to file with the
Commission, within 60 days following the Closing, a Registration Statement (the
"Exchange Offer Registration Statement") under the Securities Act relating to
the Exchange Offer pursuant to which Exchange Notes would be offered in exchange
for the then outstanding Notes tendered at the option of the holders thereof and
(ii) to use its reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective as soon as practicable thereafter, but in no event
later than 120 days after the Closing. The Company has further agreed to
commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has become effective, hold the offer open for at least 20 business
days, and exchange the Exchange Notes for all Notes validly tendered and not
withdrawn before the expiration of the Exchange Offer.
Under existing Commission interpretations set forth in no-action
letters issued to third parties, the Exchange Notes would in general be freely
transferable after the Exchange Offer without further registration under the
Securities Act, except that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of Exchange Notes. The Commission
has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Notes) by delivery
of the prospectus contained in the Exchange Offer Registration Statement. Under
the Registration Rights Agreement, the Company and the Subsidiary Guarantors are
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes. The Exchange Offer Registration Statement will be
kept effective for a period of up to 90 days after the Exchange Offer has been
consummated in order to permit resales of Exchange Notes acquired by
broker-dealers in after-market transactions. Each holder of Notes (other than
certain specified holders) who wishes to exchange such Notes for Exchange Notes
in the Exchange Offer will be required to represent that any Exchange Notes to
be received by it will be acquired in the ordinary course of its business, that
at the time of the commencement of the Exchange Offer it is not participating,
does not intend to participate and has no arrangement or understanding with any
person to participate in, the distribution (within the meaning of the Securities
Act) of the Exchange Notes and that it is not an Affiliate of the Company.
However, if (i) on or before the date of consummation of the Exchange
Offer, the existing Commission interpretations are changed such that the
Exchange Notes would not in general be
<PAGE> 25
2
freely transferable in such manner on such date or (ii) the Exchange Offer has
not been consummated within the 175 days following the Closing, the Company
will, in lieu of effecting the registration of the Exchange Notes, use its
reasonable best efforts to cause a registration statement under the Securities
Act relating to a shelf registration of the Notes for resale by holders (the
"Resale Registration") to become effective and to remain effective for a period
of up to two years after the effective date of such registration statement. The
Company will, in the event of the Resale Registration, provide to the holders of
the Notes copies of the prospectus that is a part of the registration statement
filed in connection with the Resale Registration, notify such holders when the
Resale Registration for the Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Notes. A holder of
Notes that sells such Notes pursuant to the Resale Registration generally would
be required to be named as a selling securityholder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
that are applicable to such a holder (including certain indemnification
obligations).
Although the Company intends to file the registration statement
previously described, there can be no assurance that the registration statement
will be filed, or if filed, that it will become effective. In the event that (i)
the Company has not filed the registration statement relating to the Exchange
Offer within 60 days following the Closing, (ii) such registration statement has
not become effective within 120 days following the Closing, (iii) the Exchange
Offer has not been consummated within 30 business days after the effectiveness
deadline for the Exchange Offer Registration Statement, (iv) the Company has not
filed the resale registration statement within 30 days of the date on which the
obligation to file such resale registration statement arose, (v) the resale
registration statement has not been declared effective within 105 days of the
date on which the obligation to file such resale registration statement arose or
(vi) any registration statement required by the Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective (except
as specifically permitted therein) without being succeeded within 30 days by an
additional registration statement filed and declared effective (any such event
referred to in clauses (i) through (vi), the "Registration Default"), interest
("Liquidated Damages") will accrue on the Notes and the Exchange Notes (in
addition to the stated interest on the Notes and the Exchange Notes) from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured.
Liquidated Damages will accrue at a rate of 0.5% per annum during the 90-day
period immediately following the occurrence of any Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90-day period,
but in no event shall such rate exceed 1.50% per annum.
All accrued Liquidated Damages shall be paid to Holders in the same
manner in which payments of other interest are made pursuant to the Indenture.
See "Description of Notes -- General."
<PAGE> 26
3
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
The Notes and the Exchange Notes will be considered collectively to be
a single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and Offers to Purchase, and for
purposes of the Description of Notes (except under this "Exchange Offer;
Registration Rights") all references herein to the "Notes" shall be deemed to
refer collectively to the Notes and any Exchange Notes, unless the context
otherwise requires.
<PAGE> 27
ANNEX A
Each broker-dealer that receives New Securities for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration Date
(as defined herein) and ending on the close of business on the first anniversary
of the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 28
ANNEX B
Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. See "Plan of Distribution."
<PAGE> 29
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on the
first anniversary of the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 1 year after the Expiration Date, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
[If applicable, add information required by Regulation S-K
Items 507 and/or 508.]
<PAGE> 30
ANNEX D
Rider A
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CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
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Address:
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Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities, it represents that
the Securities to be exchanged for New Securities were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Securities; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 8, 1998, among Queen Sand Resources, Inc., a
Delaware corporation (the "Company"), and the undersigned buyers (each a
"Buyer" and collectively, the "Buyers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of June 25, 1998 among the Company and the Buyers, as
amended and restated by the Amended and Restated Securities Purchase Agreement,
dated as of July 8, 1998 (the "Purchase Agreement").
The Company and the Buyers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section
3(o).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.0015 per share.
"Effectiveness Date" means the 120th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 2
"Filing Date" means the 60th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Initial Common Shares" shall have the meaning set forth in
the Purchase Agreement.
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registration Delay Payments" shall have the meaning set forth
in Section 2(d).
"Registration Delay Payment Shares" shall have the meaning set
forth in Section 2(d).
"Registrable Securities" means (i) the Initial Common Shares,
the Registration Delay Payment Shares (if any) and the Warrant Shares and (ii)
the Repricing Common Shares; provided, however in order to account for the
fact that the number of Repricing Shares is determined in part upon the market
price of the Common Stock prior to the determination of the Repricing Rate,
Registrable Securities contemplated by clause (ii) above shall include (but not
be limited to) 5,357,144 shares of Common Stock. The Registration Statement to
be filed by the Company on the Filing Date shall cover 9,678,573 shares of
Common Stock. The Company shall be required to file additional Registration
Statements to the extent the sum of (i) the Initial Common Shares, the
Repricing Common Shares and the Warrant Shares and (ii) the Registration Delay
Payment Shares exceeds the number of shares of Common Stock initially
registered in accordance with the immediately prior sentence. The Company
shall have fifteen (15) days to
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<PAGE> 3
file such additional Registration Statements after notice of the requirement
thereof, which the Holders may give at such time when the number of shares
referenced in clauses (i) and (ii) above exceeds 85% of the number of shares of
Common Stock to be registered in a Registration Statement hereunder.
"Registration Statement" means the registration statement and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Repricing Common Shares" means the shares of Common Stock
issuable in respect of the Repricing Rights.
"Repricing Rights" shall have the meaning set forth in the
Purchase Agreement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders
(initially Robinson Silverman Pearce Aronsohn & Berman LLP), for which the
Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means collectively (i) the Common Stock purchase
warrants issued or issuable to the Buyers pursuant to the Purchase Agreement,
and (ii) the Common Stock purchase warrants issued or issuable to Jesup &
Lamont Securities Corporation or to any other broker, placement agent or other
Person performing similar services to the Company in connection with the
transactions contemplated by the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise in full of the Warrants.
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<PAGE> 4
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3 such registration shall be on another appropriate form in
accordance herewith). The Registration Statement shall state, to the extent
permitted by Rule 416 under the Securities Act, that it also covers such
indeterminate number of shares of Common Stock as may be required to effect
exercises of Repricing Rights and exercise of the Warrants, in each case to
prevent dilution resulting from stock splits, stock dividends or similar
events, or by reason of changes in the Repricing Rate in accordance with the
terms of the Purchase Agreement or by reason of changes in the Warrant Exercise
Price (as defined in the Warrants) in accordance with the terms of the
Warrants. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (the "Effectiveness Period"),
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is pursuant to a
Blackout Period permitted hereunder, required under applicable law or the
Company has filed a post-effective amendment to the Registration Statement and
the Commission has not declared it effective. The aggregate number of
Registrable Securities under a Registration Statement shall be allocated among
Holders pro rata based on the total number of Registrable Securities issued or
issuable as of the date such Registration Statement is declared effective by
the Commission.
(b) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an Underwritten Offering.
In such event, and, if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold
in an Underwritten Offering, the investment banker in interest that will
administer the offering will be selected by the Holders of a majority of the
Registrable Securities included in such offering upon consultation with the
Company. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided
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<PAGE> 5
in any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
(d) If (i) a Registration Statement covering all
Registrable Securities is not filed on or before the Filing Date, or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Securities Exchange Act
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed" or is not subject to further review; or (iii) a
Registration Statement covering all Registrable Securities is not declared
effective by the Commission on or before the Effectiveness Date, or (iv) if,
after the Registration Statement has been declared effective by the Commission,
the Registration Statement is either not effective as to all Registrable
Securities throughout the Effectiveness Period or the Holders are not permitted
for any reason to make sales thereunder during such period, except that days
that a Registration Statement is not effective or unavailable as to all
Registrable Securities (1) because of a Blackout Period hereunder or (2)
because of changes required by the Holders in the Registration Statement with
respect to information relating to the Holders, including without limitation
changes to the plan of distribution (any such failure or breach being referred
to as an "Event," and for purposes of clauses (i) and (iii) the date on which
such Event occurs, or for purposes of clause (ii) the date on which such five
(5) day period is exceeded, being referred to as "Event Date"), then, in any
such case, as partial relief for the damages suffered therefrom by the Holders
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Holder an amount, in cash, as
liquidated damages and not as a penalty, on the Event Date, equal to 2.0% of
the aggregate Purchase Price paid by each Holder, and, on the first day of each
month following the Event Date until the triggering Event in cured, 2.0% of the
aggregate Purchase Price paid by each Holder, on a cumulative basis. The
payments to which a Holder shall be entitled pursuant to this Section are
referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be calculated on a cumulative basis and paid within five
Business Days of the Event Date and each monthly anniversary thereof. If the
Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of 2.0% per month
(or the maximum rate permitted by law), prorated for partial months, until paid
in full. If the Company fails to pay the Registration Delay Payments,
including any interest thereon, within 15 Business Days of the applicable
payment date, then the Holder entitled to such payments shall have the right at
any time, so long as the Company continues to fail to make such payments, to
require the Company, upon written notice, to immediately issue, in lieu of the
Registration Delay Payments, including any interest thereon, the number of
shares of Common Stock (the "Registration Delay Payment Shares") equal to the
quotient of (X) the sum of the Registration Delay Payments and all interest
accrued thereon, divided by (Y) the lowest Closing Bid Price on any Trading Day
during the period beginning on and including the date the Registration Delay
Payments were due and payable and ending on and including the date the Holder
delivers written notice to the Company of its election to receive shares of
Common Stock in lieu of the Registration Delay Payments.
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<PAGE> 6
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to
the Filing Date, a Registration Statement on Form S-3 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3
such registration shall be on another appropriate form in accordance herewith,
or, in connection with an Underwritten Offering hereunder, such other form
available to the Company and reasonably acceptable to the Holders) which shall
contain the "Plan of Distribution" attached hereto as Annex A (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such underwriters,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than five (5)
days prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Business Day following the day
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(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) if at any time any
of the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the
Holders of a majority in interest of the Registrable Securities to be sold in
connection with an Underwritten Offering, (i) (subject to a permitted Blackout
Period) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as such managing
underwriters and such Holders reasonably agree should be included therein, and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
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<PAGE> 8
(g) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
a Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least two Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by
Section 3(c)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will contain 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, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on the Nasdaq
SmallCap Market ("NASDAQ") and any other Subsequent Market, if any, on which
similar securities issued by the Company are then listed as and when required
pursuant to the Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by any
managing underwriters and the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the disposition of
such
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<PAGE> 9
Registrable Securities, and is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to the Company
and updates thereof addressed to each Holder and each such underwriter, in
form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of
delivery of any Registrable Securities sold pursuant thereto, use its best
reasonable efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such Underwritten Offering); and (v)
deliver such documents and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities being sold, their Special
Counsel and any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 3(l)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that any information that
is determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by such Person;
or (iii) such information becomes available to such Person from a source other
than the Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of
the Commission.
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<PAGE> 10
(o) The Company may require each selling Holder to
furnish to the Company such information regarding the distribution of such
Registrable Securities and the beneficial ownership of Common Stock held by
such Holder as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration, without any
penalty otherwise provided by this Agreement, the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
If there is a significant business opportunity (including but
not limited to the acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
other similar transaction) available to the Company which the Board reasonably
determines not to be in the Company's best interest to disclose, then the
Company may suspend the right of the Holders to sell Registrable Securities
under a Registration Statement for a period not to exceed 20 Business Days
during the Effectiveness Period (the "Blackout Period").
4. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
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<PAGE> 11
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the NASDAQ and any Subsequent Market on which the Common Stock is then
listed for trading, and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of its counsel or,
if its counsel fails to timely make such determinations, counsel for the
Holders (which will not be subject to the restrictions set forth below) in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses of the Company, (iv) fees and disbursements of counsel
for the Company and Special Counsel for the Holders (which, in the case of the
Special Counsel, will not exceed $7,500), (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering
pursuant to the terms hereof, the Company shall be responsible for all costs,
fees and expenses in connection therewith, except for the fees and
disbursements of the Underwriters (including any underwriting commissions and
discounts) and their legal counsel and accountants. By way of illustration
which is not intended to diminish from the provisions of Section 4(a), the
Holders shall not be responsible for, and the Company shall be required to pay
the fees or disbursements incurred by the Company (including by its legal
counsel and accountants) in connection with, the preparation and filing of a
Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the
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<PAGE> 12
fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for
inclusion in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus, or in
any amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the "Indemnifying
Party") in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it
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<PAGE> 13
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party; provided,
however, that the Indemnifying Party shall be responsible for the fees and
expenses of one counsel for all such Indemnified Parties unless an Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent all such Indemnified Parties, in
which case such Indemnified Party shall be permitted, at the expense of the
Indemnifying Party, to employ separate counsel). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied
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<PAGE> 14
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in Schedule 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the right to request the Company to register any securities of the Company
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement
(so long as the
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<PAGE> 15
Company is in compliance with its registration obligations hereunder and the
restrictions relating to registration of securities set forth in the Purchaser
Agreement this sentence will not operate to restrict the Company).
(c) No Piggyback on Registrations. Except as and to the
extent specified in Schedule 6(c) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there
is not an effective Registration Statement covering all of the Registrable
Securities and the Underlying Shares, the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send to each holder of
Registrable Securities written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such holder requests to be
registered; provided, however, that the Company shall not be required to
register any Registrable Securities pursuant to this Section 7(d) that are
eligible for sale pursuant to Rule 144(k) of the Commission. Any registration
statement referred to in this Section 6(d) may be withdrawn at any time by the
Company. The piggy-back rights of the Holders pursuant to this Section 6(d)
shall only be available at times when there is not then an effective
Registration Statement which the Holders are permitted to utilize and that
covers the resale of all Registrable Securities then outstanding.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least two-thirds of the then
outstanding Registrable Securities; provided, however, that, for the purposes
of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:00 p.m. (New York time) on a
Business Day, (iii) the
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<PAGE> 16
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:00 p.m. (New York time) on any date and earlier than 11:59
p.m. (New York time) on such date; or (iv) upon receipt, when delivered by a
reputable overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, LB#31
Dallas, Texas 75219
Facsimile: 214-521-9960
Attention: Robert P. Lindsay
and
Queen Sand Resources, Inc.
30 Metcalfe Street, Suite 620
Ottawa, Ontario, Canada K1P 5L4
Facsimile: 613-230-6055
Attention: Edward J. Munden
With copies to: Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Facsimile: 214-651-5940
Attention: William L. Boeing
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers attached to the Purchase Agreement.
Each party shall provide five days' prior written notice to the other
party of any change in address or facsimile number.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company or
such other address as may be designated in
writing hereafter, in the same manner, by
such Person.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights
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<PAGE> 17
hereunder in the manner and to the Persons as permitted under this Agreement
and the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of
each Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by each Holder to any Affiliate of such
Holder, any other Holder or Affiliate of any other Holder if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities
Act and applicable state securities laws, (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the
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<PAGE> 18
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or its Affiliates (other than any Holder or transferees or
successors or assigns thereof if such Holder is deemed to be an Affiliate
solely by reason of its holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
QUEEN SAND RESOURCES, INC.
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Name:
Its:
JNC OPPORTUNITY FUND LTD.
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Name:
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, LLC
By: /s/ AUTHORIZED SIGNATORY
-----------------------------
Name:
Title:
CSM GMBH
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Its:
Name:
<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
QUEEN SAND RESOURCES, INC.
By: /s/ BRUCE I. BENN
----------------------------------
Name: Bruce I. Benn
Title: Executive Vice President
THOMSON KERNAGHAN & CO, LTD., AS AGENT
By: /S/ MARK VALENTINE
----------------------------------
Name: Mark Valentine
Title: Vice President and Director
<PAGE> 21
Thomson Kernaghan & Co., Ltd. is executing this Agreement as Agent for
the following investors:
<TABLE>
<S> <C>
Sovereign Partners, LP $ 4,000,000
c/o Southridge Capital Management LLC
Executive Pavilion - Suite 01
90 Grove Street
Ridgefield, Connecticut 06877
Dominion Capital Fund Ltd. $ 2,500,000
c/o Citco Fund Service Ltd.
Bahamas Financial Center
P.O.B. CB 13146
Nassau, Bahamas
Canadian Advantage L.P. $ 500,000
c/o Thomson Kernaghan & Co., Ltd.
365 Bay Street
Suite 1000 - 10th Floor
Toronto, Ontario M5H 2V2
Advantage (Bermuda) Fund, Ltd. $ 500,000
Washington Mall
3rd Floor
Church Street
Hamilton, Bermuda
</TABLE>
Each investor expressly disclaims beneficial ownership in any
securities owned by any other investor for whom Thomson Kernaghan & Co., Ltd.
is acting as agent.
<PAGE> 22
Annex A
PLAN OF DISTRIBUTION
The Selling Stockholders, their pledgees, donees, transferees or other
successors-in-interest, may, from time to time, sell all or a portion of the
shares of Common Stock being registered hereunder (the "Shares") in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders by one or more of the following methods, without limitation: (a)
block trades in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of the
applicable exchange, (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (e) privately negotiated transactions,
(f) short sales, (g) a combination of any such methods of sale and (h) any
other method permitted pursuant to applicable law.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
Shares in connection therewith or in settlement of securities loans. If the
Selling Stockholders engage in such transactions, the applicable conversion
price may be affected. From time to time the Selling Stockholders may pledge
their Shares pursuant to the margin provisions of its customer agreements with
its brokers. Upon a default by the Selling Stockholders, the broker may offer
and sell the pledged Shares from time to time.
In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate in such
sales. Brokers or dealers may receive commissions or discounts from the
Selling Stockholders (or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be negotiated
which are not expected to exceed those customary in the types of transactions
involved. Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such Shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Stockholder, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer commitment to the Selling Stockholders.
Broker-dealers who acquire Shares as principal may thereafter resell such
Shares from time to time in transactions (which may involve block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above. The Selling Stockholders may also sell the
Shares in accordance with Rule 144 under the Securities Act, rather than
pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by
<PAGE> 23
such broker-dealers or agents and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements of one counsel
(not to exceed $7,500) to the Selling Stockholders. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
[such other disclosure as may be required
pursuant to applicable law]
