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Date: August 3, 2000
To: Talon I LLC
Attention: LJM2 Co-Investment, L.P.
From: Harrier I LLC
Re: Equity Swap Transaction
Dear Sir/Madam:
The purpose of this letter (this "Confirmation") is to confirm the terms and
conditions of the transaction entered into between Harrier I LLC ("Party A") and
Talon I LLC ("Party B") on the Trade Date specified below (the "Transaction").
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of April 18, 2000, as amended and supplemented from time to
time (the "Agreement") between Party A and Party B. All provisions contained in
the Agreement govern this Confirmation except as expressly provided below.
The definitions and provisions contained in the 2000 ISDA Definitions (the "ISDA
Definitions") and the 1996 ISDA Equity Derivatives Definitions (the "Equity
Derivative Definitions") (as published by the International Swaps and
Derivatives Association, Inc.) and any subsequent amendment thereto are
incorporated into this Confirmation. In the event of any inconsistency between
the ISDA Definitions and the Equity Derivative Definitions, the Equity
Derivative Definitions will govern. In the event of any inconsistency between
the ISDA Definitions, the Equity Derivative Definitions and this Confirmation,
this Confirmation will govern.
1. The terms of the Transaction to which this Confirmation relates are as
follows:
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General Terms:
Trade Date: August 3, 2000
Effective Date: August 3, 2000
Termination Date: The earlier of August 3, 2003 or any day
on which a Notice is sent designating an
amount of Shares that, when added to the
amounts of Shares designated in all other
Notices, equals 5,760,000.
Shares: Queen Sand Resources, Inc. Series A
Convertible Preferred Stock (each Share
convertible to one common share) (ticker
symbol: QSRI)
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Exchange: NASDAQ
Related Exchange: The exchange or quotation systems, if any,
on which options or futures contracts on
the Shares are traded or quoted, and as
may be selected from time to time by the
Calculation Agent
Calculation Agent: Party A
Business Days: Houston
Business Day Convention: Modified Following
Equity Amounts:
Equity Amount Payer. Party A
Number of Shares: The amount of Shares designated in a
Notice, provided that in no event shall
the aggregate amount of all Shares
designated in all Notices exceed
5,760,000.
Initial Equity Notional Amount: USD 518,400
Equity Notional Amount: (Number of Shares) X (Initial Price)
Equity Notional Reset: Inapplicable
Equity Payment Dates: Three Currency Business Days following the
Valuation Date
Type of Return: Price Return
Initial Price: Notwithstanding Section 7.9 of the Equity
Derivative Definitions, the Initial Price
shall be USD .09 for the first Valuation
Date and each subsequent Valuation Date.
Final Price: The closing price per Share shall equal
the closing price per common share of
Queen Sand Resources, Inc. quoted by the
Exchange.
Valuation Time: As of the close of trading on the Exchange
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Valuation Date: The (i) Termination Date and (ii) each
date specified as such in a written notice
from either party to the other party with
respect to a designated Number of Shares
specified in the notice (the "Notice").
For the avoidance of doubt, if the
Termination Date is August 3, 2003, a
Notice shall be sent from each party to
the other party on the Termination Date
that designates a Number of Shares equal
to 5,760,000 less all Shares previously
designated by either party in all prior
Notices.
Equity Amount: "Equity Amount" means, in respect of each
Equity Payment Date, an amount determined
by the Calculation Agent as of each
Valuation Date to which the Equity Payment
Date relates equal to:
(Equity Notional Amount) X (Rate of
Return)
where the "Rate of Return" is calculated
for each Valuation Date as follows:
(Final Price) - (Initial Price)
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(Initial Price)
Payment Obligations: In respect of each Equity Payment Date for
the Equity Amount Payer:
(i) if the Equity Amount
determined by the
Calculation Agent in
relation to Party A is
a positive number, then
Party A will pay to
Party B the Equity
Amount on that Equity
Payment Date; and
(ii) if the Equity Amount
determined by the
Calculation Agent in
relation to Party A is
a negative number, then
Party B will pay to
Party A the absolute
value of the Equity
Amount on the Equity
Payment Date.
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
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Extraordinary Events:
Consequence of Merger Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or
Insolvency: Cancellation and Payment
2. Account and Notice Details:
Address for Notices to Party A: Harrier I LLC
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Corporate Treasury
Telephone: (713) 853-3353
Fax: (713) 646-3422
Address for Notices to Party B: Talon I LLC
c/o LJM2 Co-Investment, LP.
333 Clay Street. State 1203
Houston, TX 77002
Attention; Andrew S. Fastow
Telephone: (713) 345-5867
Fax: (713) 646-8656
Account for Payments to Party A: Harrier I LLC
Citibank, N.A.
Acct. No.: 3042-6504
ABA No.: 021000089
Account for Payments to Party B: Talon I LLC Cash Collateral Account
Wilmington Trust Company
Acct. No.: 51419-0
ABA No: 031100092
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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
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Harrier I LLC
By: Enron Corp., its managing member
By:
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Name:
Title:
Date Executed:
Confirmed effective as of the date first above:
Talon I LLC
By: LJM2 CO-INVESTMENT. L.P.,
its Servicer
By: LJM2 Capital Management, L.P.,
its general partner
By: LJM2 Capital Management, LLC, its general partner
By:
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Name:
Title:
Date Executed:
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