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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.).
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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 Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx, 1290 Avenue of
the Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, 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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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 0000 Xxx) 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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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 0000 Xxx) 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
0000 Xxx) 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 xxxx 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 xxxx 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 xxxx 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 xxxx 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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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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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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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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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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(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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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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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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(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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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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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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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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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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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 0000 Xxx) 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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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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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 Xxxxxx and
Xxxxx, 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.
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(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-
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
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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.
0000 Xxx Xxxx, Xxxxx 000, XX#00
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President
and
Queen Sand Resources, Inc.
00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President
With a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. 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-
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-
38
m. Placement Agent. The Company acknowledges that it has
engaged Jesup & Xxxxxx 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-
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.
* * * * * *
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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/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Its: Executive Vice
President
JNC OPPORTUNITY FUND LTD.
By: /s/ XXXX XXXX
---------------------------------
Name: Xxxx Xxxx
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, LLC
By: /s/ XXXX XXXX
--------------------------
Name: Xxxx Xxxx
Title:
CSM GMBH
By: /s/ XXXXXX XXXX
---------------------------------
Its: Managing Director
Name: Xxxxxx Xxxx
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
---------------------------------------
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
------------------------------
Address Printed Name of Subscriber
THOMSON KERNAGHAN & CO., LTD.
By: /s/ XXXX XXXXXXXXX
-----------------------------------
Telecopier No.: (000) 000-0000 (Signature of Authorized Person)
Xxxx Xxxxxxxxx, Vice President and
Director
---------------------------------------
Xxxxxxx, Xxxxxxx 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/ XXXXX X. XXXX
----------------------------
Title: Executive Vice President
Date: July 8, 1998
42
SCHEDULE OF BUYERS
PURCHASE PRICE OF
INVESTOR NAME ADDRESS INITIAL COMMON SHARES
----------------------------- ----------------------------------------- ------------------------------------
JNC Opportunity Fund Ltd. c/o Encore Capital Management, LLC $12,150,000 (U.S.)
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Managing Member
Facsimile: (000) 000-0000
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
Diversified Strategies Fun c/o.Encore Capital Management, LLC $350,000 (U.S.)
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Managing Member
Facsimile: (000) 000-0000
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
CSM GmbH Xxxxxx Xxxxxxxxx Promenade 93-95 $4,000,000 (U.S.)
X00000 Xxx Xxxxxxx
Xxxxxxx
Attn:: Xxxxxx Xxxx, Managing
Director
Facsimile (000) 00 0000-000000
Sovereign Partners L.P. c/o Thomson Kernaghan & Co. $4,000,000 (U.S.)
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Xxxxxxx & Prager
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
43
PURCHASE PRICE OF
INVESTOR NAME ADDRESS INITIAL COMMON SHARES
--------------------------- --------------------------------- -----------------------
Dominion Capital Fund Ltd. c/o Thomson Kernaghan & Co. $2,500,000 (U.S.)
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Xxxxxxx & Prager
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Canadian Advantage, L.P. c/o Thomson Kernaghan & Co. $500,000 (U.S.)
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Xxxxxxx & Prager
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Advantage (Bermuda) Fund, c/o Thomson Kernaghan & Co. $500,000 (U.S.)
Ltd. 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Xxxxxxx & Prager
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
LIST OF SCHEDULES
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(o) Liens
SCHEDULE 3(u) Certain Transactions
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
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.
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): ----------------------------------------------
46
Thomson Kernaghan & Co., Ltd. is executing this Agreement as Agent for
the following investors:
Sovereign Partners, LP $ 4,000,000
c/o Southridge Capital Management LLC
Executive Xxxxxxxx - Xxxxx 00
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.
000 Xxx Xxxxxx
Xxxxx 0000 - 10th Floor
Toronto, Ontario M5H 2V2
Advantage (Bermuda) Fund, Ltd. $ 500,000
Washington Mall
0xx Xxxxx
Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
Each investor expressly disclaims beneficial ownership in any
securities owned by any other investor for whom Thomson Kernaghan & Co., Ltd.
is acting as agent.
