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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
DECEMBER 24, 1997
QUEEN SAND RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE 0-21179 75-2615565
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
3500 OAK LAWN
SUITE 380, LB #31
DALLAS, TEXAS 75219-4398
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 521-9959
NO CHANGE
(FORMER NAME OR FORMER ADDRESS, IF CHANGE SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
General. On December 24, 1997, the transaction (the "Transaction")
contemplated under the Securities Purchase Agreement, dated December 22, 1997
(the "Purchase Agreement") among Queen Sand Resources, Inc., a Delaware
corporation (the "Company"), and certain institutional investors named therein
(the "Purchasers") was consummated.
Pursuant to the Transaction, the Company has issued an aggregate of
10,000 shares of Series C Convertible Preferred Stock, par value $0.01 per
share (the "Series C Preferred Stock") to the Purchasers and warrants to
purchase an aggregate of 340,138 shares of common stock, par value $0.0015 per
share (the "Common Stock"), of the Company (the "Warrants") to the Purchasers
in exchange for aggregate cash consideration of $10,000,000. In addition, the
Company issued 400 shares of Series C Preferred Stock to Palisades Holdings,
Inc. in exchange for its services as the placement agent for the Transaction.
In connection with the purchase by the Purchasers of the Series C
Preferred Stock and the Warrants, the Company has agreed to file a registration
statement within ninety (90) days and the Company has granted to the Purchasers
certain registration rights with respect to the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock and the shares of Common Stock
issuable upon exercise of the Warrants.
Description of the Purchase Agreement. The following summary of the
material provisions of the Purchase Agreement is not intended to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of such agreement, a copy of which is filed as an exhibit to this
Current Report on Form 8-K.
Purchase of Series C Preferred Stock and Warrants. Pursuant
to the Purchase Agreement, the Purchasers purchased 10,000 shares of Series C
Preferred Stock and the Warrants in exchange for the payment to the Company of
an aggregate of $10,000,000 cash.
Certain Representations and Warranties. Under the Purchase
Agreement, the Company has made certain representations and warranties to the
Purchasers regarding the Company and its business, including (i) due corporate
organization of the Company and its subsidiaries; (ii) the due authorization
and issuance of the Series C Preferred Stock and the Warrants and the shares of
Common Stock issuable upon conversion of the Series C Preferred Stock and the
exercise of the Warrants; (iii) the due authorization, execution, delivery and
performance by the Company of the Purchase Agreement and related agreements and
their enforceability; (iv) no conflict with or violation of the Company's
Certificate of Incorporation or bylaws, any of the Company's agreements and
applicable law; (v) the capital structure of the Company and its subsidiaries;
(vi) the accuracy of reports and other documents filed by the Company with the
Securities and Exchange Commission ("SEC"); (vii) disclosure of pending and
threatened litigation; (viii) payment of taxes; (ix) title to its real and
personal property; (x) adequacy of financial statements; (xi) accuracy of
permits and licenses; (xii) title of intellectual property; (xiii) no payments
owed to brokers and finders; (xiv) acknowledgment of dilution; (xv)
registration rights; (xvi) trading on NASDAQ; (xvii) no solicitation; (xviii)
no violation of the Foreign Corrupt Practices Act of 1977; (xix) no
integration; and (xx) eligibility to file registration statements on Form S-3.
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Under the Purchase Agreement, the Purchasers have made certain
representations and warranties to the Company, including (i) due organization;
(ii) the due authorization, execution, delivery and performance by the
Purchasers of the Purchase Agreement and its enforceability; and (iii) certain
investment representations.
Covenants. Pursuant to the Purchase Agreement, the Company
has covenanted to: (i) maintain its corporate existence; (ii) provide each
Purchaser copies of reports sent to the Company's stockholders; (iii) file a
Form D with respect to the Series C Preferred Stock and the Warrants and make
the necessary filings under state securities laws (iv) timely make filings
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and not terminate its status as an issuer required to file reports
under the Exchange Act; (v) reserve a sufficient number of shares of Common
Stock for issuance upon conversion of the Series C Preferred Stock and upon
exercise of the Warrants; (vi) use the proceeds from the sale of the Series C
Preferred Stock for general corporate purposes only in the ordinary course of
its business; (vii) take necessary acts to designate for quotation the shares
of Common Stock issued upon conversion of the Series C Preferred Stock and upon
exercise of the Warrants on the NASDAQ Small Cap Market and to maintain the
designation and quotation of such shares; (viii) not use any Purchaser's name
in any advertisement announcement or press release without the prior written
consent of such Purchaser; (ix) deliver irrevocable restrictions to the
Company's transfer agent regarding issuance of Common Stock upon conversion of
the Series C Preferred Stock or exercise of the Warrants; (x) abide by certain
limitations on the Company's ability to raise equity; (xi) provide each
Purchaser with an opportunity to purchase a proportionate share of securities
before the securities are offered or sold to third parties; and (xii) refrain
from entering into any arrangements that are adverse to the rights and
privileges of the holders of Series C Preferred Stock or the Warrants, while
any of the Series C Preferred Stock or Warrants are outstanding.
Description of Series C Preferred Stock. The Certificate of
Designation of the Series C Preferred Stock (the "Series C Certificate of
Designation") authorizes the issuance of up to 10,400 shares of Series C
Preferred Stock. The following description of the rights, preferences and
limitations of the Series C Preferred Stock is a summary only and is qualified
in its entirety by reference to the entire text of the Series C Certificate of
Designation which is an exhibit to this Current Report on Form 8-K.
Voting. The holders of shares of Series C Preferred Stock are
not entitled to vote with the holders of the Common Stock except as required by
law or as set forth below.
For so long as any shares of Series C Preferred Stock are outstanding,
the following matters will require the approval of the holders of at least
two-thirds of the then outstanding shares of Series C Preferred Stock, voting
together as a separate class:
(i) alter or change the rights, preferences or privileges
of the Series C Preferred Stock or any other capital stock of the
Company so as to affect adversely the Series C Preferred Stock;
(ii) create any new class or series of capital stock
having a preference over or ranking pari passu with the Series C
Preferred Stock as to redemption, the payment of dividends or
distribution of assets upon a Liquidation Event (as defined in the
Series C Certificate of Designation) or any other liquidation,
dissolution or winding up of the Company;
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(iii) increase the authorized number of shares of preferred
stock of the Company;
(iv) re-issue any shares of Series C Preferred Stock which
have been converted in accordance with the terms hereof;
(v) issue any Senior Securities (other than the Company's
Series B Participating Convertible Preferred Stock pursuant to the
terms of the Company's Series A Participating Convertible Preferred
Stock) or Pari Passu Securities (each, as defined in the Series C
Certificate of Designation); or
(vi) declare, pay or make any provision for any dividend
or distribution with respect to the Common Stock or any other capital
stock of the Company ranking junior to the Series C Preferred Stock as
to dividends or as to the distribution of assets upon liquidation,
dissolution or winding up of the Company.
In the event that the holders of at least two-thirds (2/3) of the then
outstanding shares of Series C Preferred Stock agree to allow the Company to
alter or change the rights, preferences or privileges of the shares of Series C
Preferred Stock pursuant to the terms hereof, or to waive any rights of the
holders hereunder, then the Company will deliver notice of such approved change
to the holders of the Series C Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and the Dissenting Holders
shall have the right for a period of thirty (30) days following such delivery
to convert their Series C Preferred Stock pursuant to the terms hereof as they
existed prior to such alteration or change, or to continue to hold such shares.
No such change shall be effective to the extent that, by its terms, it applies
to less than all of the holders of Series C Preferred Stock then outstanding.
Conversion. Subject to certain limitations set forth in the
Series C Certificate of Designation, a holder of shares of Series C Preferred
Stock has the right, at the holder's option, to convert all or a portion of its
shares into shares of Common Stock at any time. The number of shares of Common
Stock into which a share of Series C Preferred Stock may be converted will be
determined as of the conversion date according to a formula set forth in the
Series C Certificate of Designation. If the Company fails to deliver shares of
Common Stock to a holder following a conversion in accordance with the Series C
Certificate of Designation, then the Company will be liable to the holder for
certain cash default payments set forth in the Series C Certificate of
Designation.
On December 24, 2001, all shares of Series C Preferred Stock that are
then outstanding shall be automatically converted into the number of shares of
Common Stock determined in accordance with the formula set forth in the Series
C Certificate of Designation.
The Series C Certificate of Designation provides for customary
adjustments to the number of shares issuable upon conversion in the event of
certain dividends and distributions to holders of Common Stock, certain
reclassifications of the Common Stock, stock splits, combinations and mergers
and similar transactions and certain changes of control.
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Dividends. The holders of the shares of Series C Preferred
Stock are entitled to receive dividends, when, and as if declared by the Board
of Directors, out of funds legally available therefor, subject to the prior
payment of any accumulated and unpaid dividends to holders of Senior
Securities, but before payment of dividends to holders of Junior Securities (as
defined in the Series C Certificate of Designation), cumulative dividends on
each of the Series C Preferred Stock shares in an amount equal to the stated
value of such share multiplied by five percent (5%).
Liquidation. Upon the liquidation, dissolution or winding up
of the Company, the holders of the shares of Series C Preferred Stock, before
any distribution to the holders of Junior Securities, and after payment to
holders of Senior Securities, will be entitled to receive an amount equal to
the stated value of the Series C Preferred Stock (subject to ratable adjustment
in the event of reclassification of the Series C Preferred Stock or other
similar event) plus any accrued and unpaid dividends thereon ("Liquidation
Preference").
Optional Redemption. The Company has the right to redeem all
of the outstanding Series C Preferred Stock at a price equal to the Liquidation
Preference of the Series C Preferred Stock then held by the holder divided by
eighty percent (80%) ("Optional Redemption Price"), to the extent permitted by
law and so long as (i) the Company has sufficient cash available at the time;
(ii) the Company delivers prior written notice at least thirty trading days'
prior to the redemption, specifying both the date of the redemption and the
amount payable to the holder; and (iii) the Common Stock is actively traded on
the NASDAQ Stock Market, the New York Stock Exchange or the American Stock
Exchange.
Mandatory Redemption. The Series C Certificate of Designation
provides for mandatory redemption by the Company when a Mandatory Redemption
Event occurs (as defined in the Series C Preferred Stock Certificate of
Designation).
Upon the occurrence of a Mandatory Redemption Event, each holder of
Series C Preferred Stock will have the right to require the Company to redeem
its Series C Preferred Stock at a redemption price equal to the greater of (i)
the Liquidation Preference of the Series C Preferred Stock being redeemed
multiplied by one hundred and twenty five percent (125%) and (ii) an amount
determined by dividing the Liquidation Preference of the Series C Preferred
Stock being redeemed by the conversion price in effect on the mandatory
redemption dated and multiplying the resulting quotient by the average closing
bid price for the Common Stock on the five (5) trading days preceding the
mandatory redemption date ("Mandatory Redemption Price").
If the Mandatory Redemption Price is not paid within five business
days of the redemption date and the holder has tendered its Series C Preferred
Stock to the Company, the holder is entitled to interest thereon, from the
redemption date until the Mandatory Redemption Price has been paid in full.
If the Mandatory Redemption Price is not paid within ten business days
of the redemption date, each holder of shares of Series C Preferred Stock will
have the right, by written notice to the Company, to require the Company to
issue, in lieu of the Mandatory Redemption Price, the number of shares of
Common Stock of the Company equal to the Mandatory Redemption Price divided by
the conversion price in effect on such conversion date as specified by the
holder, with the conversion price to be reduced by one percent (1%) for each
day beyond the 10th business day in which the Company fails to pay the
Mandatory Redemption Price, but with the maximum reduction of the conversion
price to be fifty percent (50%).
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Description of the Warrants. Pursuant to the Purchase
Agreement, on December 24, 1997, the Company issued the Warrants to the
Purchasers. The Warrants are exercisable commencing on December 24, 1997 and
ending on December 24, 2001. The Warrants are exercisable for an aggregate of
340,138 shares of Common Stock as adjusted from time to time pursuant to the
Warrants. The Warrants may be exercised in full or in part by means of payment
of the exercise price which is equal to a fixed conversion price in effect on
the exercise date; provided, however, that if the ADTV (as defined in the
Series C Certificate of Designation) for the Common Stock during the period of
six (6) months following the closing date is less than five hundred and forty
thousand dollars ($540,000), the exercise price shall be the lesser of (i) the
fixed conversion price and (ii) the average of the closing bid prices (as
defined in the Certificate of Designation) for the Common Stock during the
twenty-two (22) trading days occurring prior to the last day of such six- month
period. The Warrants provide for customary adjustments to the exercise price
and number of shares to be issued in the event of certain dividends and
distributions to holders of Common Stock, stock splits, combinations and
mergers. The Warrants also include customary provisions with respect to, among
other things, transfer of the Warrants, mutilated or lost warrant certificates,
and notices to holder(s) of the Warrants.
Description of the Registration Rights Agreement. The Common
Stock issuable upon conversion of the Series C Preferred Stock or upon exercise
of the Warrants will not be registered with the SEC and therefore, will be,
when issued, restricted securities. Pursuant to the Purchase Agreement, on
December 24, 1997, the Company entered into a Registration Rights Agreement
with the Purchasers pursuant to which the Purchasers will be entitled to
certain rights with respect to the registration under the Securities Act of
1933, as amended (the "Securities Act"), of shares of Common Stock issuable
upon conversion of Series C Preferred Stock or upon exercise of the Warrants
(the "Registrable Securities").
The Company granted certain registration rights in the Registration
Rights Agreement. Pursuant to the Registration Rights Agreement, the Company
agreed to file a registration statement on Form S-3 on or before March 24,
1998, covering the resale of at least 200% of the number of shares of
registrable securities then issuable on conversion of the Series C Preferred
Stock and exercise of the Warrants. The Company is required to use its best
efforts to cause such registration statement to become effective as soon as
practicable following the filing thereof; but in no event later than April 23,
1998. If the registration statement does not become effective by this date,
then the Company is required to make certain payments to the holders of Series
C Preferred Stock as set forth in the Registration Rights Agreement. The
Registration Rights Agreement also provides for unlimited piggyback
registration rights. That is, in the event that the Company proposes to
register the sale for cash of any of its securities under the Securities Act
for its own account, or for the account of any other person, the holders will
be entitled to include Registrable Securities in any such registration, subject
to the limited right of the managing underwriter of any such offering under
certain circumstances to exclude some or all of such Registrable Securities
from such registration, and also subject to the prior right of holders of
registrable shares of Common Stock under the Registration Rights Agreement,
dated as of May 6, 1997, between the Company and Joint Energy Development
Investments Limited Partnership ("JEDI") to include any or all of JEDI's
Registrable Shares before any holder of Series C Preferred Stock includes any
or all of its registrable securities in a registration statement. The Company
generally bears the expense of any piggyback registration statement, while
selling holders
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generally bear selling expenses such as underwriting fees and discounts. The
Registration Rights Agreement also includes customary indemnification
provisions. The Company will no longer be obligated to register the
Registrable Securities upon disposition pursuant to Rule 144 under the
Securities Act, the eligibility of disposal under Rule 144(k) under the
Securities Act or a registration statement covering such Registrable Security
has been declared effective by the SEC and such Registrable Security has been
issued, sold or disposed of pursuant to such effective registration statement.
The Purchasers may transfer their registration rights to a third party upon
written notice to the Company.
ITEM 7. EXHIBITS.
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1.1 Certificate of Designation of Series C Convertible Preferred Stock of Queen
Sand Resources, Inc., a Delaware corporation.
1.2 Securities Purchase Agreement among Queen Sand Resources, Inc., a Delaware
corporation, and certain institutional investors named therein, dated December
22, 1997.
1.3 Registration Rights Agreement among Queen Sand Resources, Inc., a Delaware
corporation, and certain institutional investors named therein, dated December
22, 1997.
1.4 Form of Common Stock Purchase Warrant Representing Right to Purchase
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to certain institutional investors on December 24, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUEEN SAND RESOURCES, INC.
Date: December 31, 1997 By: /s/ Edward J. Munden
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Name: Edward J. Munden
Title: Chairman of the Board,
President and Chief
Executive Officer
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Index to Exhibits
Exhibit No. Description
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1.1 Certificate of Designation of Series C Convertible Preferred Stock of Queen
Sand Resources, Inc., a Delaware corporation.
1.2 Securities Purchase Agreement among Queen Sand Resources, Inc., a Delaware
corporation, and certain institutional investors named therein, dated December
22, 1997.
1.3 Registration Rights Agreement among Queen Sand Resources, Inc., a Delaware
corporation, and certain institutional investors named therein, dated December
22, 1997.
1.4 Form of Common Stock Purchase Warrant Representing Right to Purchase
Shares of Common Stock of Queen Sand Resources, Inc., a Delaware
corporation, issued to certain institutional investors on December 24, 1997.
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