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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JULY 8, 1998
QUEEN SAND RESOURCES, INC.
(Exact name of registrant as specified in its charter)
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 July 8, 1998, Queen Sand Resources, Inc., a Delaware corporation
(the "Company"), completed a private placement (the "Note Offering") of
$125,000,000 principal amount of its 12 1/2% Senior Notes due 2008 (the
"Notes"). In addition, on July 8, 1998 and July 20, 1998, the Company
completed private placements of Common Stock (collectively, the "Private Equity
Placements," and, together with the Note Offering, the "Offerings").
The net proceeds received by the Company from the Offerings completed
on July 8, 1998 of approximately $144.5 million and on July 20, 1998 of
approximately $6.9 million were used to repay indebtedness outstanding under
the Company's Amended and Restated Credit Agreement, dated as of April 17,
1998, as amended (the "Credit Agreement"), with Bank of Montreal, as Agent, and
certain lenders thereunder and to repay indebtedness outstanding under the
Variable Rate Senior Subordinated Debt Bridge Note Purchase Agreements and the
Variable Rate Subordinated Equity Bridge Note Purchase Agreements, each dated
as of April 17, 1998. Substantially all of this indebtedness was incurred to
fund the Company's acquisition of net revenue interests and royalty interests
in producing oil and natural gas properties from certain trusts managed by J.P.
Morgan Investments. Immediately following such repayments, the amount of
indebtedness outstanding under the Credit Agreement was $10.3 million.
THE NOTE OFFERING
GENERAL
Pursuant to the Note Offering, the Company issued and sold the Notes
to certain institutional buyers pursuant to Rules 144A and Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). The Notes mature on July 1, 2008, and interest on the Notes is payable
semiannually on January 1 and July 1 of each year, commencing January 1, 1999
at the rate of 12 1/2% per annum. The payment of the Notes is guaranteed (the
"Subsidiary Guarantees") by the Company's three operating subsidiaries (the
"Subsidiary Guarantors"). Initially capitalized terms used but not defined in
this section "The Note Offering" have the meanings ascribed to them in the
Indenture, dated as of July 1, 1998, among the Company, the Subsidiary
Guarantors and Harris Trust and Savings Bank, as trustee, filed as Exhibit 4.1
to this Report on Form 8-K and incorporated by reference herein.
RANKING
The Notes are senior unsecured obligations of the Company. The Notes
rank pari passu with any existing and future unsubordinated indebtedness of the
Company, but are effectively subordinated to the rights of holders of secured
unsubordinated indebtedness of the Company to the extent of the value of the
collateral securing such indebtedness. The Notes rank senior to all unsecured
subordinated indebtedness of the Company.
SUBSIDIARY GUARANTEES
The Notes are jointly, severally and unconditionally guaranteed by
each of the existing and future Restricted Subsidiaries of the Company. The
Subsidiary Guarantees are senior unsecured obligations of the Subsidiary
Guarantors and rank pari passu with any existing and future unsubordinated
indebtedness of the Subsidiary Guarantors, but are effectively subordinated to
the rights of holders of secured unsubordinated indebtedness of the Subsidiary
Guarantors to the extent of the value of the collateral securing such
indebtedness.
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OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in
part, at any time on and after July 1, 2003, at the redemption prices set forth
therein, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of redemption. Furthermore, prior to July 1, 2001, up to 20% of the
aggregate principal amount of the Notes originally issued may be redeemed from
time to time at the option of the Company, in whole or in part, at 112.5% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption, with the net cash proceeds of one
or more Equity Offerings, provided that at least 80% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after
each such redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control the Company is required to
make an offer to purchase the Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. There can be no assurance, however,
that the Company will have sufficient funds with which to purchase the Notes at
that time, and certain provisions of the Company's other debt agreements may
further limit the Company's ability to make such purchases.
A "Change of Control" shall be deemed to occur if (i) any person or
group becomes the beneficial owner of 50% or more of the total voting power of
all classes of the Voting Stock of the Company or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale,
lease, conveyance or transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole shall have occurred,
(iii) the stockholders of the Company shall have approved any plan of
liquidation or dissolution of the Company, (iv) the Company consolidates with
or merges into another Person or any Person merges into the Company in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is reclassified into or exchanged for cash, securities or other
property or (v) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors cease
for any reason to constitute a majority of the Company's Board of Directors
then in office, excluding directors elected by JEDI or its affiliates.
COVENANTS
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to (i) incur
additional Indebtedness (as described more particularly below), (ii) pay
dividends or make other distributions with respect to Capital Stock or
Redeemable Stock or purchase, redeem or retire Capital Stock or Redeemable
Stock or make other Restricted Payments (as described more particularly below),
(iii) enter into certain transactions with Affiliates, (iv) create certain
Liens, (v) enter into certain consolidations, mergers and transfers of assets,
(vi) issue any Capital Stock of a Restricted Subsidiary or permit any Person
other than the Company or a Wholly Owned Restricted Subsidiary to own such
stock, (vii) permit any Restricted Subsidiaries to suffer to exist certain
types of restrictions on the ability of Restricted Subsidiaries to pay
dividends and make other transfers of assets to the Company and other
Restricted Subsidiaries and (viii) dispose of the proceeds of certain Asset
Sales.
Pursuant to the covenant limiting the incurrence of Indebtedness,
neither the Company nor its Restricted Subsidiaries may incur Indebtedness
other than Permitted Indebtedness unless, after giving pro forma effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, (i) no Default or Event of Default would occur as a consequence of or
be continuing following, such Incurrence and application and (ii) the
Consolidated Interest Coverage Ratio would exceed (1) 2.25 to 1.0 if such
Incurrence is between the Issue Date and July 1, 1999 and (2) 2.50 to 1.0 if
such Incurrence is thereafter.
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Pursuant to the covenant limiting Restricted Payments, neither the
Company nor the Restricted Subsidiaries may make any Restricted Payment if, at
the time of and after giving effect to the proposed Restricted Payment, (i) any
Default or Event of Default would have occurred and be continuing, (ii) the
Company could not incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the Indenture or (iii) the aggregate amount
expended or declared for all Restricted Payments from the Issue Date would
exceed the sum (without duplication) of the following:
(A) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis commencing on the last day of
the fiscal quarter immediately preceding the Issue Date, and ending on
the last day of the fiscal quarter ending on or immediately preceding
the date of such proposed Restricted Payment (or, if such aggregate
Consolidated Net Income shall be a loss, minus 100% of such loss),
plus
(B) the aggregate net cash proceeds, or the Fair Market
Value of Property other than cash, received by the Company on or after
the Issue Date from the issuance or sale (other than to a Subsidiary
of the Company) of Capital Stock of the Company or any options,
warrants or rights to purchase Capital Stock of the Company, plus
(C) the aggregate net cash proceeds or the Fair Market
Value of Property other than cash received by the Company as capital
contributions to the Company (other than from a Subsidiary of the
Company) on or after the Issue Date, plus
(D) the aggregate net cash proceeds received by the
Company upon the exercise of any options, warrants or rights to
purchase shares of Capital Stock of the Company (other than from a
Subsidiary of the Company) on or after the Issue Date, plus
(E) the aggregate net cash proceeds received on or after
the Issue Date by the Company from the issuance or sale (other than to
any Subsidiary of the Company) of convertible debt or convertible
Redeemable Stock that has been converted into or exchanged for Capital
Stock of the Company, together with the aggregate cash received by the
Company at the time of such conversion or exchange, plus
(F) to the extent not otherwise included in the Company's
Consolidated Net Income, an amount equal to the net reduction in
Investments made by the Company and its Restricted Subsidiaries
subsequent to the Issue Date in any Person resulting from (1) payments
of interest on debt, dividends, repayments of loans or advances or
other transfers or distributions of Property, in each case to the
Company or any Restricted Subsidiary from any Person other than the
Company or a Restricted Subsidiary, and in an amount not to exceed the
book value of such Investments previously made in such Person that
were treated as Restricted Payments, or (2) the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount
not to exceed the lesser of (x) the book value of all Investments
previously made in such Unrestricted Subsidiary that were treated as a
Restricted Payments and (y) the Fair Market Value of such Unrestricted
Subsidiary.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect
to the Notes: (i) failure to pay any interest on the Notes when due, continued
for 30 days; (ii) failure to pay principal of (or premium or Liquidated
Damages, if any, on) the Notes when due; (iii) failure to perform or comply
with the covenants limiting merger, consolidations and sales of substantially
all assets; (iv) failure to perform any other covenant of the Company or any
Subsidiary Guarantor in the Indenture, continued for 30 days after written
notice as provided in the Indenture; (v) the occurrence and continuation beyond
any applicable grace period of any default in the payment of the principal of
(or premium, if any, on) or interest on any Indebtedness of the Company (other
than the Notes) or any Restricted Subsidiary for money borrowed
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when due (whether resulting from maturity, acceleration, mandatory redemption
or otherwise), or any other default causing acceleration of any Indebtedness of
the Company or any Restricted Subsidiary for money borrowed, provided that the
aggregate principal amount of such Indebtedness shall exceed $5.0 million; (vi)
one or more final judgments or orders by a court of competent jurisdiction are
entered against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount outstanding at any time in excess of $5.0
million and such judgments or orders are not discharged, waived, stayed,
satisfied or bonded for a period of 60 consecutive days; (vii) certain events
of bankruptcy, insolvency or reorganization with respect to the Company or any
Restricted Subsidiary; or (viii) a Subsidiary Guaranty ceases to be in full
force and effect (other than in accordance with the terms of the Indenture and
such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty.
The Indenture provides that if an Event of Default (other than an
Event of Default described in clause (vii) above) with respect to the Notes at
the time outstanding shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the outstanding Notes
by notice as provided in the Indenture may declare the principal amount of the
Notes to be due and payable immediately. If an Event of Default described in
clause (vii) above with respect to the Notes at the time outstanding shall
occur, the principal amount of all the Notes will automatically, and without
any action by the Trustee or any Holder, become immediately due and payable.
After any such acceleration, but before a judgment or decree based on
acceleration, the Holders of at least a majority in aggregate principal amount
of the outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of
accelerated principal (or other specified amount), have been cured or waived as
provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders of the
Notes, unless such Holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the Trustee,
the Holders of at least a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Notes.
No Holder of Notes will have any right to institute any proceeding
with respect to the Indenture, or for the appointment of a receiver or a
trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Notes, (ii) the Holders of at least 25% in aggregate
principal amount of the outstanding Notes have made written request, and such
Holder or Holders have offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee and (iii) the Trustee has failed to
institute such proceeding and has not received from the Holders of at least a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request, within 60 days after such notice, request and
offer. However, such limitations do not apply to a suit instituted by a Holder
of Notes for the enforcement of payment of the principal of or any premium or
interest on such Notes on or after the applicable due date specified in such
Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the
Indenture may be made by the Company, the Subsidiary Guarantors and the Trustee
without the consent of any Holders of Notes in certain limited circumstances,
including (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to
provide for the assumption of the obligations of the Company under the
Indenture upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole and certain other events specified in the covenants limiting
mergers, consolidations and sales of substantially all assets, (iii) to provide
for uncertificated Notes in
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addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, (v) to make any change that
does not adversely affect the rights of any Holder of Notes in any material
respect, (vi) to add or remove Subsidiary Guarantors pursuant to the procedure
set forth in the Indenture and (vii) certain other modifications and amendments
as set forth in the Indenture.
The Indenture contains provisions permitting the Company, the
Subsidiary Guarantors and the Trustee, with the written consent of the Holders
of not less than a majority in aggregate principal amount of the outstanding
Notes, to execute supplemental indentures or amendments adding any provisions
to or changing or eliminating any of the provisions of the Indenture or
modifying the rights of the Holders of the Notes, except that no such
supplemental indenture, amendment or waiver may, without the consent of all the
Holders of outstanding Notes, among other things, (i) reduce the principal
amount of Notes whose Holders must consent to an amendment or waiver, (ii)
reduce the rate of or change the time for payment of interest on any Notes,
(iii) change the currency in which any amount due in respect of the Notes is
payable, (iv) reduce the principal of or any premium on or change the Stated
Maturity of any Notes or alter the redemption or repurchase provisions with
respect thereto, (v) reduce the relative ranking of any Notes, (vi) release any
security that may have been granted to the Trustee in respect of the Notes
(except as contemplated in the documents under which such security was granted
to the Trustee) or (vii) make certain other significant amendments or
modifications as specified in the Indenture.
The Holders of at least a majority in principal amount of the
outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. The Holders of at least a majority in principal
amount of the outstanding Notes may waive any past default under the Indenture,
except a default in the payment of principal, premium or interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the Holders of each outstanding Note.
TRANSFER RESTRICTIONS
The Notes have not been registered under the Securities Act, or under
any state securities laws and are subject to certain restrictions on transfer.
The Exchange Notes (defined below) registered pursuant to an effective
registration statement generally will be freely transferable.
PORTAL LISTING
The Notes are eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages (PORTAL) Market of the National
Association of Securities Dealers, Inc.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Subsidiary Guarantors have agreed to use their
reasonable best efforts to file on or before September 5, 1998, a registration
statement (the "Exchange Offer Registration Statement") relating to an exchange
offer (the "Exchange Offer") pursuant to which another series of unsecured debt
securities of the Company (the "Exchange Notes") with substantially the same
terms as the Notes will be offered in exchange for the then outstanding Notes
tendered at the option of the holders thereof and to use its reasonable best
efforts to cause such registration statement to become effective as soon as
practicable thereafter, but in no event later than November 4, 1998. In the
event that the applicable law or interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, the Company will use
its reasonable best efforts to cause to become effective a shelf registration
statement with respect to the resale of the Notes and to keep such resale
registration statement effective for a period of up to two years. If such
exchange offer or shelf registration statement is not filed or is not declared
effective, or if such exchange offer is not consummated, within the time
periods set forth herein, Liquidated Damages will accrue and be payable on the
Notes until such registration or consummation.
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PRIVATE EQUITY PLACEMENTS
GENERAL
Pursuant to the Private Equity Placements, the Company raised $25
million of equity on July 8, 1998 and an additional $7.5 million on July 20,
1998. Pursuant to the Securities Purchase Agreement, dated as of June 25,
1998, among the Company and the buyers signatory thereto (the "Buyers"), as
amended and restated pursuant to the Amended and Restated Securities Purchase
Agreement dated as of July 8, 1998 (as amended and restated, the "Purchase
Agreement"), the Company issued (i) 2,357,144 shares of the Company's Common
Stock on July 8, 1998 and issued an additional 1,071,430 shares of the
Company's Common Stock on July 20, 1998 to the Buyers (the "Common Shares"),
(ii) certain repricing rights (the "Repricing Rights") to acquire additional
shares of Common Stock (the "Repricing Common Shares") and (iii) warrants (the
"Warrants") to purchase an aggregate of up to 605,000 shares of Common Stock
(the "Warrant Common Shares"). The aggregate gross consideration for the
issuances was $24 million, $16.5 million of which was received by the Company
on July 8, 1998 and $7.5 million of which was received by the Company on July
20, 1998. The Company also agreed to register for resale the Common Shares,
Repricing Common Shares and Warrant Common Shares pursuant to the terms of a
registration rights agreement (the "Registration Rights Agreement"). Initially
capitalized terms used but not defined in this section "Private Equity
Placement" have the meanings ascribed to such terms in the Purchase Agreement
filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by
reference herein.
On July 8, 1998, Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI"), exercised certain
warrants to acquire an aggregate of 980,935 shares of Common Stock for an
aggregate exercise price of approximately $3.3 million and exercised certain
antidilution rights to purchase 693,301 shares of the Company's Common Stock
for an aggregate purchase price of $1.67 million. A second holder of warrants
exercised warrants on July 8, 1998 to acquire an aggregate of 1,400,000 shares
of Common Stock. The Company received approximately $3.5 million for the
exercise of these warrants.
REPRICING RIGHTS
Pursuant to the Purchase Agreement, each of the Buyers (or their
permitted assignees or successors) may exercise its Repricing Rights and
acquire shares of Common Stock in accordance with the following formula (the
"Repricing Rate"):
(Repricing Price -- Market Price)
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Market Price
The "Repricing Price" means, (i) during the period beginning on and
including the date which is 121 days after the Closing Date and ending on and
including the date which is 150 days after the Closing Date, 124% of the
Purchase Price, (ii) during the period beginning on and including the date
which is 151 days after the Closing Date and ending on and including the date
which is 180 days after the Closing Date, 125% of the Purchase Price, (iii)
during the period beginning on and including the date which is 181 days after
the Closing Date and ending on and including the date which is 210 days after
the Closing Date, 126% of the Purchase Price, (iv) during the period beginning
on and including the date which is 211 days after the Closing Date and ending
on and including the date which is 240 days after the Closing Date, 127% of the
Purchase Price and (v) after the date which is 240 days after the Closing Date,
128% of the Purchase Price.
The "Market Price" means, as of any date of determination, the lowest
closing bid price during the fifteen consecutive trading days immediately
preceding such date of determination.
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The Repricing Rate is multiplied by the number of Common Shares the
Buyer has chosen to reprice in order to determine the number of shares to be
issued to the Buyer.
If the Company fails to issue a stock certificate for the number of
shares of Common Stock to which the holder is entitled or to credit the
holder's balance account with The Depository Trust Company for such number of
shares of Common Stock to which the holder is entitled upon such holder's
exercise of the Repricing Rights within three trading days after the Company's
or the transfer agent's receipt of the exercise notice, the Company shall pay
damages to such holder on each day after the third trading day that such
exercise is not effected. The amount of damages shall equal 0.5% of the product
of (i) the sum of the number of shares of Common Stock not issued to the holder
on a timely basis and (ii) the closing bid price of the Common Stock on the
last possible date which the Company could have issued such Common Stock
without violating its delivery requirements. In addition, if the Buyer to whom
the Company has failed to timely deliver the shares is forced to purchase other
outstanding shares of Common Stock of the Company in order to cover a sale
order by such Buyer (a "Buy-In"), then the Company will be required to pay to
such Buyer the positive difference between the price at which the Buyer bought
its covering shares and the sale price in respect of the shares sold by it.
The right of a holder of Repricing Rights to exercise such Repricing
Rights is limited as set forth below.
(i) Without the prior written consent of the Company, a
holder of Repricing Rights shall not be entitled to exercise an
aggregate number of Repricing Rights in excess of the number of
Repricing Rights which when divided by the number of Repricing Rights
purchased by such holder would exceed (A) 0.00 for the period
beginning on July 8, 1998 and ending on and including the 120th day
thereafter, (B) 0.25 for the period beginning on the 121st day after
July 8, 1998 and ending on and including the 150th day after July 8,
1998, (C) 0.50 for the period beginning on and including the 151st day
after July 8, 1998 and ending on and including the 180th day after
July 8, 1998, (D) 0.75 for the period beginning on the 181st day after
July 8, 1998 and ending on and including the 210th day after July 8,
1998, and (E) 1.00 for the period beginning on and including the 211th
day after July 8, 1998. This exercise restriction shall cease to apply
if a Major Transaction (as defined below) or Triggering Event (as
defined below) shall have occurred or been publicly announced or if a
registration statement meeting the requirements of the Registration
Rights Agreement shall not have been declared effective by the 120th
day after July 8, 1998.
(ii) As more fully described in the Purchase Agreement, a
holder of Repricing Rights shall not be entitled to exercise Repricing
Rights in excess of that number of Repricing Rights which, upon giving
effect to such exercise, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to
exceed 4.99% of the outstanding number of shares of the Common Stock
following such exercise. Such restriction is waivable by a holder
upon at least 61 days notice. In addition, as more fully described in
the Purchase Agreement, a holder of Repricing Rights shall not be
entitled to exercise Repricing Rights in excess of that number of
Repricing Rights which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates to exceed 9.99% of the
outstanding number of shares of the Common Stock following such
exercise. Such restriction is waivable by a holder upon at least 61
days notice.
In addition to the exercise restrictions, a Buyer's right to exercise
its Repricing Right terminates automatically on the earlier of (i) if the
Initial Common Share with respect to which such Repricing Right was acquired is
sold prior to the date which is 121 days after the date on which such Repricing
Right was acquired, (ii) if the Initial Common Share with respect to which such
Repricing Right was acquired is sold on or after the date which is 121 days
after the Closing Date on which such Repricing Right was acquired at a price
equal to or greater than the Repricing Price in effect on the date of such
sale, (iii) on the date immediately following the date which is one year after
the date of the sale of the Initial Common Share
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with respect to which such Repricing Right was acquired and (iv) if the Buyer
elects to terminate the Repricing Right in lieu of the Company repurchasing
such Buyer's related Initial Common Share.
COMPANY REPURCHASE RIGHTS
Pursuant to the Purchase Agreement, the Company may elect to
repurchase Repricing Rights exercised in lieu of issuing Repricing Common
Shares upon such exercise if the average closing bid price of the Common Stock
for the five day trading period immediately preceding the exercise date of the
Repricing Rights is not greater than $5.30. The repurchase price per Repricing
Right shall be equal to the product of (i) the Repricing Rate of the Repricing
Right on the exercise date and (ii) the last reported sale price of the Common
Stock on the exercise date.
The Company may also elect to repurchase any or all of the Common
Shares issued to the Buyers and the Repricing Rights associated with such
Common Shares at any time prior to the Repricing Rights being exercised. The
repurchase price per Repricing Right shall be an amount per Common Share and
associated Repricing Right equal to (i) 119% of the Purchase Price, if the
repurchase date is prior to the date which is 120 days after the Closing Date
and (ii) 128% of the Purchase Price, if the repurchase date is on or after the
date which is 120 days after the Closing Date.
HOLDER PUT RIGHTS
Pursuant to the Purchase Agreement, each holder of Common Shares or
Repricing Rights, has the right to require the Company to repurchase all or a
portion of such holder's Common Shares or Repricing Rights upon the occurrence
of a Major Transaction or a Triggering Event. The repurchase price is equal to
(i) for each Common Share with an associated Repricing Right, the greater of
(A) 130% of the Purchase Price and (B) the sum of (i) the Purchase Price and
(ii) the product of (x) the Repricing Rate of the Repricing Right on the date
of such holder's delivery of a notice of repurchase and (y) the last reported
sale price of the Common Stock on the delivery date of a notice of repurchase,
(ii) for each Repricing Right without the associated Common Share, the product
of (A) the Repricing Rate of the Repricing Right on the date such holder's
delivery of a notice of repurchase and (B) the last reported sale price of the
Common Stock on the date of such holder's delivery of notice of repurchase and
(iii) for each Common Share without an associated Repricing Right, 130% of the
Purchase Price.
A "Major Transaction" is deemed to have occurred at such time as any
of the following events:
(i) the consolidation, merger or other business
combination of the Company with or into another person (other than (A)
a consolidation, merger or other business combination in which holders
of the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the
voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent
if other than a corporation) of such surviving entity or entities, or
(B) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or substantially all of
the Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 40% of the outstanding shares of
Common Stock.
A "Triggering Event" is deemed to have occurred at such time as any of
the following events:
(i) a registration statement in respect of the resale of
the Common Shares, Repricing Common Shares and Warrant Common Shares
(the "Resale Registration Statement") has not been deemed effective by
the Commission on or prior to the 210th day after the Closing Date;
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(ii) the effectiveness of the Resale Registration
Statement lapses for any reason or is unavailable for sale of the
Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of
ten trading days in aggregate (excluding any "blackout" periods
permitted by the terms of the Registration Rights Agreement);
(iii) the Common Stock is suspended from listing or is
delisted from The Nasdaq SmallCap Market or on any subsequent market
for a period of five consecutive days, unless such delisting is due to
the Company having the Common Stock relisted on a subsequent market
within such five day period;
(iv) the Company notifies any holder of Repricing Rights,
including by way of public announcement, at any time, of its intention
not to comply or inability to comply with proper requests for exercise
of any Repricing Rights into shares of Common Stock;
(v) the Company fails to deliver shares of Common Stock
pursuant to the exercise of Repricing Rights within ten days of an
exercise date or to pay the amount due in respect of a Buy-In within
ten days after notice of such Buy-In is delivered to the Company;
(vi) the Company is not required to issue any Repricing
Common Shares pursuant to the exercise of Repricing Rights due to
certain restrictions imposed under the rules and regulations of The
Nasdaq Stock Market or the Company is otherwise unable to issue shares
of Common Stock upon delivery of an exercise notice for any reason;
(vii) if stockholder approval of the issuance of the
securities is required, the Company's stockholders fail to approve the
issuance of the shares of Common Stock upon the exercise of Repricing
Rights within 135 days of a Proxy Statement Trigger Date (as defined
in the Purchase Agreement);
(viii) the Company breaches any representation, warranty,
covenant or other material term or condition of the Purchase
Agreement, the Warrants, the Registration Rights Agreement or the
irrevocable transfer agent instructions or any other agreement,
document, certificate or other instrument delivered in connection with
the transactions contemplated thereby or hereby, and such breach, if
curable, continues for a period of at least ten days after written
notice thereof to the Company; or
(ix) a voluntary or involuntary case or proceeding is
commenced by or against the Company or a subsidiary under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar proceeding (excluding any involuntary proceeding that is
dismissed within thirty days of the filing thereof).
At any time after receipt of a notice from the Company that a Major
Transaction is to occur (or, in the event a notice is not delivered at least
ten days prior to a Major Transaction), any holder of Common Shares, Repricing
Common Shares or Repricing Rights then outstanding may require the Company to
repurchase all or a portion of the holder's Common Shares, Repricing Common
Shares or Repricing Rights. At any time after the earlier of a holder's
receipt of a notice from the Company that a Triggering Event has occurred and
such holder becoming aware of a Triggering Event, but in no event later than
fifteen business days after a holder's receipt of such notice, any holder of
Common Shares, Repricing Common Shares or Repricing Rights then outstanding may
require the Company to repurchase all or a portion of the holder's Common
Shares, Repricing Common Shares or Repricing Rights. The repurchase price upon
the occurrence of a Major Transaction or a Triggering Event is equal to (i) for
each Common Share with an associated Repricing Right, the greater of (A) 130%
of the Purchase Price and (B) the sum of (I) the Purchase Price and (II) the
product of (x) the Repricing Rate of the Repricing Right on the date of such
holder's delivery of notice of repurchase and (y) the last reported sale price
of the
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Common Stock 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 of such holder's
delivery of a notice to repurchase and (y) the last reported sale price of the
Common Stock on the date of such holder's delivery of notice of repurchase and
(iii) for each Common Share without an associated Repricing Right, 130% of the
Purchase Price.
The Company shall deliver the applicable repurchase price, in the case
of a repurchase pursuant to the occurrence of a Triggering Event, to such
holder within five business days after the Company's receipt of a notice of
repurchase from the holder and, in the case of a repurchase pursuant to the
occurrence of a Major Transaction, the Company shall deliver the applicable
repurchase price immediately prior to the consummation of the Major
Transaction; provided that if Common Shares are being repurchased, the holder's
stock certificates shall have been delivered to the Company; provided further
that if the Company is unable to repurchase all of the Common Shares or the
Repricing Rights to be repurchased, the Company shall repurchase an amount from
each holder on a pro rata basis.
OTHER TERMS OF THE PURCHASE AGREEMENT
The Purchase Agreement contains customary representations and
warranties of the Company for transactions of this type.
Pursuant to the Purchase Agreement, the Company has agreed, among
other things, to abide by certain limitations on the Company's ability to raise
equity (the "Capital Raising Limitation"). The Capital Raising Limitation
prohibits the Company and its subsidiaries from negotiating with any party for
any equity financing or issue any equity securities of the Company or any
subsidiary or securities convertible or exchangeable into or for equity
securities of the Company or any subsidiary during the period beginning on July
8, 1998 and ending on and including the 365th day after the Closing Date unless
it first delivers a written notice of the future offering to each Buyer and
provides each Buyer an option to purchase up to its pro rata portion of the
shares to be offered in the future offering.
In addition, on or before November 4, 1998, the Company must provide
stockholders of the Company with a proxy statement relating to the next meeting
of stockholders of the Company, which meeting shall be not later than 60 days
after November 4, 1998, which proxy statement solicits the affirmative vote of
the stockholders for approval of the Company's issuance of all of the
Securities described in the Purchase Agreement (including the approval of
issuances as may be required by the Rules of the Nasdaq Stock Market, Inc.).
Certain holders of capital stock having voting power aggregating over 50% of
the total current outstanding voting capital stock have executed a letter
agreement agreeing to vote in favor of the issuance. If the Company fails to
hold the meeting by the deadline described above, then the Company shall pay to
each Buyer an amount in cash equal to the product of (i) the aggregate Purchase
Price paid by such Buyer multiplied by (ii) .025; multiplied by (iii) the
quotient of (x) the number of days after the deadline that a meeting is not
held, divided by (y) 30.
WARRANTS
Pursuant to the Purchase Agreement, on July 8, 1998 the Company issued
the Warrants to the Buyers. The Warrants are exercisable for three years
commencing July 8, 1998. The Warrants are exercisable for an aggregate of up
to 925,000 shares of Common Stock at an exercise price equal to 110% of the
Purchase Price. The Warrants provide for customary adjustments to the exercise
price and number of shares to be issued in the event of certain dividends and
distributions to holders of Common Stock, stock splits, combinations and
mergers. The Warrants also include customary provisions with respect to, among
other things, transfer of the Warrants, mutilated or lost warrant certificates,
and notices to holder(s) of the Warrants.
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REGISTRATION RIGHTS AGREEMENT
At the time of sale, none of the Common Shares, the Repricing Common
Shares or the Warrant Common Shares will be registered under the Securities Act
and therefore, will be, when issued, "restricted securities." Effective July
8, 1998, the Company entered into a Registration Rights Agreement with the
Buyers pursuant to which the Buyers are entitled to certain rights with respect
to the registration under the Securities Act of the Common Shares, the
Repricing Common Shares and the Warrant Common Shares (the "Registrable
Securities").
Pursuant to the Registration Rights Agreement, the Company agreed to
file a registration statement on Form S-3 on or before September 5, 1998,
covering the resale of all of the Registrable Securities. The Company is
required to use its best efforts to cause such registration statement to become
effective as soon as practicable following the filing thereof; but in no event
later than the earlier of (i) November 4, 1998 and (ii) the fifth day after the
Company learns that the Commission will not review the registration statement
or that the Commission has no further comments on the registration statement.
If the registration statement does not become effective by this date, then the
Company is required to make cash payments to the holders of the Registrable
Securities equal to 2.0% of the aggregate Purchase Price paid by each holder on
the first day of each month during the default. The Registration Rights
Agreement also provides for unlimited piggyback registration rights prior to
the expiration of the registration period for the Registrable Securities. The
Company generally bears the expense of any registration statement, while
selling holders generally bear selling expenses such as underwriting fees and
discounts. The Registration Rights Agreement also includes customary
indemnification provisions. In addition, under the Purchase Agreement, the
Company cannot file a registration statement (other than a registration
statement filed pursuant to the Registration Rights Agreement, a registration
statement filed pursuant to a demand registration right or a registration
statement on Form S-8) covering the sale or resale of shares of Common Stock
with the Securities and Exchange Commission beginning on July 8, 1998 and
ending on the 60th trading day after the date that the registration statement
filed on behalf of the holders has been declared effective by the Securities
and Exchange Commission.
PLACEMENT AGENTS
The Company paid $1.8 million cash and issued warrants to purchase
480,000 shares of the Company's Common Stock in consideration for Jesup &
Lamont Securities Corp., Phillip Louis Trading Co., Inc. and Laidlaw & Co.
acting as the placement agents in connection with the Private Equity Placements
to the Buyers.
ITEM 7. EXHIBITS.
1.1 Purchase Agreement dated June 30, 1998 among Queen Sand
Resources, Inc., a Delaware corporation (the "Company"),
Nesbitt Burns Securities Inc., CIBC Oppenheimer Corp. and
Societe Generale Securities Corporation, previously filed as
an Exhibit to this Current Report on Form 8-K.
4.1 Indenture dated as of July 8, 1998 among the Company, Queen
Sand Resources, Inc., a Nevada corporation ("QSR-N"),
Northland Operating Co., a Nevada corporation ("Northland"),
Corrida Resources, Inc., a Nevada corporation ("Corrida"), and
Harris Trust and Savings Bank, previously filed as an Exhibit
to this Current Report on Form 8-K.
4.2 Form of Warrant dated as of July 8, 1998 for the purchase of
shares of Common Stock issued by the Company to the persons
named on Schedule A, previously filed as an Exhibit to this
Current Report on Form 8-K.
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10.1 Amended and Restated Securities Purchase Agreement dated as of
July 8, 1998 among Queen Sand Resources, Inc. and the buyers
signatory thereto, previously filed as an Exhibit to this
Current Report on Form 8-K.
10.2 Registration Rights Agreement dated as of July 8, 1998 among
the Company, QSR-N, Northland, Corrida, Nesbitt Burns
Securities, Inc., CIBC Oppenheimer Corp. and Societe Generale
Securities Corporation, previously filed as an Exhibit to this
Current Report on Form 8-K.
10.3 Registration Rights Agreement dated as of July 8, 1998 among
the Company and the buyers signatory thereto, previously filed
as an Exhibit to this Current Report on Form 8-K.
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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: September 4, 1998 By: /s/ ROBERT P. LINDSAY
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Name: Robert P. Lindsay
Title: Chief Operating Officer and
Executive Vice President