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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):
NOVEMBER 24, 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.)
13760 NOEL ROAD
SUITE 1030
DALLAS, TEXAS 75240-7336
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 233-9906
3500 OAK LAWN
SUITE 380, L.B. #31
DALLAS, TEXAS 75219-4398
(Former name or former address, if change since last report)
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ITEM 5. OTHER EVENTS
GENERAL
On November 24, 1998, pursuant to the Securities Purchase Agreement
(the "Purchase Agreement"), dated as of November 10, 1998, among Queen Sand
Resources, Inc., a Delaware corporation (the "Company"), and the buyers
signatory thereto (the "Buyers"), the Company issued (i) 416,667 shares of the
Company's Common Stock to the Buyers (the "Common Shares"), (ii) certain
repricing rights (the "Repricing Rights") to acquire additional shares of Common
Stock (the "Repricing Common Shares") to the Buyers, (iii) warrants (the "Buyer
Warrants") to the Buyers to purchase an aggregate of up to 50,000 shares of
Common Stock (the "Warrant Common Shares") and (iv) warrants (the "Placement
Agent Warrants") to Jesup & Lamont Securities Corp. and Wellington Capital
Corporation, acting as placement agents, to purchase an aggregate of up to
50,000 shares of Common Stock. The aggregate gross consideration for the
issuances was $2.5 million. 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 Current Report on Form
8-K 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
REPRICING RIGHTS
Pursuant to the Purchase Agreement, each of the Buyers (or their
permitted assignees or successors) may exercise its Repricing Rights and acquire
shares of Common Stock in accordance with the following formula (the "Repricing
Rate"):
(Repricing Price -- Market Price)
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Market Price
The "Repricing Price" means, (i) during the period beginning on and
including the date which is 121 days after the Closing Date and ending on and
including the date which is 150 days after the Closing Date, 124% of the
Purchase Price, (ii) during the period beginning on and including the date which
is 151 days after the Closing Date and ending on and including the date which is
180 days after the Closing Date, 125% of the Purchase Price, (iii) during the
period beginning on and including the date which is 181 days after the Closing
Date and ending on and including the date which is 210 days after the Closing
Date, 126% of the Purchase Price, (iv) during the period beginning on and
including the date which is 211 days after the Closing Date and ending on and
including the date which is 240 days after the Closing Date, 127% of the
Purchase Price and (v) after the date which is 240 days after the Closing Date,
128% of the Purchase Price.
The "Market Price" means, as of any date of determination, the lowest
closing bid price during the fifteen consecutive trading days immediately
preceding such date of determination.
The Repricing Rate is multiplied by the number of Common Shares the
Buyer has chosen to reprice in order to determine the number of shares to be
issued to the Buyer.
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
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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 November 24,
1998 and ending on and including the 120th day thereafter, (B) 0.25 for
the period beginning on the 121st day after November 24, 1998 and
ending on and including the 150th day after November 24, 1998, (C) 0.50
for the period beginning on and including the 151st day after November
24, 1998 and ending on and including the 180th day after November 24,
1998, (D) 0.75 for the period beginning on the 181st day after November
24, 1998 and ending on and including the 210th day after November 24,
1998, and (E) 1.00 for the period beginning on and including the 211th
day after November 24, 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 November 24, 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 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.
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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) 124% of the Purchase Price, if the repurchase date
is prior to the date which is 120 days after the Closing Date and (ii) 128% of
the Purchase Price, if the repurchase date is on or after the date which is 120
days after the Closing Date.
HOLDER PUT RIGHTS
Pursuant to the Purchase Agreement, each holder of Common Shares or
Repricing Rights, has the right to require the Company to repurchase all or a
portion of such holder's Common Shares or Repricing Rights upon the occurrence
of a Major Transaction or a Triggering Event. The repurchase price is equal to
(i) for each Common Share with an associated Repricing Right, the greater of (A)
130% of the Purchase Price and (B) the sum of (i) the Purchase Price and (ii)
the product of (x) the Repricing Rate of the Repricing Right on the date of such
holder's delivery of a notice of repurchase and (y) the last reported sale price
of the Common Stock on the delivery date of a notice of repurchase, (ii) for
each Repricing Right without the associated Common Share, the product of (A) the
Repricing Rate of the Repricing Right on the date such holder's delivery of a
notice of repurchase and (B) the last reported sale price of the Common Stock on
the date of such holder's delivery of notice of repurchase and (iii) for each
Common Share without an associated Repricing Right, 130% of the Purchase Price.
A "Major Transaction" is deemed to have occurred at such time as any of
the following events:
(i) the consolidation, merger or other business combination of
the Company with or into another person (other than (A) a
consolidation, merger or other business combination in which holders of
the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the
voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent
if other than a corporation) of such surviving entity or entities, or
(B) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 40% of the outstanding shares of
Common Stock.
A "Triggering Event" is deemed to have occurred at such time as any of
the following events:
(i) a registration statement in respect of the resale of the
Common Shares, Repricing Common Shares and Warrant Common Shares (the
"Resale Registration Statement") has not been deemed effective by the
Commission on or prior to the 210th day after the Closing Date;
(ii) the effectiveness of the Resale Registration Statement
lapses for any reason or is unavailable for sale of the Registrable
Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and
such lapse or 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;
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(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
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
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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"). Until December 31, 1998, the Capital Raising
Limitation prohibits the Company and its subsidiaries from entering into any
agreement for any equity financing through a structure similar to that set forth
in the Purchase Agreement (including any issuance of equity securities of the
Company or any subsidiary that are convertible or exchangeable into Common
Stock) 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. However, the Capital Raising
Limitation is limited to up to $2.5 million of future offerings.
If the Company would be, if all Repricing Rights were exercised on such
date required by the rules by the Nasdaq Stock Market, Inc. to obtain the
approval of the stockholders of the Company to issue the Repricing Shares upon
such exercise, then the Company must within 15 days file proxy materials with
the Securities and Exchange Commission relating to such stockholder approval and
use its best efforts to obtain as soon as possible, and in any event within 75
days, such stockholder approval. If the Company fails to obtain the approval of
the stockholders as described in this paragraph, 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 the stockholder
approval is not obtained, divided by (y) 30.
WARRANTS
Pursuant to the Purchase Agreement, on November 24, 1998 the Company
issued the Buyer Warrants to the Buyers. The Buyer Warrants are exercisable for
three years commencing November 10, 1998. The Warrants are exercisable for an
aggregate of up to 50,000 shares of Common Stock at an exercise price of $6.60
per share. The Buyer 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 Buyer 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 Buyer Warrants.
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." The Company
entered into a Registration Rights Agreement dated November 10, 1998 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 the 60th day following
November 24, 1998, 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) the 135th day following November 24, 1998
and (ii) the fifth day after the Company learns that the
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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.
PLACEMENT AGENTS
The Company paid $187,500 cash and issued the Placement Agent Warrants
to purchase 50,000 shares of the Company's Common Stock in consideration for
Jesup & Lamont Securities Corp. and Wellington Capital Corporation acting as the
placement agents in connection with the private equity placements to the Buyers.
The terms of the Placement Agent Warrants are substantially similar to those of
the Buyer Warrants.
ITEM 7. EXHIBITS.
4.1 Form of Warrant dated as of November 10, 1998 for the purchase
of shares of Common Stock issued by the Company to the persons
named on Schedule A.
10.1 Securities Purchase Agreement dated as of November 10, 1998
among Queen Sand Resources, Inc. and the buyers signatory
thereto.
10.3 Registration Rights Agreement dated as of November 10, 1998
among the Company and the buyers signatory thereto.
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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 3, 1998 By: /s/ EDWARD J. MUNDEN
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Name: Edward J. Munden
Title: Chairman, Chief Executive
Officer and President
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EXHIBIT INDEX
Exhibit No. Description
4.1 Form of Warrant dated as of November 10, 1998 for the purchase
of shares of Common Stock issued by the Company to the persons
named on Schedule A.
10.1 Securities Purchase Agreement dated as of November 10, 1998
among Queen Sand Resources, Inc. and the buyers signatory
thereto.
10.3 Registration Rights Agreement dated as of November 10, 1998
among the Company and the buyers signatory thereto.