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EXHIBIT 4.1
NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE SECURITIES INTO WHICH
THIS WARRANT ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
QUEEN SAND RESOURCES, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ____ Number of Shares: _________
Date of Issuance: November 10, 1998
Queen Sand Resources, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, ___________________, or its registered
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company upon surrender of this Warrant, at any time or times on or after the
date hereof, but not after 11:59 P.M. New York City time on the Expiration Date
(as defined herein) _______________ (______) fully paid nonassessable shares of
Common Stock (as defined in Section 1(b)) of the Company (the "WARRANT SHARES")
at the purchase price per share provided in Section 1(b) below (the "WARRANT
EXERCISE PRICE"); provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise. For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder and
its affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned by
the holder and its affiliates and (ii) exercise or conversion of the unexercised
or unconverted portion of any other securities of the Company beneficially owned
by the holder and its affiliates (including, without limitation, any
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convertible notes, convertible preferred stock, warrants or rights to receive
shares of Common Stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. The holder may waive the foregoing limitations by written
notice to the Company upon not less than 61 days prior notice (with such waiver
taking effect only upon the expiration of such 61 day notice period).
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
warrants (the "COMMON STOCK WARRANTS") issued pursuant to Section 1 of that
certain Securities Purchase Agreement, dated as of November 10, 1998, among the
Company and the Buyers party thereto (as amended and restated, the "PURCHASE
AGREEMENT").
(b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
"APPROVED STOCK PLAN" shall mean any plan which has been
approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant for services provided to the Company.
"BUSINESS DAY" means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.
"CLOSING BID PRICE" means, for any security as of any
date, the last closing bid price for such security on The Nasdaq SmallCap Market
as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if The Nasdaq
SmallCap Market is not the principal trading market for such security, the last
closing bid price of such security on a Subsequent Market (as defined below) on
which such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price is reported for such security
by Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
the Common Stock Warrants. If the Company and the holders
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of the Common Stock Warrants are unable to agree upon the fair market value of
the Common Stock, then such dispute shall be resolved pursuant to Section 2(a)
of this Warrant with the term "Closing Bid Price" being substituted for the term
"Market Price." (All such determinations to be appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period).
"COMMON STOCK" means (i) the Company's common stock, par
value $.0015 per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 8(b)(i) and 8(b)(ii) hereof regardless of whether the Options (as
defined in Section 8(b)(i) below) or Convertible Securities (as defined in
Section 8(b)(i) below) are actually exercisable or convertible at such time, but
excluding any shares of Common Stock issuable upon exercise of the Common Stock
Warrants.
"EXPIRATION DATE" means the date three (3) years from the
date of this Warrant or, if such date is not a Business Day, the next preceding
Business Day.
"MARKET PRICE" means, with respect to any security for any
date, the average of the Closing Bid Prices for such security during the five
(5) consecutive trading days immediately preceding such date.
"OTHER SECURITIES" means (i) those convertible securities,
options and warrants of the Company issued prior to, and outstanding on, the
date of issuance of this Warrant, (ii) the Common Shares (as defined in the
Securities Purchase Agreement), (iii) the Repricing Common Shares (as defined in
the Securities Purchase Agreement), (iv) the Repricing Rights (as defined in the
Securities Purchase Agreement), (v) shares of Common Stock, and warrants or
other securities that are convertible into or exchangeable for shares of Common
Stock, issuable in connection with the acquisition by the Company of oil and
natural gas companies (whether by merger, purchase of shares or exchange) or
properties, and (vi) rights of Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI"), under Section 7.01 of the
Securities Purchase Agreement, dated as of March 27, 1997, between the Company
and JEDI (as such agreement is in effect on the date of the issuance of this
Warrant) arising from any issuances described in clause (v) above in this
definition.
"PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof, or any other
entity or organization.
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"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement dated the date hereof, among the Company and the Buyers party
thereto entered into in connection with the Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SUBSEQUENT MARKET" means any of the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market.
"TRADING DAY" means (a) a day on which the Common Stock is
listed for trading on the Nasdaq SmallCap Market or on a Subsequent Market or
(b) if the Common Stock is not listed on the Nasdaq SmallCap Market or a
Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then a Trading Day shall be a Business Day.
"WARRANT" means this Warrant and all Warrants issued in
exchange, transfer or replacement thereof.
"WARRANT EXERCISE PRICE" shall be $6.60, subject to
adjustment as hereinafter provided.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "HEREIN,"
"HEREOF," and "HEREUNDER," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"SECTION," "SCHEDULE," and "EXHIBIT" shall refer to Sections of, and Schedules
and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
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Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time during normal business hours on any
business day on or after the opening of business on the date hereof and prior to
11:59 P.M. New York City time on the Expiration Date by (i) delivery of a
written notice, in the form of the subscription notice attached as Exhibit A
hereto, of such holder's election to exercise this Warrant, which notice shall
specify the number of Warrant Shares to be purchased, (ii) payment to the
Company of an amount equal to the Warrant Exercise Price multiplied by the
number of Warrant Shares as to which the Warrant is being exercised (the
"AGGREGATE EXERCISE PRICE") in cash or by check or wire transfer, and (iii) the
surrender of this Warrant, at the principal office of the Company; provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 7 shall be applicable. In the event of any exercise of
the rights represented by this Warrant in compliance with this Section 2(a), a
certificate or certificates for the Warrant Shares so purchased, in such
denominations as may be requested by the holder hereof and registered in the
name of, or as directed by, the holder, shall be delivered at the Company's
expense to, or as directed by, such holder as soon as practicable after such
rights shall have been so exercised, and in any event no later than three
business days after such exercise. In the case of a dispute as to the
determination of the Warrant Exercise Price of a security or the arithmetic
calculation of the Warrant Shares, the Company shall promptly issue to the
holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one business day of receipt of the holder's subscription
notice. If the holder and the Company are unable to agree upon the determination
of the Warrant Exercise Price or arithmetic calculation of the Warrant Shares
within one day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price to an independent,
reputable investment banking firm or (ii) the disputed arithmetic calculation of
the Warrant Shares to its independent, outside accountant. The Company shall
cause the investment banking firm or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the holder
of the results no later than two (2) Business Days from receipt of the disputed
determinations or calculations. Such investment banking firm's or accountant's
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five Business Days after any exercise and
at its own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such
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exercise under the Warrant exercised, less the number of Warrant Shares with
respect to which such Warrant is exercised, and (ii) the holder thereof shall be
deemed for all corporate purposes to have become the holder of record of such
Warrant Shares immediately prior to the close of business on the date on which
the Warrant is surrendered and payment of the amount due in respect of such
exercise and any applicable taxes is made, irrespective of the date of delivery
of certificates evidencing such Warrant Shares, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
properly closed, such person shall be deemed to have become the holder of such
Warrant Shares at the opening of business on the next succeeding date on which
the stock transfer books are open.
(c) No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock
issued upon exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) If the Company shall fail for any reason or for no reason
to issue to the holder on a timely basis as described in this Section 2, a
certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant or a new Warrant for the
number of shares of Common Stock to which such holder is entitled pursuant to
Section 2(b) hereof, the Company shall, in addition to any other remedies under
this Warrant or the Securities Purchase Agreement or otherwise available to such
holder, including any indemnification under Section 11 of the Securities
Purchase Agreement, pay as additional damages in cash to such holder on each
date after the fifth Business Day following receipt by the Company of the
exercise notice that such exercise is not timely effected in an amount equal to
0.5% of the product of (A) the sum of the number of shares of Common Stock not
issued to the holder on a timely basis and to which the holder is entitled and,
in the event the Company has failed to timely deliver a new Warrant, the number
of shares represented by the portion of this Warrant which is not being
converted, as the case may be, and (B) the average of the Closing Bid Prices for
the three consecutive trading days immediately preceding the last possible date
which the Company could have issued such Common Stock to the holder without
violating this Section 2.
(e) Notwithstanding anything contained herein to the contrary,
the holder of this Warrant may, at its election exercised in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula:
Net Number = (A x B) - (A x C)
-----------------
B
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For purposes of the foregoing formula:
A= the total number shares with respect to which this
Warrant is then being exercised.
B= the Market Price immediately prior to the date of
the subscription notice.
C= the Warrant Exercise Price then in effect at the
time of such exercise.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the holder hereof,
and the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
Section 3. Covenants as to Common Stock; Certain Registrations. The
Company hereby covenants and agrees as follows:
(a) This Warrant is, and any Common Stock Warrants issued in
substitution for or replacement of this Warrant will upon issuance be, duly
authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) The Company shall list the Warrant Shares within 10 days
of the date of this Warrant on the Nasdaq SmallCap Market and each other
Subsequent Market on which the Common Stock is then listed or traded and shall
maintain such listing for so long as any other shares of Common Stock shall be
so listed.
(e) The Company will not, by amendment of its charter or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant.
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Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Warrant Exercise Price then in effect, and
(ii) will take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which may
be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment and not with a view to, or for
sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such
holder is an accredited investor as such term is defined in Rule 501(a) of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act (an "ACCREDITED INVESTOR"). Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a
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view toward distribution or resale other than pursuant to an effective
registration statement or an exemption under the Securities Act and that such
holder is an Accredited Investor. Notwithstanding the foregoing, by making the
representations herein, the holder does not agree to hold the Warrant or the
Warrant Shares for any minimum or other specified term and reserves the right to
dispose of the Warrant and the Warrant Shares at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
If such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of the Warrant that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of the Warrant shall not violate any United States or state
securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted to the holder hereof
are transferable to affiliates of the holder hereof and to any investment funds
that are under common management with such holder, without the written consent
of the Company, and to other Persons, with the consent of the Company, which
consent shall not be unreasonably withheld, in whole or in part, upon surrender
of this Warrant, together with a properly executed warrant power in the form of
Exhibit B attached hereto; provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Section 7(c) below.
(c) The holder of this Warrant understands that this Warrant
has not been and is not expected to be, registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) such holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; provided that (i)
any sale of such securities made in reliance on Rule 144 promulgated under the
Securities Act may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an
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underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (ii)
neither the Company nor any other person is under any obligation to register the
Common Stock Warrants under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder.
(d) The Company is obligated to register the Warrant Shares
for resale under the Securities Act pursuant to the Registration Rights
Agreement and the initial holder of this Warrant (and certain assignees thereof)
is entitled to the registration rights in respect of the Warrant Shares as set
forth in the Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of Shares.
In order to prevent dilution of the rights granted under this Warrant, the
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever on or after the date of issuance
of this Warrant, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock or rights, warrants or options exercisable into
or exchangeable for shares of Common Stock (other than shares of Common Stock
deemed to have been issued by the Company in connection with an Approved Stock
Plan or upon exercise of the Other Securities) for a consideration per share
less than a price (the "APPLICABLE PRICE") equal to the Warrant Exercise Price
in effect immediately prior to such issuance or sale, then immediately after
such issue or sale the Warrant Exercise Price shall be reduced to an amount
determined by multiplying the Warrant Exercise Price in effect immediately prior
to such issue or sale by a fraction, the numerator of which shall be the sum of
(i) the number of shares of Common Stock Deemed Outstanding immediately prior to
such issue or sale, and (ii) the number of shares of Common Stock which the
aggregate consideration received (or to be received, assuming exercise or
conversion in full of such rights, warrants or convertible securities) for the
issuance of such additional shares of Common Stock would purchase at the Warrant
Exercise Price, and the denominator of which shall be the number of shares of
Common Stock Deemed Outstanding immediately after such issue or sale. Upon each
such adjustment of the Warrant Exercise Price hereunder, the number of shares of
Common Stock acquirable upon exercise of this Warrant shall be adjusted to the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment. However, upon the expiration of any right, warrant or option to
purchase shares of Common Stock the issuance of which resulted in an adjustment
in the Warrant Exercise Price pursuant to this Section, if any such right,
warrant or option shall
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expire without having been exercised, the Warrant Exercise Price shall,
immediately upon such expiration, be recomputed and effective immediately upon
such expiration shall be increased to the price which it would have been (but
reflecting any other adjustments in the Warrant Exercise Price made pursuant to
this Warrant upon the issuance of other rights, warrants or options) had the
adjustment of the Warrant Exercise Price made the issuance of such rights,
options or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such rights, options or warrants actually exercised.
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a),
the following shall be applicable:
(i) Issuance of Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase Common Stock (other
than pursuant to an Approved Stock Plan or Other Securities) or any stock or
other securities convertible into or exchangeable for, directly or indirectly,
Common Stock (such rights or options being herein called "OPTIONS" and such
convertible or exchangeable stock or securities being herein called "CONVERTIBLE
SECURITIES") and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Applicable Price, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of this Section 8(b)(i), the "price per share for which
Common Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities" is determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options. No
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or exchange is
less than the Applicable
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Price, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of this Section 8(b)(ii), the "price per share for which
Common Stock is issuable upon such conversion or exchange" is determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No adjustment of the Warrant Exercise Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion.
If the purchase price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Warrant Exercise Price
in effect at the time of such change shall be readjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of shares of Common
Stock acquirable hereunder shall be correspondingly readjusted; provided that no
adjustment shall be made if such adjustment would result in an increase of the
Warrant Exercise Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price of such securities on the date
of receipt. In case any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any
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merger in which the Company is the surviving entity the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined by the
Company's Board of Directors, provided, that, if the Holder disagrees with such
determination, such dispute shall be resolved promptly by the independent
certified public accountants that regularly examines the financial statements of
the Company.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Company, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.
(iii) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(iv) Calculations. All calculations under this
Warrant shall be made to the nearest cent or the nearest 1/100th of a share, as
the case may be.
(d) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.
(e) Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person (as defined below) or other
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transaction which is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "ORGANIC CHANGE." Prior to the consummation of any Organic Change,
the Company will make appropriate provision (in form and substance satisfactory
to the holders of the Common Stock Warrants representing a majority of the
shares of Common Stock issuable upon exercise of such Common Stock Warrants then
outstanding) to ensure that each of the holders of the Common Stock Warrants
will thereafter have the right to acquire and receive in lieu of or addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such holder's Common Stock
Warrants, such shares of stock, securities or assets as may be issued or payable
in the Organic Change with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon the exercise
of such holder's Common Stock Warrants had such Organic Change not taken place
(without taking into account any limitations or restrictions on exercise). In
any such case, the Company will make appropriate provision (in form and
substance satisfactory to the holders of the Common Stock Warrants representing
a majority of the shares of Common Stock issuable upon exercise of such Common
Stock Warrants then outstanding) with respect to such holders' rights and
interests to insure that the provisions of this Section 8 and Section 9 will
thereafter be applicable to the Common Stock Warrants (including, in the case of
any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Warrant Exercise Price to the value for the Common Stock reflected by the terms
of such consolidation, merger or sale, and a corresponding immediate adjustment
in the number of shares of shares of Common Stock acquirable and receivable upon
exercise of the Common Stock Warrants, if the value so reflected is less than
the Warrant Exercise Price in effect immediately prior to such consolidation,
merger or sale). The terms of any documents evidencing an Organic Change shall
include such terms as to give effect to the tenor of this provision and
evidencing the obligation to deliver to each holder of Common Stock Warrants
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) Distribution of Assets. If the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way or return of capital
or otherwise (including any dividend or distribution to the Company's
stockholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, after the record date for determining shareholders entitled to receive
such Distribution, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for determination of stockholders entitled to
such Distribution.
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(g) Notices.
(i) Immediately upon any adjustment of the Warrant
Exercise Price, the Company will give written notice thereof to the holder of
this Warrant, setting forth in reasonable detail and certifying the calculation
of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation and in no
event shall such notice be provided to such holder prior to such information
being made known to the public.
(iii) The Company will also give written notice to
the holder of this Warrant at least twenty (20) days prior to the date on which
any Organic Change, dissolution or liquidation will take place and in no event
shall such notice be provided to such holder prior to such information being
made known to the public.
Section 9. Purchase Rights. In addition to any adjustments pursuant to
Section 8 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of Common Stock (the "PURCHASE
RIGHTS"), then the holder of this Warrant will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking, issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) upon receipt, when delivered by a
delivery service, in each case properly addressed to the
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party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Queen Sand Resources, Inc.
3500 Oak Lawn, Suite 380, LB#31
Dallas, Texas 75219
Telephone: 214-521-9955
Facsimile: 214-521-9960
Attention: Robert P. Lindsay
and
Queen Sand Resources, Inc.
30 Metcalfe Street, Suite 620
Ottawa, Ontario, Canada K1P 5L4
Telephone: 613-230-7211
Facsimile: 613-230-6055
Attention: Edward J. Munden
With copy to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Telephone: (214) 651-5553
Facsimile: (214) 651-5940
Attention: William L. Boeing, Esq.
If to a holder of this Warrant, to it at the address set forth
below such holder's signature on the signature page hereof.
Each party shall provide five days' prior written notice to the other party of
any change in address or facsimile number.
Section 12. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the laws
of the State of New York without regard to principles of conflicts of law
thereof.
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has cause this Warrant to be
duly executed by its duly authorized officer as of the date first indicated
above.
QUEEN SAND RESOURCES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
19
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
QUEEN SAND RESOURCES, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Queen Sand
Resources, Inc., a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant (the "WARRANT"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of
the Warrant Exercise Price shall be made as:
a "Cash Exercise" with respect to ________________
------------ Warrant Shares; and/or
a "Cashless Exercise" with respect to ______________
------------ Warrant Shares (to the extent permitted by the terms of
the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: ,
--------------- -- ------
- --------------------------------
Name of Registered Holder
By:
-----------------------------
Name:
Title:
20
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Queen Sand Resources, Inc., a
Delaware corporation, represented by warrant certificate no. _____, standing in
the name of the undersigned on the books of said corporation. The undersigned
does hereby irrevocably constitute and appoint ______________, attorney to
transfer the warrants of said corporation, with full power of substitution in
the premises.
Dated:
-------------------
------------------------------------
By:
---------------------------------
Its:
--------------------------------
21
SCHEDULE A
Name Number of Warrants
- ---- ------------------
Sovereign Partners L.P. 25,000
Dominion Capital Fund Ltd. 25,000
Jesup & Lamont Securities Corporation 20,000
Wellington Capital Corporation 30,000