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EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 8, 1998, among Queen Sand Resources, Inc., a
Delaware corporation (the "Company"), and the undersigned buyers (each a
"Buyer" and collectively, the "Buyers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of June 25, 1998 among the Company and the Buyers, as
amended and restated by the Amended and Restated Securities Purchase Agreement,
dated as of July 8, 1998 (the "Purchase Agreement").
The Company and the Buyers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section
3(o).
"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 generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.0015 per share.
"Effectiveness Date" means the 120th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Filing Date" means the 60th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Initial Common Shares" shall have the meaning set forth in
the Purchase Agreement.
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registration Delay Payments" shall have the meaning set forth
in Section 2(d).
"Registration Delay Payment Shares" shall have the meaning set
forth in Section 2(d).
"Registrable Securities" means (i) the Initial Common Shares,
the Registration Delay Payment Shares (if any) and the Warrant Shares and (ii)
the Repricing Common Shares; provided, however in order to account for the
fact that the number of Repricing Shares is determined in part upon the market
price of the Common Stock prior to the determination of the Repricing Rate,
Registrable Securities contemplated by clause (ii) above shall include (but not
be limited to) 5,357,144 shares of Common Stock. The Registration Statement to
be filed by the Company on the Filing Date shall cover 9,678,573 shares of
Common Stock. The Company shall be required to file additional Registration
Statements to the extent the sum of (i) the Initial Common Shares, the
Repricing Common Shares and the Warrant Shares and (ii) the Registration Delay
Payment Shares exceeds the number of shares of Common Stock initially
registered in accordance with the immediately prior sentence. The Company
shall have fifteen (15) days to
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file such additional Registration Statements after notice of the requirement
thereof, which the Holders may give at such time when the number of shares
referenced in clauses (i) and (ii) above exceeds 85% of the number of shares of
Common Stock to be registered in a Registration Statement hereunder.
"Registration Statement" means the registration statement and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Repricing Common Shares" means the shares of Common Stock
issuable in respect of the Repricing Rights.
"Repricing Rights" shall have the meaning set forth in the
Purchase Agreement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders
(initially Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP), for which the
Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means collectively (i) the Common Stock purchase
warrants issued or issuable to the Buyers pursuant to the Purchase Agreement,
and (ii) the Common Stock purchase warrants issued or issuable to Jesup &
Xxxxxx Securities Corporation or to any other broker, placement agent or other
Person performing similar services to the Company in connection with the
transactions contemplated by the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise in full of the Warrants.
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2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3 such registration shall be on another appropriate form in
accordance herewith). The Registration Statement shall state, to the extent
permitted by Rule 416 under the Securities Act, that it also covers such
indeterminate number of shares of Common Stock as may be required to effect
exercises of Repricing Rights and exercise of the Warrants, in each case to
prevent dilution resulting from stock splits, stock dividends or similar
events, or by reason of changes in the Repricing Rate in accordance with the
terms of the Purchase Agreement or by reason of changes in the Warrant Exercise
Price (as defined in the Warrants) in accordance with the terms of the
Warrants. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (the "Effectiveness Period"),
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is pursuant to a
Blackout Period permitted hereunder, required under applicable law or the
Company has filed a post-effective amendment to the Registration Statement and
the Commission has not declared it effective. The aggregate number of
Registrable Securities under a Registration Statement shall be allocated among
Holders pro rata based on the total number of Registrable Securities issued or
issuable as of the date such Registration Statement is declared effective by
the Commission.
(b) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an Underwritten Offering.
In such event, and, if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold
in an Underwritten Offering, the investment banker in interest that will
administer the offering will be selected by the Holders of a majority of the
Registrable Securities included in such offering upon consultation with the
Company. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided
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in any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
(d) If (i) a Registration Statement covering all
Registrable Securities is not filed on or before the Filing Date, or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Securities Exchange Act
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed" or is not subject to further review; or (iii) a
Registration Statement covering all Registrable Securities is not declared
effective by the Commission on or before the Effectiveness Date, or (iv) if,
after the Registration Statement has been declared effective by the Commission,
the Registration Statement is either not effective as to all Registrable
Securities throughout the Effectiveness Period or the Holders are not permitted
for any reason to make sales thereunder during such period, except that days
that a Registration Statement is not effective or unavailable as to all
Registrable Securities (1) because of a Blackout Period hereunder or (2)
because of changes required by the Holders in the Registration Statement with
respect to information relating to the Holders, including without limitation
changes to the plan of distribution (any such failure or breach being referred
to as an "Event," and for purposes of clauses (i) and (iii) the date on which
such Event occurs, or for purposes of clause (ii) the date on which such five
(5) day period is exceeded, being referred to as "Event Date"), then, in any
such case, as partial relief for the damages suffered therefrom by the Holders
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Holder an amount, in cash, as
liquidated damages and not as a penalty, on the Event Date, equal to 2.0% of
the aggregate Purchase Price paid by each Holder, and, on the first day of each
month following the Event Date until the triggering Event in cured, 2.0% of the
aggregate Purchase Price paid by each Holder, on a cumulative basis. The
payments to which a Holder shall be entitled pursuant to this Section are
referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be calculated on a cumulative basis and paid within five
Business Days of the Event Date and each monthly anniversary thereof. If the
Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of 2.0% per month
(or the maximum rate permitted by law), prorated for partial months, until paid
in full. If the Company fails to pay the Registration Delay Payments,
including any interest thereon, within 15 Business Days of the applicable
payment date, then the Holder entitled to such payments shall have the right at
any time, so long as the Company continues to fail to make such payments, to
require the Company, upon written notice, to immediately issue, in lieu of the
Registration Delay Payments, including any interest thereon, the number of
shares of Common Stock (the "Registration Delay Payment Shares") equal to the
quotient of (X) the sum of the Registration Delay Payments and all interest
accrued thereon, divided by (Y) the lowest Closing Bid Price on any Trading Day
during the period beginning on and including the date the Registration Delay
Payments were due and payable and ending on and including the date the Holder
delivers written notice to the Company of its election to receive shares of
Common Stock in lieu of the Registration Delay Payments.
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3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to
the Filing Date, a Registration Statement on Form S-3 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3
such registration shall be on another appropriate form in accordance herewith,
or, in connection with an Underwritten Offering hereunder, such other form
available to the Company and reasonably acceptable to the Holders) which shall
contain the "Plan of Distribution" attached hereto as Annex A (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such underwriters,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than five (5)
days prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Business Day following the day
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(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) if at any time any
of the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the
Holders of a majority in interest of the Registrable Securities to be sold in
connection with an Underwritten Offering, (i) (subject to a permitted Blackout
Period) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as such managing
underwriters and such Holders reasonably agree should be included therein, and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
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(g) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
a Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least two Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by
Section 3(c)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on the Nasdaq
SmallCap Market ("NASDAQ") and any other Subsequent Market, if any, on which
similar securities issued by the Company are then listed as and when required
pursuant to the Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by any
managing underwriters and the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the disposition of
such
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Registrable Securities, and is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to the Company
and updates thereof addressed to each Holder and each such underwriter, in
form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of
delivery of any Registrable Securities sold pursuant thereto, use its best
reasonable efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such Underwritten Offering); and (v)
deliver such documents and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities being sold, their Special
Counsel and any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 3(l)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that any information that
is determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by such Person;
or (iii) such information becomes available to such Person from a source other
than the Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of
the Commission.
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(o) The Company may require each selling Holder to
furnish to the Company such information regarding the distribution of such
Registrable Securities and the beneficial ownership of Common Stock held by
such Holder as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration, without any
penalty otherwise provided by this Agreement, the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
If there is a significant business opportunity (including but
not limited to the acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
other similar transaction) available to the Company which the Board reasonably
determines not to be in the Company's best interest to disclose, then the
Company may suspend the right of the Holders to sell Registrable Securities
under a Registration Statement for a period not to exceed 20 Business Days
during the Effectiveness Period (the "Blackout Period").
4. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
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Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the NASDAQ and any Subsequent Market on which the Common Stock is then
listed for trading, and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of its counsel or,
if its counsel fails to timely make such determinations, counsel for the
Holders (which will not be subject to the restrictions set forth below) in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses of the Company, (iv) fees and disbursements of counsel
for the Company and Special Counsel for the Holders (which, in the case of the
Special Counsel, will not exceed $7,500), (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering
pursuant to the terms hereof, the Company shall be responsible for all costs,
fees and expenses in connection therewith, except for the fees and
disbursements of the Underwriters (including any underwriting commissions and
discounts) and their legal counsel and accountants. By way of illustration
which is not intended to diminish from the provisions of Section 4(a), the
Holders shall not be responsible for, and the Company shall be required to pay
the fees or disbursements incurred by the Company (including by its legal
counsel and accountants) in connection with, the preparation and filing of a
Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the
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fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for
inclusion in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus, or in
any amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the "Indemnifying
Party") in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it
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shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party; provided,
however, that the Indemnifying Party shall be responsible for the fees and
expenses of one counsel for all such Indemnified Parties unless an Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent all such Indemnified Parties, in
which case such Indemnified Party shall be permitted, at the expense of the
Indemnifying Party, to employ separate counsel). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied
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by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in Schedule 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the right to request the Company to register any securities of the Company
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement
(so long as the
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Company is in compliance with its registration obligations hereunder and the
restrictions relating to registration of securities set forth in the Purchaser
Agreement this sentence will not operate to restrict the Company).
(c) No Piggyback on Registrations. Except as and to the
extent specified in Schedule 6(c) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there
is not an effective Registration Statement covering all of the Registrable
Securities and the Underlying Shares, the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send to each holder of
Registrable Securities written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such holder requests to be
registered; provided, however, that the Company shall not be required to
register any Registrable Securities pursuant to this Section 7(d) that are
eligible for sale pursuant to Rule 144(k) of the Commission. Any registration
statement referred to in this Section 6(d) may be withdrawn at any time by the
Company. The piggy-back rights of the Holders pursuant to this Section 6(d)
shall only be available at times when there is not then an effective
Registration Statement which the Holders are permitted to utilize and that
covers the resale of all Registrable Securities then outstanding.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least two-thirds of the then
outstanding Registrable Securities; provided, however, that, for the purposes
of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:00 p.m. (New York time) on a
Business Day, (iii) the
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Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:00 p.m. (New York time) on any date and earlier than 11:59
p.m. (New York time) on such date; or (iv) upon receipt, when delivered by a
reputable overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Queen Sand Resources, Inc.
0000 Xxx Xxxx, Xxxxx 000, XX#00
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx
and
Queen Sand Resources, Inc.
00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
With copies to: Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Boeing
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers attached to the Purchase Agreement.
Each party shall provide five days' prior written notice to the other
party of any change in address or facsimile number.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company or
such other address as may be designated in
writing hereafter, in the same manner, by
such Person.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights
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hereunder in the manner and to the Persons as permitted under this Agreement
and the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of
each Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by each Holder to any Affiliate of such
Holder, any other Holder or Affiliate of any other Holder if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities
Act and applicable state securities laws, (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the
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18
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or its Affiliates (other than any Holder or transferees or
successors or assigns thereof if such Holder is deemed to be an Affiliate
solely by reason of its holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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19
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
QUEEN SAND RESOURCES, INC.
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Name:
Its:
JNC OPPORTUNITY FUND LTD.
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Name:
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, LLC
By: /s/ AUTHORIZED SIGNATORY
-----------------------------
Name:
Title:
CSM GMBH
By: /s/ AUTHORIZED SIGNATORY
-----------------------------------
Its:
Name:
20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
QUEEN SAND RESOURCES, INC.
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
Title: Executive Vice President
THOMSON KERNAGHAN & CO, LTD., AS AGENT
By: /S/ XXXX XXXXXXXXX
----------------------------------
Name: Xxxx Xxxxxxxxx
Title: Vice President and Director
21
Thomson Kernaghan & Co., Ltd. is executing this Agreement as Agent for
the following investors:
Sovereign Partners, LP $ 4,000,000
c/o Southridge Capital Management LLC
Executive Xxxxxxxx - Xxxxx 00
90 Grove Street
Ridgefield, Connecticut 06877
Dominion Capital Fund Ltd. $ 2,500,000
c/o Citco Fund Service Ltd.
Bahamas Financial Center
P.O.B. CB 13146
Nassau, Bahamas
Canadian Advantage L.P. $ 500,000
c/o Thomson Kernaghan & Co., Ltd.
000 Xxx Xxxxxx
Xxxxx 0000 - 10th Floor
Toronto, Ontario M5H 2V2
Advantage (Bermuda) Fund, Ltd. $ 500,000
Washington Mall
0xx Xxxxx
Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
Each investor expressly disclaims beneficial ownership in any
securities owned by any other investor for whom Thomson Kernaghan & Co., Ltd.
is acting as agent.
22
Annex A
PLAN OF DISTRIBUTION
The Selling Stockholders, their pledgees, donees, transferees or other
successors-in-interest, may, from time to time, sell all or a portion of the
shares of Common Stock being registered hereunder (the "Shares") in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders by one or more of the following methods, without limitation: (a)
block trades in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of the
applicable exchange, (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (e) privately negotiated transactions,
(f) short sales, (g) a combination of any such methods of sale and (h) any
other method permitted pursuant to applicable law.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
Shares in connection therewith or in settlement of securities loans. If the
Selling Stockholders engage in such transactions, the applicable conversion
price may be affected. From time to time the Selling Stockholders may pledge
their Shares pursuant to the margin provisions of its customer agreements with
its brokers. Upon a default by the Selling Stockholders, the broker may offer
and sell the pledged Shares from time to time.
In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate in such
sales. Brokers or dealers may receive commissions or discounts from the
Selling Stockholders (or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be negotiated
which are not expected to exceed those customary in the types of transactions
involved. Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such Shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Stockholder, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer commitment to the Selling Stockholders.
Broker-dealers who acquire Shares as principal may thereafter resell such
Shares from time to time in transactions (which may involve block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above. The Selling Stockholders may also sell the
Shares in accordance with Rule 144 under the Securities Act, rather than
pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by
23
such broker-dealers or agents and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements of one counsel
(not to exceed $7,500) to the Selling Stockholders. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
[such other disclosure as may be required
pursuant to applicable law]
