EXHIBIT 2
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement ("Agreement") dated as of May 6, 1997 is by
and among Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxx, Xxxxx X. Xxxx, Xxxxxx X. Xxxxxxx
(each, a "Management Stockholder" and collectively, the "Management
Stockholders"), EIBOC Investments Ltd., a corporation organized under the laws
of Barbados ("EIBOC"), Queen Sand Resources, Inc., a Delaware corporation (the
"Company"), and Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI"). Initially capitalized terms used but not
otherwise defined herein have the meanings ascribed to such terms in the
Securities Purchase Agreement dated as of March 27, 1997 between the Company and
JEDI (the "Purchase Agreement").
WHEREAS, JEDI and the Company have entered into the Purchase Agreement
pursuant to which JEDI will purchase certain securities of the Company; and
WHEREAS, EIBOC is the legal owner of 6,600,000 shares of Common Stock which
are represented by certificate no. 3949 (the "Shares"); and
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of JEDI and the Company to consummate the
transactions contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFERS OF SHARES.
(a) No Stockholder shall, without the prior written consent of JEDI,
Transfer any of the Shares or any interest therein except as
specifically permitted by Section 1(b) or (c) of this Agreement.
For purposes of this Agreement, the term "Stockholder" means
EIBOC, the Management Stockholder and any Person who is required
by the terms of this Agreement to execute an Adoption Agreement,
as described in the following sentence and the term "Transfer"
means any direct or indirect sale, assignment, donation,
transfer, devise, pledge, hypothecation, encumbrance or other
disposition of any shares or any interest therein. Any Person
who is required by the terms of this Agreement to become a party
to this Agreement shall do so by executing an Adoption Agreement
in the form attached as Exhibit A or in any other form
satisfactory to the Company and JEDI, whereupon such person or
entity shall be deemed a "Stockholder" and shall have all of the
rights and obligations of a Stockholder under this Agreement and
the Shares or any
interest therein held by any such Person shall be subject to the
provisions hereof.
(b) Notwithstanding the restrictions contained in paragraph (a) of
this Section 1, after October 1, 1997 (i) any Stockholder may
Transfer Shares, provided that the number of Shares to be
Transferred together with the number of all Shares Transferred
by all Stockholders during the preceding twelve months does not
exceed the lesser of (x) four percent of the shares of Common
Stock outstanding as shown by the most recent report or
statement published by the Company and filed with the
Commission, (y) four times the average weekly reported volume of
trading, excluding any trades made by Stockholders, in Common
Stock on all national securities exchanges and/or reported
through the automated quotation system of a registered
securities association during the four calendar weeks preceding
the date of Transfer and (z) four times the average weekly
volume of trading, excluding any trades made by Stockholders, in
Common Stock reported through the consolidated transaction
reporting system, contemplated by Rule 11Aa3-1 under the
Exchange Act during the four-week period specified in clause (y)
of this paragraph (b); and (ii) Stockholders may Transfer Shares
in a registered underwritten public offering of Common Stock;
provided, however, that no Stockholder may transfer Shares
pursuant to this paragraph (b) if after such transfer the
Management Stockholders would beneficially own less than
4,950,000 Shares in the aggregate, subject (1) to a
proportionate adjustment in the event of a stock split, reverse
stock split, combination of shares, stock dividend or
distribution or other similar change in the outstanding shares
of Common Stock and (2) reduction by the number of Shares
Transferred in accordance with paragraph (d) of this Section 1
to the estate of a deceased Management Stockholder or to a
Disabled Management Stockholder. As used herein, the term
"beneficial owner" shall have the meaning set forth in paragraph
(a)(2) of Rule 16a-1 under the Exchange Act.
(c) Nothing in this Section 1: (i) shall prevent any Stockholder
from (x) voting their Shares or other Voting Securities in any
vote of stockholders of the Company on a merger or consolidation
of the Company with or into any other Person, (y) Transferring
their Shares in exchange for consideration payable in respect of
such Shares in connection with a merger or consolidation of the
Company with or into any other Person or (z) Transferring their
Shares pursuant to a tender or exchange offer that the Board of
Directors of the Company endorses or does not oppose, (ii) shall
prevent EIBOC from Transferring Shares to the Management
Stockholders in proportion to their percentage beneficial
interests in the EIBOC Shares, (iii) shall prevent a Management
Stockholder from Transferring Shares to his Family Group;
provided, that no Transfer may be made to a Management
Stockholder's Family Group until the transferee has executed an
Adoption Agreement agreeing in be bound by the terms of this
Agreement. "Family
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Group" means, with respect to a Management Stockholder, (x) the
spouse of the Management Stockholder, (y) any entity of which
the Management Stockholder or his spouse legally and
beneficially owns 100% of the equity interests, provided such
interests are not transferrable and provided further that
concurrently with such Transfer, such entity agrees in writing
with JEDI that it will not issue any equity interest to any
Person other than the Management Stockholder and his spouse, or
(z) any trust solely for the benefit of the Management
Stockholder, the Management Stockholder's spouse, and/or their
respective ancestors and/or descendants, including any
descendants by adoption; provided, however, that the trustee or
trustees (including any substitute or replacement trustee or
trustees) shall have been approved by JEDI, which approval may
not be unreasonably withheld, or (iv) shall prevent EIBOC from
transferring or otherwise allocating any Shares to Xxxxxx X.
Xxxxxxx.
(d) Notwithstanding the restrictions contained in paragraph (a) or
(b) of this Section 1, upon the death or Disability of a
Management Stockholder, EIBOC may Transfer Shares to the estate
of the Management Stockholder or a Disabled Management
Stockholder, or the Disabled Management Stockholder's personal
representative, in proportion to his percentage beneficial
interest in the Shares owned by EIBOC. "Disability" shall exist,
and a Management Stockholder shall be "Disabled," if such
Management Stockholder becomes incapacitated by accident,
sickness or other circumstance which renders him mentally or
physically incapable of, or would have been incapable of, had he
been an employee of the Company at the time he became disabled,
performing the duties and services required of the Management
Stockholder under the Employment Agreement between the Company
and such Management Stockholder for a period of 120 consecutive
days, or if, in any 12-month period, for a period of 180 days,
regardless of whether or not such days are consecutive, as
determined in good faith by the Company's Board of Directors.
2. RESTRICTIONS ON TRANSFER BY JEDI.
(a) JEDI agrees that until the second anniversary of the date of
this Agreement and except pursuant to its registration rights
contained in the Registration Rights Agreement, it will not
Transfer any shares of Common Stock or other securities that are
convertible into or exchangeable or exercisable for Common Stock
("Common Stock Equivalents") to any Person that is not an
Affiliate of JEDI except in blocks of at least 600,000 shares of
Common Stock or blocks of Common Stock Equivalents that are
convertible into or exchangeable or exercisable for at least
600,000 shares of Common Stock.
(b) JEDI agrees that, until the second anniversary of the date of
this Agreement and except pursuant to its registration rights
contained in the Registration
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Rights Agreement, it will not Transfer any shares of Common
Stock or Common Stock Equivalents to any Person that is not an
Affiliate of JEDI without first providing the Company and the
Management Stockholders the right to purchase the shares to be
Transferred in accordance with the following provisions:
(i) If JEDI desires to Transfer shares of Common Stock or
Common Stock Equivalents to a Person that is not an Affiliate of JEDI, JEDI
shall deliver to the Company and, provided the Management Stockholders
beneficially own more than 10% of the voting power of all the voting power
of all the outstanding Voting Securities of the Company, to each of the
Management Stockholders a written notice (a "Transfer Notice"), which shall
specify the proposed transferee, the number of shares of Common Stock or
Common Stock Equivalents to be Transferred (the "Subject Shares"), the
proposed consideration to be paid therefor (the "Proposed Sale Price"), and
other material terms of the proposed Transfer, and which notice shall
include a copy of any agreement with respect to the proposed Transfer.
(ii) The Company shall have the right, for a period of thirty
days following its receipt of a Transfer Notice to elect to acquire all,
but not less than all, of the Shares specified in the Transfer Notice at a
cash price equal to the Proposed Sale Price or, at the Company's election
if the Proposed Sale Price consists of noncash consideration, for
substantially identical consideration The Company may exercise the
foregoing right by delivering to JEDI, within thirty days after receipt of
the Transfer Notice, written notice (an "Acceptance Notice") of its
intention to purchase the Subject Shares. The closing of any acquisition
of Subject Shares by the Company shall be consummated within five Business
Days following delivery of the Acceptance Notice, at the principal offices
of JEDI (unless otherwise mutually agreed), at which time the purchase
price (in the form of a wire transfer to an account designated by JEDI or,
if other than cash, in a form reasonably acceptable to JEDI) shall be
delivered to JEDI or its representative and JEDI shall deliver to the
Company certificates representing the Subject Shares, duly endorsed for
transfer or accompanied by duly executed stock powers.
(iii) If the Company elects not to acquire the Subject Shares, so
long as the Management Stockholders beneficially own, in the aggregate,
Capital Stock of the Company representing more than 10% of the voting power
of all the outstanding Voting Securities of the Company, the Management
Stockholders shall have the right to acquire all, but not less than all, of
the Subject Shares on the same terms as the Company could acquire the
Subject Shares, as provided in paragraph (b), by delivering an Acceptance
Notice, signed by each Management Stockholder and specifying the number of
Subject Shares to be purchased by each Management Stockholder, to JEDI
within thirty days following receipt by the Company of a Transfer Notice.
The right to purchase Subject Shares shall be allocated among the
Management Stockholders in a manner determined by the Management
Stockholders.
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(iv) If neither the Company nor the Management Stockholders
deliver an Acceptance Notice within thirty days after delivery of the
Transfer Notice or the party delivering an Acceptance Notice fails to
complete the purchase of the Subject Shares within five Business Days of
delivery of the Acceptance Notice, JEDI shall be free to consummate the
proposed Transfer on the terms set forth in the Transfer Notice, provided
the proposed Transfer of the Subject Shares on the terms set forth in the
Transfer Notice is consummated within 90 days after the date of receipt of
the Transfer Notice.
3. REPRESENTATIONS OF MANAGEMENT STOCKHOLDERS. Xxxxxx X. Xxxxxx, Xxxxx
X. Xxxx and Xxxxxx X. Xxxx jointly and severally represent to JEDI that EIBOC is
the sole legal owner of the Shares.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EIBOC. EIBOC hereby
represents, warrants and agrees with JEDI as follows:
(a) EIBOC is a corporation duly organized, validly existing and in
good standing under the laws of Barbados. EIBOC (i) has
conducted no business since its formation other than ownership
of the Shares, (ii) owns the Shares free and clear of all Liens,
and (iii) has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement.
(b) This Agreement has been duly executed on behalf of EIBOC and
constitutes the legal, valid and binding obligation of EIBOC,
enforceable against it in accordance with its terms.
(c) ATC is the sole holder of Capital Stock of EIBOC and managing
director of EIBOC, with sole power and authority to act on its
behalf.
(d) The authorized Capital Stock of EIBOC consists of an unlimited
number of shares, 120 of which are outstanding and represented
by certificate no. 1, registered in the name of ATC. There are
no outstanding securities convertible into or exchangeable for
any shares of Capital Stock of EIBOC or any contract,
commitment, agreement, understanding or arrangement of any kind
to which EIBOC is a party relating to the issuance of any
Capital Stock of EIBOC. EIBOC owns the Shares, free and clear of
all Liens.
(e) EIBOC will not (i) issue any Capital Stock or permit any of its
Capital Stock to be Transferred, (ii) enter into any contract,
agreement, commitment, understanding or arrangement of any kind
relating to any issuance of Capital Stock of EIBOC or (iii)
engage in any trade or business or engage in any other activity
other than ownership of the Shares, provided, however, that this
subsection 4(e) shall not prohibit any Transfer to any successor
trustee of the Capital Stock of EIBOC; provided, that written
consent is obtained from JEDI, which consent shall not be
unreasonably withheld.
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5. LEGEND ON CERTIFICATES; STOP TRANSFER ORDERS. The parties hereto
agree to the placement on certificates representing securities covered by
Section 1 or Section 2 of a legend, in the form of Exhibit B attached hereto,
indicating that such securities may not be transferred except in accordance with
this Agreement and to the entry of a stop transfer order with the transfer agent
for such securities against the transfer of such securities except in accordance
with this Agreement.
6. ESCROW OF THE SHARES. On the date of this Agreement, the Shares shall
be deposited in escrow with an escrow agent pursuant to an escrow agreement
mutually acceptable to EIBOC, the Management Stockholders and JEDI, and the
Shares shall be held in such escrow until the earlier of (i) the Transfer of all
the Shares in accordance with this Agreement to a Person other than a Management
Stockholder or his Family Group, or (ii) the termination of this Agreement
pursuant to Section 10(a). Upon termination of this Agreement or if EIBOC, the
Management Stockholders and JEDI determine that a proposed Transfer of Shares
may be effected in compliance with this Agreement, then EIBOC, the Management
Stockholders and JEDI shall promptly send a notice to such escrow agent to
release the Shares to EIBOC or the Management Stockholders at the place
requested by EIBOC and the Management Stockholders.
7. ESCROW OF THE EIBOC SHARES. On the date of this Agreement, all of the
shares of issued and outstanding Capital Stock of EIBOC (the "EIBOC Shares")
shall be deposited in escrow with an escrow agent pursuant to an escrow
agreement mutually acceptable to EIBOC, the Management Stockholders and JEDI,
and the EIBOC Shares shall be held in such escrow until the earlier of (i) the
Transfer of all of the Shares in accordance with this Agreement to a Person
other than a Management Stockholder or his Family Group, or (ii) the termination
of this Agreement pursuant to Section 11(a). Upon termination of this Agreement
or if EIBOC, the Management Stockholders and JEDI agree that the EIBOC Shares
may be Transferred, then EIBOC, the Management Stockholders and JEDI shall
promptly send a notice to such escrow agent to release the EIBOC Shares to the
Management Stockholders at the place requested by the Management Stockholders.
8. PROXY. EIBOC hereby irrevocably appoints Xxxxx X. Xxxx, Xxxxxx X.
Xxxx, Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxx, collectively, as its attorney-in-
fact and proxy, with full power and substitution, to vote and otherwise act (by
written consent or otherwise) with respect to the Shares which EIBOC is entitled
to vote at any meeting of stockholders (whether annual or special and whether or
not an adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on all matters. EIBOC ACKNOWLEDGES THAT THIS PROXY IS COUPLED WITH
AN INTEREST AND IS IRREVOCABLE AND SHALL NOT BE TERMINATED BY OPERATION OF LAW
UPON THE OCCURRENCE OF ANY EVENT.
9. TRANSFERS IN VIOLATION OF AGREEMENT DEEMED FRAUDULENT. Any Transfer
of EIBOC Shares or any Shares contrary to the provisions of this Agreement and
any Transfer of any interest of any Stockholder intended to circumvent the
restrictions set forth herein or in violation of this Agreement shall be deemed
fraudulent and such Transfer shall be void ab initio and of no force and effect.
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10. MISCELLANEOUS.
(a) Except as to provisions that, by their terms, terminate earlier,
this Agreement shall terminate at the earlier of (i) the fifth
anniversary of the date of this Agreement or (ii) such time as
JEDI and its Affiliates beneficially own, in the aggregate,
Capital Stock of the Company representing less than 10% of the
voting power of all then outstanding Voting Securities of the
Company.
(b) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto.
Notwithstanding the foregoing, the rights and obligations of the
parties hereunder shall not be assignable, except that JEDI's
rights and obligations hereunder shall be assigned to an
Affiliate of JEDI if and to the extent that such Affiliate
becomes the owner of shares of Common Stock or Common Stock
Equivalents.
(c) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which counterparts, when so executed and delivered, shall be
deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement.
(d) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(e) The laws of the State of Texas shall govern this Agreement
without regard to principles of conflict of laws.
(f) Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof or affecting or impairing the validity or
enforceability of such provision in any other jurisdiction.
(g) This Agreement, together with the Purchase Agreement, and the
other Basic Documents, is intended by the parties as a final
expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein
This Agreement, the Purchase Agreement and the other Basic
Documents supersede all prior agreements and understandings
between the parties with respect to such subject matter.
(h) This Agreement may be amended only by means of a written
amendment signed by all of the parties hereto.
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(i) All notices provided for hereunder shall be given by telecopy
(confirmed by overnight delivery), air courier guaranteeing
overnight delivery or personal delivery at the following
addresses:
If to a Management Stockholder, to such Management Stockholder at:
Queen Sand Resources, Inc.
0000 Xxx Xxxx, Xxxxx 000, X.X. #00
Xxxxxx, Xxxxx 00000-0000
Telecopier: (000) 000-0000
and
Queen Sand Resources, Inc.
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Telecopier: (000) 000-0000
If to JEDI:
Joint Energy Development Investments Limited Partnership
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx Xxxxx, Director - 28th Floor
Telecopier: (000) 000-0000
If to EIBOC:
EIBOC Investments Ltd.
c/o Company Directors Ltd.
X.X. Xxx 00000
S.M.B. Cayside, 0xx Xxxxx
Xxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxx Xxxxxx
Xxxxxx Xxxxxxx VW1
Telecopier: (000) 000-0000
or to such other address as any such party may designate by notice in the manner
provided above. All such notices shall be deemed to have been delivered and
received at the time delivered by hand, if personally delivered, when receipt
acknowledged, if telecopied, and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
THE MANAGEMENT STOCKHOLDERS
/s/ XXXXXX X. XXXXXX
___________________________________
Xxxxxx X. Xxxxxx
/s/ XXXXXX X. XXXX
___________________________________
Xxxxxx X. Xxxx
/s/ XXXXX X. XXXX
___________________________________
Xxxxx X. Xxxx
/s/ XXXXXX X. XXXXXXX
___________________________________
Xxxxxx X. Xxxxxxx
EIBOC INVESTMENTS LTD.
By: /s/ XXXXXX X. XXXXXXXX
_______________________________
Name: Xxxxxx X. Xxxxxxxx
_____________________________
Title: Director
____________________________
QUEEN SAND RESOURCES, INC.
By: /s/ XXXXXX X. XXXXXX
_______________________________
Name: Xxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
and
By: /s/ XXXXXX X. XXXXXXX
_______________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chief Operating Officer
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp.,
its general partner
By: /s/ XXXXXX X. XXXXXXX
_______________________________
Xxxxxx X. Xxxxxxx
Attorney-in-Fact
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QUEEN SAND RESOURCES, INC.
SPOUSAL CONSENT
The undersigned spouse of __________________________ executes this Consent
and Agreement to acknowledge her joining the Stockholders Agreement (a copy of
which is annexed hereto) with respect to her community property interest in the
Shares, as such term is defined in the Stockholders Agreement.
WITNESS: SPOUSE:
____________________________ ____________________________
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EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Agreement") is executed by the person or entity
named as "Transferee" below pursuant to the terms of the Stockholders' Agreement
dated as of March __, 1997 ("Stockholders' Agreement"), relating to Shares of
Common Stock, $.0015 per share, of Queen Sand Resources, Inc., a Delaware
corporation. Initially capitalized terms used but not otherwise defined herein,
shall have the meanings ascribed to them in the Stockholders' Agreement.
1. Acknowledgment. Transferee acknowledges that Transferee is acquiring
certain Shares, or interest therein subject to the terms and conditions of the
Stockholders' Agreement.
2. Agreement. Transferee (a) agrees that Transferee and the Shares
acquired by Transferee shall be bound by and subject to the terms of the
Stockholders' Agreement and (b) adopts the Stockholders' Agreement with the same
force and effect as if Transferee were a "Stockholder" thereunder.
3. Notice. Any notice required or permitted by the Stockholders'
Agreement shall be given to Transferee at the address listed below Transferee's
signature.
4. Joinder. The spouse of Transferee, if applicable, executes this
Agreement to acknowledge that it is fair and in such spouse's best interests and
to bind such spouse's community interest, if any, in the Shares to the terms of
the Stockholders' Agreement.
This Agreement is executed by Transferee on .
TRANSFEREE: SPOUSE (if applicable):
____________________________ ______________________________
Signature Signature
____________________________ ______________________________
Print Name Print Name
____________________________
____________________________
Address
QUEEN SAND RESOURCES, INC.
By:
__________________________
President
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EXHIBIT B
Legend for Stock Certificates:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT DATED APRIL _____, 1997 BY AND AMONG XXXXXX X.
XXXXXX, XXXXXX X. XXXX, XXXXX X. XXXX, XXXXXX X. XXXXXXX, EIBOC
INVESTMENTS LTD., QUEEN SAND RESOURCES, INC. AND JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP AND MAY NOT BE SOLD, TRANSFERRED PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH."
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