Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
OCTOBER 30, 1998
BLACK WARRIOR WIRELINE CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-18754 11-2904094
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3748 HIGHWAY 45 NORTH, COLUMBUS, MISSISSIPPI 39701
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(Address of principal executive offices)
Registrant's telephone number, including area code: (601) 329-1047
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Fleet Capital Corporation - Amended and Restated Loan Agreement
On October 30, 1998, the Company entered into an Amended and Restated Loan
and Security Agreement (the "Amended Credit Facility") with Fleet Capital
Corporation ("Fleet") which amended and restated the Credit Facility entered
into with Fleet on March 16, 1998. Reference is made to the Company's Current
Report on Form 8-K for March 16, 1998 which contained a description of the
Credit Facility. Under the terms of the Amended Credit Facility, any and all
defaults or events of default which occurred under the prior Credit Facility
were waived.
Pursuant to the Amended Credit Facility, the Company is able to borrow,
subject to meeting certain lending conditions, a total of approximately $18.3
million. Of such amount, up to $8.0 million subject to certain limitations, is a
revolving credit loan (the "Revolving Credit Loan"), $8.25 million is a
refinancing of the outstanding term loan, approximately $345,000 is a
refinancing of outstanding equipment loans, $490,000 is a refinancing of the
loan used to finance the Petro Wireline Acquisition, $600,000 is a term loan
advanced on October 30, 1998, the proceeds of which were specified to be used to
repay suppliers for goods and services and to make interest payments on an
outstanding note of the Company in the amount of $3.0 million issued in
connection with the acquisition of Diamondback Drilling Inc. (the "Diamondback
Note"), and $600,000 is available to be borrowed subject to the Company meeting
certain conditions precedent. Except for the Revolving Credit Loan, all other
borrowings (the "Term Loan") are due to be repaid in monthly installments
commencing November 1, 1998, with all outstanding balances due and payable on
March 15, 2001. Interest on the Amended Credit Facility is equal to Fleet's base
rate plus 1.0% on the Revolving Line and Fleet's base rate plus 1.25% on the
other borrowings under the Amended Credit Facility. To the extent borrowings
under the Revolving Credit Loan are less than the amount available to be
borrowed, the Company is obligated to pay a commitment fee of 0.5% per month on
the unborrowed amount. In addition, the Company is obligated to pay a quarterly
collateral administration fee of $5,000 and a restructuring fee of $50,000 due
March 31, 1999. Amounts repaid under the Term Loan cannot be reborrowed.
Among other conditions to the closing under the Amended Credit Facility was
a requirement that a third party loan $750,000 to the Company, subordinated to
the Company's indebtedness to Fleet, subject to certain exceptions. The
additional $600,000 loan by Fleet to the Company is also conditioned, among
other things, on an
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additional $750,000 loan to the Company, also subordinated to the Company's
indebtedness to Fleet, subject to certain exceptions. See St. James Transaction,
below, for a description of the Company's agreement with SJMB, L.P., whereby it
agreed to make these loans to the Company.
The Amended Credit Facility terminates and, subject to all prepayment
obligations, the outstanding balance is due and payable on March 15, 2001. The
Amended Credit Facility can be terminated by the Company prior thereto without
prepayment penalty at any time through April 30, 1999, and thereafter subject to
a prepayment penalty, under certain circumstances, declining from 2% during the
period May 1, 1999 through March 15, 2000 to 1% during the last year the Amended
Credit Facility is outstanding. The Amended Credit Facility is secured by a
senior and prior lien against substantially all the Company's real and personal
property, including the assets acquired from Phoenix Drilling Services, Inc.,
subject to certain exceptions.
The Amended Credit Facility includes a number of affirmative and negative
covenants including requirements as to providing Fleet with access to the
Company's facilities, financial and other information, a requirement that St.
James Capital Partners, L.P. and SJMB, LP (collectively "St. James") convert not
less than $4.9 million of indebtedness owed by the Company to St. James into
capital stock of the Company no later than September 30, 1999, restrictions on
mergers, consolidations, acquisitions, limitations on total indebtedness,
restrictions on liens, subject to certain exceptions, on its properties,
restrictions on transactions with affiliates and stockholders, prohibitions
against the payment of dividends and other distributions to stockholders,
restrictions on capital expenditures, dispositions of assets and sales of
subsidiary stock, among other covenants. Such covenants also prohibit the
Company from making payments on the Diamondback Note, except that the Company is
permitted to pay interest when due, subject to certain scheduled payments of
overdue interest, and is permitted to make principal payments out of funds
derived from the issuance of capital stock or the issuance of subordinated debt.
The Company also is prohibited from making any payment with respect to the $15.4
million owing to St. James, except that so long as no default exists under the
Amended Credit Facility, interest may be paid in kind. The Amended Credit
Facility contains a number of affirmative covenants requiring the Company to
maintain compliance with various financial matters, including the maintenance of
ratios of scheduled principal payments to adjusted net earnings plus
depreciation and amortization plus interest on subordinated debt, ratios of
EBITDA (as defined) to interest expense on senior debt, ratios of total
indebtedness to tangible net worth, and certain levels of adjusted tangible net
worth, among other things. Events of default under the Amended Credit Facility
include, among other things, the failure to
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pay principal and interest on the indebtedness under the Amended Credit Facility
when due, failure to pay any other indebtedness when due, making any
misrepresentations to Fleet in any of the loan documents, breach of the
covenants contained in the Amended Credit Facility or defaults under the
security documents under the Amended Credit Facility, defaults under the terms
of other indebtedness, adverse changes in the Company's financial condition or
prospects, insolvency and other bankruptcy proceedings, the failure of St. James
to own at least 55% of the Company's issued and outstanding capital stock (on a
fully diluted basis) prior to a secondary offering of the Company's securities,
or, pursuant to a secondary public offering of capital stock of the Company, at
least 30% of the Company's issued and outstanding capital stock, on a fully
diluted basis. In the event of a default under the Amended Credit Facility, at
the option of Fleet, all amounts thereunder become immediately due and payable
and Fleet would have the right as a secured lender to foreclose against
substantially all of the Company's assets. In addition, under the cross-default
provisions of the Amended Credit Facility, a default under other indebtedness of
the Company could result in a default under the Amended Credit Facility.
Reference is made to the Amended and Restated Loan and Security Agreement
filed as an Exhibit hereto for a complete statement of its terms and conditions.
St. James Transaction
On October 30, 1998, the Company entered into an Agreement for Purchase and
Sale (the "Note Purchase Agreement") with SJMB, L.P. ("SJMB"), a Delaware
limited partnership and an affiliate of St. James Capital Partners, L.P.,
whereby SJMB agreed to purchase and the Company agreed to sell up to $2.0
million principal amount of a convertible promissory note (the "Note") due on
March 16, 2001. Through October 30, 1998, the Company borrowed $1.25 million
under the Note Purchase Agreement and the balance of $750,000 is intended to be
borrowed. Payment of principal and interest on the Note is collateralized by
substantially all the assets of the Company, subject, however, to the terms of a
subordination agreement between SJMB and Fleet. The Note bears interest at 10%
per annum and is convertible into shares of the Company's Common Stock at a
conversion price of $2.25 per share, subject to anti-dilution adjustment for
certain issuances of securities by the Company at prices per share of Common
Stock less than the conversion price then in effect, in which event the
conversion price is reduced to the lower price at which such shares were issued.
Pursuant to the Note Purchase Agreement, the Company has agreed to issue to SJMB
for nominal consideration warrants (the "Warrant") to purchase shares of Common
Stock exercisable at a price of $2.25 per share, subject to anti-dilution
adjustment for
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certain issuances of securities by the Company at prices per share of Common
Stock less than the exercise price then in effect, in which event the exercise
price is reduced to the lower price at which such shares were issued and the
number of shares issuable is adjusted upward. St. James will be issued warrants
to purchase 666 shares of Common Stock for each $1,000 borrowed under the Note
Purchase Agreement, or a maximum aggregate of warrants to purchase 1,333,333,
shares. The shares issuable on conversion of the Note and exercise of the
Warrant have demand and piggy-back registration rights under the Securities Act
of 1933. The Note Purchase Agreement grants St. James certain preferential
rights to provide future financings to the Company, subject to certain
exceptions. The Note contains various affirmative and negative covenants,
including, among others, a prohibition against the Company consolidating,
merging or entering into a share exchange with another person, with certain
exceptions, without the consent of St. James. Events of default under the Note
include, among other events, (i) a default in the payment of principal or
interest on the Note; (ii) a default in the performance of any covenant of the
Note Purchase Agreement or other agreement entered into in connection therewith
and the failure to cure such default; (iii) any representation or warranty of
the Company in the Note Purchase Agreement or other agreement entered into in
connection therewith being untrue in any material respect and such default
remains uncured; (iv) the Company defaults in the payment when due or by
acceleration of any other indebtedness having an aggregate principal amount
outstanding in excess of $100,000 and such default remains uncured; (v) a
judgment for the payment of money in excess of $100,000 is entered against the
Company; (vi) certain bankruptcy or insolvency proceedings; (vi) any person or
group of persons acquiring 40% or more of the voting power of the Company's
outstanding shares who was not the owner as of October 30, 1998; and (vii) a
merger of the Company with another person, its dissolution or liquidation or a
sale of all or substantially all its assets. A default under the SJMB note would
be a default under the notes issued to St. James Capital Partners, L.P. in June
and October 1997 and in January 1998. SJMB will receive an origination fee of 2%
of the amount borrowed in connection with the transaction.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) None required.
(b) None required.
(c) Exhibits:
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
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10.1 Amended and Restated Loan and Security
Agreement dated October 30, 1998 between the
Company and Fleet Capital Corporation
10.2 Agreement for Purchase and
Sale dated October 30, 1998
between the Company and SJMB,
L.P.
10.3 Promissory Note dated October 30, 1998 in the
principal amount of $2.0 million issued by the
Company to SJMB, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
Dated: November 13, 1998 By: /s/ William L. Jenkins
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William L. Jenkins, President
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of the
30th day of October, 1998, by and between FLEET CAPITAL CORPORATION ("Lender"),
a Rhode Island corporation with an office at 2711 North Haskell Avenue, Suite
2100, LB 21, Dallas, Texas 75204; and BLACK WARRIOR WIRELINE CORP., a Delaware
corporation ("Black Warrior"), and BOONE WIRELINE CO., INC., an Alabama
corporation ("Boone") (Black Warrior and Boone are hereinafter sometimes
referred to individually and collectively as the "Borrower"), each with its
chief executive office and principal place of business at 3748 Highway 45 North,
Columbus, Mississippi 39701. Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions. Accounting terms
not otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
PRELIMINARY STATEMENTS
A. Borrower and Lender have entered into that certain Loan and Security
Agreement, dated March 16, 1998, as amended by that certain First Amendment to
Loan and Security Agreement between Borrower and Lender dated April 21, 1998,
and as further amended by that certain Second Amendment to Loan and Security
Agreement between Borrower and Lender dated June 2, 1998 (collectively, the
"Existing Loan Agreement"); and
B. The parties hereto now desire to amend and restate the Existing Loan
Agreement by, among other things: (i) changing the names of the Term Loan,
Equipment Loan(s) and the Petro Wireline Term Loan (all as defined in the
Existing Loan Agreement) to "Term Loan A", "Term Loan B" and "Term Loan C"
respectively; (ii) adding a "Term Loan D" facility in the aggregate amount of up
to Six Hundred Thousand Dollars ($600,000); (iii) adding a "Term Loan E"
facility in the aggregate amount of up to Six Hundred Thousand Dollars
($600,000); and (iv) amending certain of the other provisions thereof, and in
that connection desire to amend and restate the Existing Loan Agreement in its
entirety, it being the intention of the parties hereto that the Revolving Credit
Loans, the Term Loan, the Equipment Loans and the Petro Wireline Term Loan (all
as defined in the Existing Loan Agreement) outstanding under the Existing Loan
Agreement to or for the account of the Borrower on the date hereof shall
continue and remain outstanding and not be repaid on the date hereof, and
accordingly, the Revolving Credit Loans, Term Loan A, Term Loan B, Term Loan C,
Term Loan D and Term Loan E (as all are defined herein) are not in novation or
discharge thereof.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties , hereto,
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intending to be legally bound, agree that the Existing Loan Agreement shall, as
of the date hereof, be amended and restated in its entirety, as follows:
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to Eighteen
Million Two Hundred Eight-Four Thousand Nine Hundred Thirty-Six Dollars
Seventy-Seven Cents ($18,284,936.77) available upon Borrower's request, as
follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. On the date hereof, the outstanding
balance of the Revolving Credit Loans (as defined in the Existing Loan
Agreement) made by the Lender under the Existing Loan Agreement shall
automatically, and without any action on the part of any Person, be deemed to be
Revolving Credit Loans hereunder. Lender agrees, during the term of this
Agreement and for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrower from time to time, as requested by Borrower
in the manner set forth in Section 3.1.1 hereof, up to a maximum principal
amount at any time outstanding equal to the Borrowing Base at such time minus
reserves, if any. Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender shall deem necessary or
appropriate, against the amount of Revolving Credit Loans which Borrower may
otherwise request under this Section 1.1.1, including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned products
or other matters for which credit memoranda are issued in the ordinary course of
Borrower's business; (ii) other sums chargeable against Borrower's Loan Account
as Revolving Credit Loans under any section of this Agreement; (iii) amounts
owing by Borrower to any Person to the extent secured by a Lien other than a
Permitted Lien on, or trust over, any Property of Borrower; (iv) all amounts of
past due rent or other charges owing at such time by Borrower to any landlord of
any premises where any of the Collateral is located; (v) real and personal
property taxes which are or may become due with respect to any of the
Collateral; and (vi) such other matters, events, conditions or contingencies as
to which Lender, in its sole credit judgment, determines reserves should be
established from time to time hereunder. Borrower hereby acknowledges that the
aggregate amount of the reserves established by Lender pursuant to Section 1.1.1
which are in effect as of the date of this Agreement equals $500,000 and that
such amount may be increased or decreased by Lender from time to time by such
amounts, and with respect to such matters, as Lender shall deem necessary or
appropriate.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely
for Borrower's general operating capital needs (including the payment of
accounts payable to trade vendors incurred for Capital Expenditures made for
Equipment purchased from such trade vendors prior to the date hereof) in a
manner consistent with the provisions of this Agreement and Applicable Law. In
no event shall any proceeds of any Revolving Credit Loans be used to: (i)
purchase or to carry, reduce, retire or refinance any Indebtedness incurred to
purchase or carry
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any margin stock (within the meaning of Regulations G or U of the Federal
Reserve Board); or (ii) make Capital Expenditures other than Capital
Expenditures made after the date hereof for Equipment acquired after the date
hereof which comply with the first and third sentences of Section 8.2.8 hereof.
1.2 Term Loans.
1.2.1 Term Loan A. On the date hereof, the outstanding balance
of the Term Loan (as defined in the Existing Loan Agreement) in the principal
amount of Eight Million Two Hundred Fifty Thousand Dollars and Five Cents
($8,250,000.05) made by the Lender under the Existing Loan Agreement shall
automatically, and without any action on the part of any Person, be deemed to be
Term Loan A hereunder and shall be repayable in accordance with the terms of the
Term A Note and secured by all of the Collateral. The proceeds of the Term Loan
A shall be used solely for purposes for which the proceeds of the Revolving
Credit Loans are authorized to be used. Borrower may not reborrow any amount
repaid with respect to the Term Loan A.
1.2.2 Term Loan B. On the date hereof, the outstanding balance of
the Equipment Loans (as defined in the Existing Loan Agreement) in the principal
amount of Three Hundred Forty-Four Thousand Nine Hundred Thirty-Six Dollars and
Seventy-Two Cents ($344,936.72) held by the Lender under the Existing Loan
Agreement shall automatically, and without any action on the part of any Person,
be deemed to be Term Loan B hereunder and shall be repayable in accordance with
the terms of the Term B Note and secured by all of the Collateral. The proceeds
of the Term Loan B, to the extent such proceeds have not already been used,
shall be used solely to finance Borrower's purchases of Equipment for use in its
business. Borrower may not reborrow any amount repaid with respect to Term Loan
B.
1.2.3 Term Loan C. On the date hereof, the outstanding balance of
the Petro Wireline Term Loan (as defined in the Existing Loan Agreement) in the
principal amount of Four Hundred Ninety Thousand ($490,000.00) held by the
Lender under the Existing Loan Agreement shall automatically, and without any
action on the part of any Person, be deemed to be Term Loan C hereunder and
shall be repayable in accordance with the terms of the Term C Note and secured
by all of the Collateral. The proceeds of the Term Loan C, to the extent such
proceeds have not already been used, shall be used solely for the acquisition of
assets of Petro Wireline. Borrower may not reborrow any amount repaid with
respect to Term Loan C.
1.2.4 Term Loan D. Lender agrees to make a term loan to Borrower
("Term Loan D") on the Closing Date in the principal amount of Six Hundred
Thousand Dollars ($600,000.00), which shall be repayable in accordance with the
terms of the Term D Note and shall be secured by all of the Collateral. The
proceeds of Term Loan D shall be used to repay Borrower's suppliers for past due
amounts owed for goods and/or services, the continued provision of which is
essential to Borrower's ability to carry on its business in the ordinary course,
and to make interest payments of the Diamondback Seller Note pursuant to Section
8.2.15 hereof. Borrower may not reborrow any amount repaid with respect to Term
Loan D. 3
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1.2.5 Term Loan E. Lender agrees, so long as no Default or Event of
Default exists, to make a term loan to Borrower ("Term Loan E") in the principal
amount of Six Hundred Thousand Dollars ($600,000.00) immediately upon Borrower's
satisfaction of all conditions precedent under Sections 9.1 and 9.2 hereof,
which date shall be no earlier than the Closing Date. Term Loan E shall be
repayable in accordance with the terms of the Term E Note and shall be secured
by all of the Collateral. The proceeds of Term Loan E shall be used to repay
Borrower's suppliers for past due amounts owed for goods and/or services, the
continued provision of which is essential to Borrower's ability to carry on its
business in the ordinary course, and to make interest payments of the
Diamondback Seller Note pursuant to Section 8.2.15 hereof. Borrower may not
reborrow any amount repaid with respect to Term Loan E.
1.3 Joint and Several Liability; Rights of Contribution.
(A) Each Borrower states and acknowledges that: (i) pursuant
to this Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity and that this Agreement reflects the establishment of credit
facilities which would not otherwise be available to such Borrower if each
Borrower were not jointly and severally liable for payment of all of the
Obligations; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this
Agreement; and (iv) Borrowers have requested and bargained for the structure and
terms of and security for the advances contemplated by this Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i)
agrees that it is jointly and severally liable to Lender for the full and prompt
payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it; and
(iii) agrees as a primary obligation to indemnify Lender on demand for and
against any loss incurred by Lender as a result of any of the obligations of any
one or more of the Borrowers being or becoming void, voidable, unenforceable or
ineffective for any reason whatsoever, whether or not known to Lender or any
Person, the amount of such loss being the amount which Lender would otherwise
have been entitled to recover from any one or more of the Borrowers.
(C) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to challenge on
any basis, including, without limitation, pursuant to any applicable fraudulent
conveyance or fraudulent transfer laws. Accordingly, as of the date hereof, the
liability of each Borrower under this Section 1.3, together with all of its
other liabilities to all Persons as of the date hereof and as of any other date
on which a transfer or conveyance is deemed to occur by virtue of this
Agreement, calculated in amount sufficient to pay its probable net liabilities
on its existing Indebtedness as the same become absolute and matured ("Dated
Liabilities") is, and is to be, less than the amount of the aggregate of a fair
valuation of its property as of such corresponding date ("Dated Assets"). To
this end, each Borrower under this Section 1.3, (i) grants to and recognizes in
each other
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Borrower, ratably, rights of subrogation and contribution in the
amount, if any, by which the Dated Assets of such Borrower, but for the
aggregate of subrogation and contribution in its favor recognized herein, would
exceed the Dated Liabilities of such Borrower or, as the case may be, (ii)
acknowledges receipt of and recognizes its right to subrogation and contribution
ratably from each of the other Borrowers in the amount, if any, by which the
Dated Liabilities of such Borrower, but for the aggregate of subrogation and
contribution in its favor recognized herein, would exceed the Dated Assets of
such Borrower under this Section 1.3. In recognizing the value of the Dated
Assets and the Dated Liabilities, it is understood that Borrowers will
recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this Section 1.3 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by reason of an arbitrary interpretation of its joint
and several obligations hereunder. In addition to and not in limitation of the
foregoing provisions of this Section 1.3, the Borrowers and Lender hereby agree
and acknowledge that it is the intent of each Borrower and of Lender that the
obligations of each Borrower hereunder be in all respects in compliance with,
and not be voidable pursuant to, applicable fraudulent conveyance and fraudulent
transfer laws.
1.4 Structure of Credit Facility. Each Borrower agrees and
acknowledges that the present structure of the credit facilities detailed in
this Agreement is based in part upon the financial and other information
presently known to Lender regarding each Borrower, the corporate structure of
Borrowers, and the present financial condition of each Borrower. Each Borrower
hereby agrees that Lender shall have the right, in its sole credit judgment, to
require that any or all of the following changes be made to these credit
facilities: (i) restrict loans and advances between Borrowers, (ii) establish
separate lockbox and dominion accounts for each Borrower, (iii) separate Term
Loan A, Term Loan B, Term Loan C, Term Loan D and/or Term Loan E into separate
loans to such of the Borrowers as shall be determined by Lender, and (iv)
establish such other procedures as shall be reasonably deemed by Lender to be
useful in tracking where Loans are made under this Agreement and the source of
payments received by Lender on such Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. The outstanding principal amount of the Loans
shall bear interest at the following rates per annum (individually called, as
applicable, an "Applicable Annual Rate"): (i) for Revolving Credit Loans, at a
fluctuating rate per annum equal to one percent (1.00%) above the Base Rate, and
(ii) for Term Loan A, Term Loan B, Term Loan C, Term Loan D and Term Loan E, at
a fluctuating rate per annum equal to one and one-fourth percent (1.25%) above
the Base Rate. The rate of interest applicable to all Loans shall increase or
decrease by an amount equal to any increase or decrease in the Base Rate,
effective as of the opening of business on the day that any such change in the
Base Rate occurs.
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2.1.2 Default Rate of Interest. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest at a rate per annum equal to two percent (2.00%)
above the Applicable Annual Rate or at such other rate per annum above the
Applicable Rate (not to exceed two percent (2.00%)) as Lender shall, in its sole
discretion, elect (the "Default Rate").
2.1.3 Maximum Interest. (A) Notwithstanding anything to the contrary
in this Agreement or otherwise, (i) if at any time the amount of interest
computed on the basis of an Applicable Annual Rate or a Default Rate would
exceed the amount of such interest computed upon the basis of the maximum rate
of interest permitted by applicable state or federal law in effect from time to
time hereafter (the "Maximum Legal Rate"), the interest payable under this
Agreement shall be computed upon the basis of the Maximum Legal Rate, but any
subsequent reduction in such Applicable Annual Rate or Default Rate, as
applicable, shall not reduce such interest thereafter payable hereunder below
the amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had been at
all times computed solely on the basis of an Applicable Annual Rate or Default
Rate, as applicable; and (ii) unless preempted by federal law, an Applicable
Annual Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the "weekly ceiling" from time to time in effect under
Chapter 303 of the Texas Finance Code (Vernon's Texas Code Annotated), as
amended from time to time (as amended, the "Texas Finance Code"). If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable in accordance with Section 3.2.2 hereof.
(B) Excess Interest. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument, document or
agreement between Borrower and Lender or default of Borrower, or the exercise by
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other Loan Document, or the arising of any contingency whatsoever, shall
entitle Lender to contract for, charge, or receive, in any event, interest
exceeding the Maximum Legal Rate. In no event shall Borrower be obligated to pay
interest exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received in excess
of the Maximum Legal Rate ("Excess Interest"), Borrower acknowledges and
stipulates that any such contract, charge, or receipt shall be the result of an
accident and bona fide error, and that any Excess received by Lender shall be
applied, first, to reduce the principal then unpaid hereunder; second, to reduce
the other Obligations; and third, returned to Borrower, it being the intention
of the parties hereto not to enter at any time into a usurious or otherwise
illegal
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relationship. Borrower recognizes that, with fluctuations in the Base
Rate and the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that (i) the credit or return of
any Excess Interest shall constitute the acceptance by Borrower of such Excess
Interest, and (ii) Borrower shall not seek or pursue any other remedy, legal or
equitable, against Lender, based in whole or in part upon contracting for,
charging or receiving of any interest in excess of the maximum authorized by
applicable law. For the purpose of determining whether or not any Excess
Interest has been contracted for, charged or received by Lender, all interest at
any time contracted for, charged or received by Lender in connection with this
Agreement shall be amortized, prorated, allocated and spread in equal parts
during the entire term of this Agreement.
(C) Incorporation by this Reference. The provisions of Section
2.1.3(B) shall be deemed to be incorporated into every document or communication
relating to the Obligations which sets forth or prescribes any account, right or
claim or alleged account, right or claim of Lender with respect to Borrower (or
any other obligor in respect of Obligations), whether or not any provision of
Section 2.1.3(B) is referred to therein. All such documents and communications
and all figures set forth therein shall, for the sole purpose of computing the
extent of the Obligations of Borrower (or any other obligor) asserted by Lender
thereunder, be automatically re-computed by Borrower or any such obligor, and by
any court considering the same, to give effect to the adjustments or credits
required by Section 2.1.3(B).
2.2 Computation of Interest and Fees. Interest and commitment fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days. For the purpose of computing interest
hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items)
one (1) Business Day after receipt by Lender of such items in Lender's account
located in Providence, Rhode Island, and Lender shall be deemed to have received
such items of payment on the date specified in Section 3.4 hereof.
2.3 Restructuring Fee. Borrower shall pay to Lender a restructuring
fee of Fifty Thousand Dollars ($50,000), which shall be fully earned and (except
to the extent otherwise required by Applicable Law) nonrefundable on the date
hereof, and shall be payable on March 31, 1999.
2.4 Commitment Fee. Borrower shall pay to Lender a commitment fee
equal to one-half percent (0.50%) per annum of the amount by which the Average
Monthly Revolving Credit Loan Balance is less than the Total Revolving Credit
Facility. The commitment fee shall be payable monthly, in arrears, on the last
day of each calendar month hereafter.
2.5 Collateral Administration Fee. Borrower shall pay to Lender a
quarterly collateral administration fee of Five Thousand Dollars ($5,000), which
fee shall be paid to Lender on each July 1, October 1, January 1, and April 1
thereafter during the term hereof.
2.6 Audit and Appraisal Fees. Borrower shall reimburse Lender for all
reasonable out-of-pocket costs and expenses incurred by Lender in connection
with audits and appraisals of
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Borrower's books and records and such other matters as Lender shall deem
appropriate. All such out-of-pocket expenses shall be payable on demand.
2.7 Reimbursement of Expenses. If, at any time or times, regardless of
whether or not an Event of Default then exists, Lender or any Participant incurs
legal or accounting expenses or any other costs or out-of-pocket expenses in
connection with (i) the negotiation and preparation of this Agreement or any of
the other Loan Documents, any amendment of or modification of this Agreement or
any of the other Loan Documents, or any sale or attempted sale of any interest
herein to any other Person; (ii) the administration of this Agreement or any of
the other Loan Documents and the transactions contemplated hereby and thereby;
(iii) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Lender, Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or Borrower's
affairs; (iv) any attempt to enforce any rights of Lender or any Participant
against Borrower or any other Person which may be obligated to Lender by virtue
of this Agreement or any of the other Loan Documents, including the Account
Debtors; or (v) any attempt to inspect, verify, protect, preserve, restore,
collect, sell, liquidate or otherwise dispose of or realize upon the Collateral;
then all such legal and accounting expenses, other costs and out of pocket
expenses of Lender shall be charged to Borrower. All amounts chargeable to
Borrower under this Section 2.7 shall be Obligations secured by all of the
Collateral, shall be payable on demand to Lender or to such Participant, as the
case may be, and shall bear interest from the date such demand is made until
paid in full at the rate applicable to Revolving Credit Loans from time to time.
Borrower shall also reimburse Lender for expenses incurred by Lender in its
administration of the Collateral to the extent and in the manner provided in
Section 6 hereof.
2.8 Bank Charges. Borrower shall pay to Lender, on demand, any and all
normal and customary fees, costs or expenses which Lender or any Participant
pays to a bank or other similar institution (including any fees paid by Lender
to any Participant) arising out of or in connection with (i) the forwarding to
Borrower or any other Person on behalf of Borrower, by Lender or any
Participant, of proceeds of loans made by Lender to Borrower pursuant to this
Agreement and (ii) the depositing for collection, by Lender or any Participant,
of any check or item of payment received or delivered to Lender or any
Participant on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan, Term
Loan C, Term Loan D or Term Loan E shall be made, or shall be deemed to be made,
in the following manner: (i) Borrower shall give Lender notice of its intention
to borrow, in which notice Borrower shall specify the amount of the proposed
borrowing and the proposed borrowing date, no later than 11:00 a.m. Dallas,
Texas time on the proposed borrowing date; provided, however, Lender shall have
the right to refuse to accept such a request or refuse to make a Revolving
Credit Loan if at such time there exists a Default or an Event of Default; and
(ii) the becoming due of any amount required to be paid under this Agreement,
under Term Notes or under any of
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the other Loan Documents, whether as principal, accrued interest, fees or other
charges, shall be deemed irrevocably to be a request by Borrower to Lender for a
Revolving Credit Loan on the due date of, and in an aggregate amount required to
pay, such principal, accrued interest, fees or other charges, and the proceeds
of any such Revolving Credit Loan may be disbursed by Lender by way of direct
payment of the relevant Obligation (whether or not any Default, Event of Default
or Out-of-Formula Condition exists at the time of or would result from such
Revolving Credit Loan) and shall bear interest at the rate of interest
applicable to Revolving Credit Loans. As an accommodation to Borrower, Lender
may permit telephonic requests for loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act upon
telephonic or electronic communications from Borrower, Lender shall have no
liability to Borrower for any loss or damage suffered by Borrower as a result of
Lender's honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to Lender telephonically
or electronically and purporting to have been sent to Lender by any individual
from time to time designated by Borrower as an authorized officer and Lender
shall have no duty to verify the origin or authenticity of any such
communication.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender
to disburse the proceeds of each Revolving Credit Loan requested, or deemed to
be requested, pursuant to this Section 3.1.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under Section 3.1.1(i) shall be disbursed
by Lender in lawful money of the United States of America in immediately
available funds, in the case of the initial borrowing, in accordance with the
terms of the written disbursement letter from Borrower, and in the case of each
subsequent borrowing, by wire transfer to such bank account as may be agreed
upon by Borrower and Lender from time to time or elsewhere if pursuant to a
written direction from Borrower; and (ii) the proceeds of each Revolving Credit
Loan requested under Section 3.1.1(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum sufficient
to pay all interest accrued on the Obligations during the immediately preceding
month and to pay all costs, fees and expenses at any time owed by Borrower to
Lender hereunder.
3.2 Payments. All payments with respect to any of the Obligations
shall be made to Lender on the date when due, in Dollars and in immediately
available funds, without any offset or counterclaim. Except where evidenced by
notes or other instruments issued or made by Borrower to Lender specifically
containing payment provisions which are in conflict with this Section 3.2 (in
which event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) except as otherwise provided in Section 3.3 hereof, the receipt by Lender or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in
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consequence of which Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that if an Out-of-Formula Condition shall exist at
any time, Borrower shall, on demand, repay the Obligations to the extent
necessary to eliminate the Out-of-Formula Condition.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first calendar day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations or
(iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations requiring
the payment of money, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or,
if no date of payment is otherwise specified in the Loan Documents, on demand.
3.3 Mandatory Prepayments; Proceeds of Sale, Loss, Destruction or
Condemnation of Collateral. If Borrower sells any of the Equipment or real
Property, or if any of the Collateral is lost or destroyed or taken by
condemnation, Borrower shall pay to Lender, unless otherwise agreed by Lender,
as and when received by Borrower and as a mandatory prepayment of the Loans (or,
at Lender's option, such of the other Obligations as Lender may elect), a sum
equal to the net proceeds (including insurance payments) received by Borrower
from such sale, loss, destruction or condemnation (other than (i) proceeds of
the disposition of Equipment otherwise permitted under Section 6.4.2 hereof
which is replaced in accordance with Section 6.4.2 hereof, and (ii) proceeds of
insurance claims or customer reimbursements for lost, damaged or destroyed
Equipment when such proceeds are used by Borrower to replace such Equipment),
and applied as follows: (i) first to accrued but unpaid interest owing on the
Loans; (ii) then to outstanding amounts under Term Loan A up to the full amount
thereof; (iii) then to outstanding amounts under Term Loan B up to the full
amount thereof; (iv) then to outstanding amounts under Term Loan C up to the
full amount thereof; (v) then to outstanding amounts under Term Loan D up to the
full amount thereof; (vi) then to outstanding amounts under Term Loan E up to
the full amount thereof; and (vii) then to outstanding amounts under the
Revolving Credit Loans up to the full amount thereof. Nothing in this Section
3.3 shall authorize Borrower to sell any of the Collateral without Lender's
prior written consent except as otherwise expressly provided elsewhere in this
Agreement.
3.4 Application of Payments and Collections. All items of payment
received by Lender by 1:00 p.m., Providence, Rhode Island time, on any Business
Day shall be deemed received on that Business Day. All items of payment received
after 1:00 p.m., Providence, Rhode Island time, on any Business Day shall be
deemed received on the following Business Day. Borrower irrevocably waives the
right to direct the application of any and all payments and
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collections at any time or times hereafter received by Lender from or on behalf
of Borrower, and Borrower does hereby irrevocably agree that Lender shall have
the continuing exclusive right to apply and reapply any and all such payments
and collections received at any time or times hereafter by Lender or its agent
against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as the
result of collections of Accounts as authorized by Section 6.2.6 hereof a credit
balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time or
times for so long as no Default or Event of Default exists. Such credit balance
shall not be applied or be deemed to have been applied as a prepayment of the
Term Loan, except that Lender may, at its option, offset such credit balance
against any of the Obligations upon and after the occurrence of an Event of
Default.
3.5 All Loans to Constitute One Obligation. All Loans shall constitute
one general Obligation of Borrower, and shall be secured by Lender's security
interest and Lien upon all of the Collateral, and by all other security
interests and Liens heretofore, now or at any time or times hereafter granted by
Borrower to Lender.
3.6 Loan Account Lender shall establish an account on its books (the
"Loan Account") and shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days after the date each accounting is deemed to
have been sent pursuant to Section 11.8 hereof. Such notice shall only be deemed
an objection to those items specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Section 4.2 hereof and Lender's
right to cease making Loans to Borrower upon or after the occurrence of any
Default or Event of Default, this Agreement shall be in effect for a period
commencing on the date hereof and ending on March 15, 2001 (the "Original
Term").
4.2 Termination.
4.2.1 Termination by Lender. Lender may terminate this Agreement
without notice as of the last day of the Original Term and at any time without
notice upon or after the occurrence of an Event of Default.
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4.2.2 Termination by Borrower. Upon (i) at least fifteen (15) days
prior written notice to Lender in the event of a termination resulting from a
secondary public offering permitted hereunder or (ii) at least sixty (60) days
prior written notice to Lender in all other circumstances, Borrower may, at its
option, terminate this Agreement; provided, however, no such termination shall
be effective until Borrower has paid all of the Obligations in immediately
available funds. Any notice of termination given by Borrower shall be
irrevocable unless Lender otherwise agrees in writing, and Lender shall have no
obligation to make any Loans on or after the termination date stated in such
notice. Borrower may elect to terminate this Agreement in its entirety only. No
section of this Agreement or type of Loan available hereunder may be terminated
singly.
4.2.3 Termination Charges. On the effective date of termination of
this Agreement for any reason, Borrower shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other charges owing under the
terms of this Agreement and any of the other Loan Documents) as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to:
(i) nothing (-0-) if termination occurs during the period from the date hereof
through and including the date which is six months from the date hereof; (ii)
two percent (2.0%) of the Total Credit Facility if termination occurs during the
period from the date which is six months and one day from the date hereof
through and including March 15, 2000; and (iii) one percent (1.0%) of the Total
Credit Facility if termination occurs during the period from March 16, 2000
through and including March 14, 2001; provided, however, that in the event the
Total Credit Facility is prepaid solely from the proceeds of a secondary public
offering of capital stock (or other securities acceptable to Lender) of Black
Warrior, Borrower shall pay to Lender an amount equal to one percent (1.0%) of
the then outstanding principal balance of the Total Credit Facility if such
secondary public offering closes during the period from the date hereof through
and including September 15, 1999, and no termination charge shall be payable if
such secondary public offering closes after September 15, 1999. If termination
occurs on the last day of the Original Term, no termination charge shall be
payable.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Lender may incur as a result of dishonored checks
or other items of payment received by Lender from Borrower or any Account Debtor
and applied to the Obligations, Lender shall, at its option, (i) have received a
written agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the Obligations
(provided, however, that such agreement shall not be required by any Person
other than Borrower in the event of a secondary public offering of capital stock
of Borrower), indemnifying Lender from any such loss or damage; or (ii) have
retained
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such monetary reserves and Liens on the Collateral for such period of time as
Lender, in its discretion, may deem necessary to protect Lender from any such
loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of all of the Obligations, Borrower hereby grants to
Lender a continuing security interest and Lien upon all of Borrower's assets,
including all of the following Property and interests in Property of Borrower,
whether now owned or existing or hereafter created, acquired or arising and
wheresoever located:
(i) All Accounts;
(ii) All Inventory;
(iii) All Equipment;
(iv) All General Intangibles;
(v) All investment property (as defined in Section 9.115 of the
Code);
(vi) All real Property;
(vii) All monies and other Property of any kind now or at any time
or times hereafter in the possession or under the control of Lender or a bailee
or Affiliate of Lender;
(viii) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (vii) above, including,
without limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral; and
(ix) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (viii)
above.
5.2 Lien Perfection; Further Assurances. To the extent not previously
executed under the Existing Loan Agreement, Borrower shall execute such UCC-1
financing statements as are required by the Code and such other instruments,
assignments or documents as are necessary to perfect Lender's Lien upon any of
the Collateral and shall take such other action as may be required to perfect or
to continue the perfection of Lender's Lien upon the Collateral. Unless
prohibited by Applicable Law, Borrower hereby authorizes Lender to execute and
file any such financing statement on Borrower's behalf. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof. At Lender's request, Borrower shall also promptly execute or cause to
be executed and shall deliver to Lender any and all documents, instruments and
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agreements deemed necessary by Lender to give effect to or carry out the terms
or intent of the Loan Documents.
5.3 Lien on Realty. The due and punctual payment and performance of
the Obligations shall also be secured by the Lien created by each Mortgage upon
all real Property of Borrower described therein. To the extent not previously
executed under the Existing Loan Agreement, each Mortgage shall be executed by
Borrower in favor of Lender and shall be duly recorded, at Borrower's expense,
in each office where such recording is required to constitute a fully perfected
Lien on the real Property covered thereby. To the extent not previously
delivered under the Existing Loan Agreement, Borrower shall deliver to Lender,
at Borrower's expense, mortgagee title insurance policies issued by a title
insurance company satisfactory to Lender, which policies shall be in form and
substance satisfactory to Lender and shall insure a valid first Lien in favor of
Lender on the Property covered thereby, subject only to those exceptions
reasonably acceptable to Lender and its counsel. Borrower shall deliver to
Lender such other documents, including, without limitation, as-built survey
prints of the real Property, as Lender and its counsel may request relating to
the real Property subject to each Mortgage.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All tangible items of Collateral,
other than Inventory in transit, such Equipment in transit as may be reasonably
necessary to perform work at locations other than the business locations set
forth on Exhibit B hereto, and only for long as may be reasonably necessary to
complete such work, motor vehicles and investment property held in an account
with a securities intermediary, shall at all times be kept by Borrower and its
Subsidiaries at one or more of the business locations set forth on Exhibit B
hereto and shall not, without the prior written approval of Lender, be moved
therefrom except, prior to an Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for (i) sales of Inventory
in the ordinary course of business; and (ii) removals in connection with
dispositions of Equipment that are authorized by Section 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability and such other risks in
such amounts and with such insurance companies as are reasonably satisfactory to
Lender. Borrower shall deliver the originals or certified copies of such
policies to Lender with satisfactory lender's loss payable endorsements, which
policies shall name Lender as sole loss payee, assignee or additional insured,
as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than thirty (30) days prior written
notice to Lender in the event of cancellation of the policy for any reason
whatsoever and a clause specifying that the interest of Lender shall not be
impaired or invalidated by any act or neglect of Borrower or the owner of the
Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy. If Borrower fails to provide and pay for such
insurance, Lender may, at its option, but shall not be required to,
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procure the same and charge Borrower therefor. Borrower agrees to deliver to
Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
Applicable Law on any of the Collateral or in respect of the sale thereof, and
all other payments required to be made by Lender to any Person to realize upon
any Collateral shall be borne and paid by Borrower. If Borrower fails to
promptly pay any portion thereof when due, Lender may, at its option, but shall
not be required to, pay the same and charge Borrower therefor. Lender shall not
be liable or responsible in any way for the safekeeping of any of the Collateral
or for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Lender's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other Person whomsoever, but the same shall be at
Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the twentieth (20th) day of each month from
and after the date hereof, Borrower shall deliver to Lender, in form acceptable
to Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of Twenty-Five
Thousand Dollars ($25,000) become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Accounts or otherwise established by Lender, Borrower shall notify Lender of
such occurrence on the first Business Day following the day such occurrence
becomes known to Borrower and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. If requested by Lender, Borrower shall execute and
deliver to Lender agings and formal written assignments of all of its Accounts
weekly or daily, which shall include all Accounts that have been created since
the date of the last assignment, together with copies of invoices or invoice
registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of Twenty-Five Thousand Dollars
($25,000) are in dispute between Borrower and any Account Debtor, Borrower shall
provide Lender with written notice thereof at the time of submission of the next
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Schedule of Accounts, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default, Lender shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorney's fees, to
Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable
to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor; provided, however, that
Lender shall not be liable for any such taxes to any governmental taxing
authority that may be due by Borrower.
6.2.4 Account Verification. Whether or not a Default or an Event
of Default has occurred, any of Lender's officers, employees or agents shall
have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, facsimile transmission or
otherwise. Borrower shall cooperate fully with Lender in an effort to facilitate
and promptly conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Borrower shall maintain a
Dominion Account pursuant to a lockbox arrangement acceptable to Lender with
such banks as may be selected by Borrower and be acceptable to Lender. Borrower
shall issue to any such banks an irrevocable letter of instruction directing
such banks to deposit all payments or other remittances received in the lockbox
to the Dominion Account for application on account of the Obligations. All funds
deposited in the Dominion Account shall immediately become the property of
Lender and Borrower shall obtain the agreement by such banks in favor of Lender
to waive any offset rights against the funds so deposited.
6.2.6 Collection of Accounts, Proceeds of Collateral. To expedite
collection, Borrower shall endeavor in the first instance to make collection of
its Accounts for Lender. All remittances received by Borrower in respect of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Lender retains the right at all times after the occurrence of a Default
or an Event of Default to notify Account Debtors that Accounts have been
assigned to Lender and to collect Accounts directly in its own name and to
charge the collection costs and expenses, including reasonable attorneys' fees
to Borrower.
6.3 Administration of Inventory. Except in the ordinary course of
business, Borrower shall keep accurate and complete records of its Inventory.
Borrower shall not return any of its Inventory to a supplier or vendor thereof,
or to any other Person, whether for cash, credit against future purchases or
then existing payables, or otherwise without prior written approval from Lender.
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6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with Section
6.4.2 hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment on which Lender has a
first Lien or any part thereof without the prior written consent of Lender;
provided, however, that the foregoing restriction shall not apply, for so long
as no Default or Event of Default exists, to (i) dispositions of Equipment
which, in the aggregate during any consecutive twelve-month period, has a fair
market value or book value, whichever is less, of Two Hundred Fifty Thousand
Dollars ($250,000) or less, provided that all proceeds thereof are remitted to
Lender for application to the Loans, or (ii) replacements of Equipment that is
substantially worn, damaged or obsolete with Equipment of like kind, function
and value, provided that the replacement Equipment shall be acquired prior to or
concurrently with any disposition of the Equipment that is to be replaced, the
replacement Equipment shall be free and clear of Liens other than Permitted
Liens that are not Purchase Money Liens, and Borrower shall have given Lender at
least five (5) days' prior written notice of such disposition.
6.4.3 Condition of Equipment. Borrower represents and warrants to
Lender that the Equipment is in good operating condition and repair, and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved,
reasonable wear and tear excepted. Borrower will not permit any of the Equipment
to become affixed to any real Property leased to Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form acceptable to Lender, or, at Lender's
discretion, a reserve for rent, acceptable to Lender, has been established, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property that is subject to a Lien unless the Lien is a Permitted Lien.
6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Revolving Credit Loans from time to
time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants and
represents to Lender and covenants with Lender that:
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7.1.1 Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit C hereto and in all other states and jurisdictions where the
character of its Properties or the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect.
7.1.2 Corporate Power and Authority. Each of Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
of Borrower or any of its Subsidiaries; (ii) contravene Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation or by-laws;
(iii) violate, or cause Borrower or any of its Subsidiaries to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to
Borrower or any of its Subsidiaries; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower or any of its Subsidiaries is a party or
by which it or its Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired by
Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each of Borrower and its Subsidiaries
enforceable against them in accordance with its respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or by principles of equity
pertaining to the availability of equitable remedies.
7.1.4 Capital Structure. Exhibit D hereto states (i) the correct
name of each of the Subsidiaries of Borrower, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by Borrower, (ii) the name of each
of Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number and nature of all outstanding Securities of
Borrower and each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower. Borrower
has good title to all of the shares it purports to own of the stock of each of
its Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. Except as set forth on Exhibit D, there are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of Borrower or any of its Subsidiaries.
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7.1.5 Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit E hereto. Except as set forth on Exhibit E,
neither Borrower nor any of its Subsidiaries has been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person.
7.1.6 Business Locations; Agent for Process. Each of Borrower's and
its Subsidiaries' chief executive office and other places of business are as
listed on Exhibit B hereto. During the preceding five-year period, neither
Borrower nor any of its Subsidiaries has had an office, place of business or
agent for service of process other than as listed on Exhibit B. Except as shown
on Exhibit B, no Inventory of Borrower or any of its Subsidiaries is stored with
a bailee, warehouseman or similar Person, nor is any Inventory consigned to or
from any Person.
7.1.7 Title to Properties; Priority of Liens. Each of Borrower and its
Subsidiaries has good and indefeasible title to and fee simple ownership of, or
valid and subsisting leasehold interests in, all of its real Property, and good
title to all of the Collateral and all of its other Property, in each case, free
and clear of all Liens except Permitted Liens. Neither Borrower nor any of its
Subsidiaries has acquired any of the Collateral from any Person (other than
purchases of Inventory and Equipment in the ordinary course of business of the
seller thereof, or through Borrower's acquisitions of Dynajet, Inc., Petrolog,
Inc., Production Well Services, Inc., Diamondback Directional, Inc., Cam
Wireline, Inc., Phoenix or Petro Wireline within the five-year period
immediately preceding the Closing Date. Borrower has paid or discharged all
lawful claims which, if unpaid, might become a Lien against any of Borrower's
Properties that is not a Permitted Lien. The Liens granted to Lender under
Section 5 hereof are first priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Lender may rely, in determining which Accounts of
Borrower are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts. Unless otherwise indicated in
writing to Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by
Borrower in the ordinary course of its business and in accordance with the terms
and conditions of all purchase orders, contracts or other documents relating
thereto and forming a part of the contract between Borrower and the Account
Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein, is
not subject to any offset, Lien, deduction, defense, dispute, counterclaim or
any other adverse condition,
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except for disputes resulting in returned goods where the amount in controversy
is deemed by Lender to be immaterial, and each such Account is absolutely owing
to Borrower and is not contingent in any respect or for any reason;
(v) Borrower has made no agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto and are reflected in the Schedules of Accounts submitted
to Lender pursuant to Section 6.2.1 hereof;
(vi) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account Debtor
thereunder (a) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (b) such Account Debtor is
Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9 Financial Statements. The Consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as of August 31, 1998, and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly the Consolidated and consolidating
financial position of Borrower and its Subsidiaries at such date and the results
of Borrower's and its Subsidiaries' operations for such periods, except that
such financial statements do not contain a statement of cash flows or notes.
Since August 31, 1998, there has been no material change in the condition,
financial or otherwise, of Borrower and its Subsidiaries, and since such date
there has been no change in the aggregate value of Equipment and real Property
owned by Borrower and its Subsidiaries, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse. The fiscal year of Borrower and each of its Subsidiaries ends on
December 31 of each year.
7.1.10 Full Disclosure. The financial statements referred to in
Section 7.1.9 hereof do not, nor does this Agreement or any other written
statement of Borrower or any of its Subsidiaries to Lender, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact or
circumstance which Borrower has failed to disclose to Lender in writing which
could reasonably be expected to have a Material Adverse Effect.
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7.1.11 Solvent Financial Condition. Each of Borrower and its
Subsidiaries is now and, after giving effect to the Loans to be made and
hereunder, at all times will be, Solvent.
7.1.12 Surety Obligations. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
7.1.13 Taxes. The federal tax identification number of each
Borrower and each of Borrower's Subsidiaries is shown on Exhibit F hereto.
Borrower and their respective Subsidiaries has filed all federal, state and
local tax returns and other reports it is required by law to file and has paid,
or made provision for the payment of, all Taxes upon it, its income and
Properties as and when such Taxes are due and payable, except to the extent any
such Taxes are being Properly Contested. The provision for Taxes on the books of
Borrower and its Subsidiaries are adequate for all years not closed by
applicable statutes, and for its current fiscal year.
7.1.14 Brokers. Except as set forth on Exhibit R, there are no
claims for brokerage commissions, finder's fees or investment banking fees in
connection with the transactions contemplated by this Agreement.
7.1.15 Patents, Trademarks, Copyrights and Licenses. Each of
Borrower and its Subsidiaries owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service marks, trade names,
copyrights, licenses and other similar rights are listed on Exhibit G hereto.
7.1.16 Governmental Consents. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it.
7.1.17 Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions of
all Applicable Laws and there have been no citations, notices or orders of
noncompliance issued to Borrower or any of its Subsidiaries under any such law,
rule or regulation. Each of Borrower and its Subsidiaries has established and
maintains an adequate monitoring system to insure that it remains in compliance
with all federal, state and local laws, rules and regulations applicable to it.
No Inventory has been produced in violation of the Fair Labor Standards Act (29
U.S.C. ss. 201 et seq.), as amended.
7.1.18 Restrictions. Neither Borrower nor any of its Subsidiaries
is a party or subject to any contract, agreement, or charter or other corporate
restriction, which has, or could reasonably be expected to have, a Material
Adverse Effect. Neither Borrower nor any of its
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Subsidiaries is a party or subject to any contract or agreement which restricts
its right or ability to incur Indebtedness, other than as set forth on Exhibit H
hereto, none of which prohibit the execution of or compliance with this
Agreement or the other Loan Documents by Borrower or any of its Subsidiaries, as
applicable.
7.1.19 Litigation. Except as set forth on Exhibit I hereto, there
are no actions, suits, proceedings or investigations pending, or to the
knowledge of Borrower, threatened, against or affecting Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of Borrower or any of its Subsidiaries. Neither Borrower nor any of
its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.20 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of Default.
Neither Borrower nor any of its Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute, a default in the payment
of any Indebtedness to any Person for Money Borrowed.
7.1.21 Leases. Exhibit J hereto sets forth a complete listing of
all capitalized leases of Borrower and its Subsidiaries and Exhibit K hereto
sets forth a complete listing of all operating leases of Borrower and its
Subsidiaries. Each of Borrower and its Subsidiaries is in full compliance with
all of the terms of each of its respective capitalized and operating leases.
7.1.22 Pension Plans. Except as disclosed on Exhibit L hereto,
neither Borrower nor any of its Subsidiaries has any Plan. Borrower and each of
its Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.23 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower or any of its Subsidiaries,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction contemplated
by this Agreement in substantially the same manner in which it has heretofore
been conducted.
7.1.24 Labor Relations. Except as described on Exhibit M hereto,
neither Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of
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Borrower's or any of its Subsidiaries' employees, or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any union
or organization.
7.1.25 Acquisition. No default has occurred under any of the
Purchase Documents.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement, and except
for such representations and warranties that by their nature are limited only to
a specific date in time.
7.3 Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of Lender,
from time to time, as often as may be reasonably requested, but only during
normal business hours, to (i) visit and inspect its Properties and the
Properties of each of its Subsidiaries, and (ii) inspect, audit and make
extracts from its books and records, and discuss with its officers, its
employees and its independent accountants, Borrower's and each of its
Subsidiaries' business, assets, liabilities, financial condition, business
prospects and results of operations.
8.1.2 Notices. Notify Lender in writing (i) of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading; (ii) promptly after Borrower's learning thereof, of
the commencement of any litigation affecting Borrower, any Subsidiary of
Borrower or any of their respective Properties, whether or not the claim is
considered by Borrower to be covered by insurance, and of the institution of any
administrative proceeding which if determined adversely to Borrower or any of
its Subsidiaries, would have a Material Adverse Effect; (iii) at least fifteen
(15) days prior thereto, of Borrower's opening of any new office or place of
business or Borrower's closing of any existing office or place of business; (iv)
promptly after Borrower's learning thereof, of any labor dispute to which
Borrower or any of its Subsidiaries may become a party, any strikes or walkouts
relating to any of their respective plants or other facilities, and the
expiration of any labor contract to which any of them is a party
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or by which any of them is bound; (v) promptly after Borrower's learning
thereof, of any material default by any Loan Party under any note, indenture,
loan agreement, mortgage, lease, deed, guaranty or other similar agreement
relating to any Indebtedness exceeding One Hundred Thousand Dollars ($100,000);
(vi) promptly after the occurrence thereof, of any Default or Event of Default;
(vii) promptly after the occurrence thereof, of any default by any obligor under
any note or other evidence of Indebtedness payable to Borrower or any of its
Subsidiaries; and (viii) promptly after the rendition thereof, of any judgment
rendered against any Loan Party in an amount exceeding Twenty-Five Thousand
Dollars ($25,000).
8.1.3 Financial Statements. Keep, and cause each Subsidiary to
keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and furnished to Lender
the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrower's certified public accountants concur in any
change therein and such change is disclosed to Lender and is consistent with
GAAP):
(i) not later than ninety (90) days after the close of each
fiscal year of Borrower, unqualified audited financial statements of Borrower
and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable to Lender
(except for a qualification for a change in accounting principles with which the
accountant concurs);
(ii) not later than thirty (30) days after the end of each
month hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of Borrower and its Subsidiaries as of the end of
such month and of the portion of Borrower's financial year then elapsed, on a
Consolidated and consolidating basis, certified by the principal financial
officer of Borrower as prepared in accordance with GAAP and fairly presenting
the Consolidated financial position and results of operations of Borrower and
its Subsidiaries for such month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain a
statement of cash flows or notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or reports
which Borrower and/or its Subsidiaries has made available to its shareholders
and copies of any regular, periodic and special reports or registration
statements which Borrower and/or its Subsidiaries files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan;
(v) not later than twenty (20) days after the end of each
month, or so often as requested by Lender, a detailed aged trial balance of all
accounts payable of Borrower
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existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each, and in form
acceptable to Lender; and
(vi) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Borrower's and each of its Subsidiaries' financial
condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 8.1.3, Borrower shall forward to Lender
a copy of the accountants' letter to Borrower's management that is prepared in
connection with such audited financial statements and also shall cause to be
prepared and shall furnish to Lender a certificate of the aforesaid certified
public accountants certifying to Lender that, based upon their examination of
the financial statements of Borrower and its Subsidiaries performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such Default
or Event of Default, specifying the nature thereof, and acknowledging, in a
manner satisfactory to Lender, that they are aware that Lender is relying on
such financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(i) and (ii) of this Section 8.1.3, or more frequently if requested by Lender,
Borrower shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of Exhibit N hereto executed by the chief financial
officer of Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender with copies
of all agreements between Borrower or any of its Subsidiaries and any landlord
or warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.5 Guarantor Financial Statements. In addition to the financial
statements of Borrower to be supplied pursuant to Section 8.1.3 hereof, deliver
or cause to be delivered to Lender financial statements for each Guarantor
(other than Borrower's Subsidiaries, if any) in form and substance satisfactory
to Lender, at such intervals and covering such time periods as Lender may
request.
8.1.6 Projections. No later than thirty (30) days prior to the end
of each fiscal year of Borrower, deliver to Lender projections of Borrower
(consisting of Consolidated and consolidating balance sheets, income statements
and cash flow statements, together with appropriate supporting details and
underlying assumptions) for the forthcoming three (3) years, year by year, and
for the forthcoming fiscal year, month by month.
8.1.7 Taxes. Pay and discharge, and cause each Subsidiary to pay
and discharge, all Taxes prior to the date on which such Taxes become delinquent
or penalties attach thereto, except and only to the extent that such Taxes are
being Properly Contested.
8.1.8 Compliance with Laws. Comply and cause each Subsidiary to
comply, with all Applicable Laws, including all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of all Taxes, and all
ERISA and Environmental Laws, and obtain
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and keep in force any and all licenses, permits, franchises, or other
governmental authorizations necessary to the ownership of its Properties or to
the conduct of its business, which violation or failure to obtain could
reasonably be expected to have a Material Adverse Effect.
8.1.9 Insurance. In addition to the insurance required herein with
respect to the Collateral, Borrower and each of its Subsidiaries shall maintain,
with financially sound and reputable insurers, insurance with respect to its
Properties and business against such casualties and contingencies of such type
(including product liability, business interruption, larceny, embezzlement, or
other criminal misappropriation insurance) as is customary in its business and
in such amounts as is acceptable to Lender.
8.1.10 Equity Conversion. Borrower shall cause not less than Four
Million Nine Hundred Thousand Dollars ($4,900,000) of Indebtedness owed by Black
Warrior on the date hereof to St. James to be converted into equity capital of
Black Warrior no later than September 30, 1999, on terms and conditions
satisfactory to Lender, and shall deliver written evidence thereof satisfactory
to Lender no later than five (5) Business Days thereafter.
8.1.11 Chief Financial Officer. Within ninety (90) days after the
date hereof, Black Warrior shall have in place a person to serve as its
permanent chief financial officer, who shall become an employee of Black Warrior
and who shall be acceptable to Lender in its reasonable credit judgment.
8.1.12 Acknowledgment by GECC and Navistar; Security Interest in
GECC Equipment. Borrower shall use its best efforts to cause GECC to
acknowledge, confirm and consent to Lender's security interest in and Lien upon
all Accessions to the Two GECC Wireline Trucks from time to time as being a
perfected security interest and Lien which is senior and prior to the security
interest and Lien of GECC therein, and to Borrower's granting to Lender a
perfected security interest in and Lien upon all of the GECC Equipment, with the
security interest and Lien of Lender as it pertains to the GECC Equipment (other
than Accessions to the Two GECC Wireline Trucks from time to time) being
subordinate to the security interest and Lien of GECC therein (but superior to
all other creditors), including but not limited to Lender's security interest
and Lien upon the GECC Equipment consisting of motor vehicles being noted on the
face of the certificates of title pertaining to such motor vehicles, all
pursuant to a written instrument in the form and substance of Exhibit W attached
hereto and made a part hereof, which is executed by GECC in favor of Lender and
delivered to Lender. Borrower shall use its best efforts to cause Navistar to
acknowledge, confirm and consent to Lender's security interest in and Lien upon
all Accessions to the Four Navistar Wireline Trucks from time to time as being a
perfected security interest and Lien which is senior and prior to the security
interest and Lien of Navistar therein, all pursuant to written instruments in
form and substance acceptable to Lender which are executed by Navistar in favor
of Lender and delivered to Lender.
8.1.13 Provide Information Regarding Motor Vehicles. Not later
than thirty (30) days following the date of this Agreement, Borrower shall have
delivered to GECC all administrative fees and other applications (with all
information pertaining to Lender and Borrower already completed) necessary to
document Lender's security interest in the GECC
3
<PAGE>
Equipment upon the certificates of title of vehicles which are part of the GECC
Equipment to the extent of all vehicles with respect to which GECC has its
security interest documented on the certificate of title thereof and at least
ninety percent (90%) of the orderly liquidation value (as set forth in that
certain Appraisal for GE Capital Corporation (Black Warrior Wireline
Corporation) prepared by Superior Appraisals dated November 17, 1997, a copy of
which Borrower has delivered to Lender, which assigns orderly liquidation
values) to of all such vehicles, and Borrower shall have furnished to Lender
copies of all such applications, documents and information and evidence of
delivery to GECC of all such administrative fees and items contemplated in this
Section 8.1.13 in form and substance acceptable to Lender to evidence Borrower's
compliance with this Section 8.1.13.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate,
or permit any of its Subsidiaries to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantial
part of the Properties of any Person; provided, however, that Borrower may merge
Boone into Black Warrior, so long as Black Warrior is the surviving entity of
such merger.
8.2.2 Loans. Make, or permit any of its Subsidiaries to make, any
loans or other advances of money to any Person, except for travel advances,
advances against commissions and other similar advances in the ordinary course
of business.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any of its Subsidiaries to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt having terms and conditions acceptable
to Lender which exists on the date of this Agreement;
(iii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iv) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged more than
thirty (30) days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are being Properly
Contested;
(v) Obligations to pay Rentals permitted by Section 8.2.13;
(vi) additional Subordinated Debt having terms and conditions
acceptable to Lender incurred after the date hereof not to exceed Three Million
Five Hundred Thousand Dollars ($3,500,000);
4
<PAGE>
(vii) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in the
ordinary course of business;
(viii) Indebtedness existing on the date hereof and described
on Exhibit O hereto;
(ix) Purchase Money Indebtedness (i) incurred prior to the
date of the Agreement and disclosed to Lender; or (ii) used to make Capital
Expenditures permitted under Section 8.2.8 hereof and which, in the aggregate,
as to Borrower and its Subsidiaries, does not exceed the following amounts
during the following time periods: (a) from the date hereof through December 31,
1998, $150,000; (b) from January 1, 1999 through December 31, 1999, $600,000;
(c) from January 1, 2000 through December 31, 2000, $600,000; and (d) January 1,
2001 through March 15, 2001, $150,000;
(x) additional Subordinated Debt having terms and conditions
acceptable to Lender incurred after the date hereof consisting of the First
Additional Capital Contribution and the Second Additional Capital Contribution;
and
(xi) Indebtedness not included in paragraphs (i) through (x)
above which does not exceed at any time, in the aggregate, the sum of Fifty
Thousand Dollars ($50,000).
8.2.4 Affiliate Transactions. Enter into or be a party to, or
permit any of its Subsidiaries to enter into or be a party to, any transaction
with any Affiliate or stockholder, except in the ordinary course of and pursuant
to the reasonable requirements of Borrower's or such Subsidiary's business and
upon fair and reasonable terms which are fully disclosed to Lender and are no
less favorable than would be obtained in a comparable arm's length transaction
with a Person not an Affiliate or stockholder of Borrower or such Subsidiary.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit
any its Subsidiaries to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due or being Properly Contested;
(iii) Liens arising in the ordinary course of its business by
operation of law or regulation in favor of materialmen, mechanics, carriers,
warehousemen, landlords and similar Persons, but only if (a) payment in respect
of any such Lien is not at the time required or (b) the Indebtedness secured by
such Lien is being Properly Contested and such Lien does not materially detract
from the value of the Property or materially impair the use thereof in the
operation of its business;
5
<PAGE>
(iv) Liens in existence on the date hereof securing the
Subordinated Debt permitted under Section 8.2.3(ii), but only if such Liens are
subordinated in priority and right to enforce remedies to those of Lender which
secure the Obligations pursuant to a written subordination agreement consistent
with the St. James Subordination Agreement, by the holder thereof in favor of
Lender;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) such other Liens as appear on Exhibit P hereto;
(vii) Purchase Money Liens securing Purchase Money
Indebtedness permitted under Section 8.2.3(ix) hereof;
(viii) Liens upon five offshore skids securing the Capital
Contribution; and
(ix) such other Liens as Lender may hereafter approve in
writing.
8.2.6 Subordinated Debt. Make, or permit any of its Subsidiaries
to make, any payment of all or any part of any Subordinated Debt or take any
other action or omit to take any other action in respect of any Subordinated
Debt (including, but not limited to, any amendment, supplement, or modification
of any agreement, instrument or document evidencing any such Subordinated Debt),
except in accordance with the subordination agreement relative thereto.
8.2.7 Distributions. Declare or make, or permit any of its
Subsidiaries to declare or make, any Distributions.
8.2.8 Capital Expenditures. Make Capital Expenditures (including
by way of capitalized leases), which, in the aggregate, as to Borrower and its
Subsidiaries, exceed the following amounts during the following time periods:
(a) from the date hereof through December 31, 1998, $300,000; (b) from January
1, 1999 through December 31, 1999, $1,200,000; (c) from January 1, 2000 through
December 31, 2000, $1,200,000; and (d) January 1, 2001 through March 15, 2001,
$300,000; Notwithstanding the limitation contained in the previous sentence,
Borrower may make additional Capital Expenditures in any amount if: (A) such
Capital Expenditures are fully funded (100%) by and made solely with funds
obtained by Borrower prior to the incurrence of such Capital Expenditure from:
(i) the issuance of capital stock of Borrower having terms and conditions
acceptable to Lender in its reasonable credit discretion; (ii) the issuance of
Subordinated Debt having terms and conditions acceptable to Lender in its
reasonable credit discretion; or (iii) insurance proceeds or customer
reimbursements for the replacement of fixed assets that have been lost, severely
damaged or destroyed; and (B) Borrower makes such Capital Expenditures within
fifteen (15) days after the receipt of such funds or from a separate deposit
account maintained by Borrower in which the funds generated pursuant to the
immediately preceding subclause (A) hereof are segregated until expended. Any
6
<PAGE>
Capital Expenditures made by Borrower shall be used exclusively for the
maintenance of existing fixed assets and/or to replace fixed assets that are no
longer functional or that have been lost, severely damaged or destroyed.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of,
or permit any of its Subsidiaries to sell, lease or otherwise dispose of, any of
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower or (iii) dispositions expressly authorized by this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to
issue any additional shares of its capital stock, except director's qualifying
shares.
8.2.11 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
8.2.12 Restricted Investment. Make or have, or permit any of its
Subsidiaries to make or have, any Restricted Investment.
8.2.13 Operating Leases. Become, or permit any of its Subsidiaries
to become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve (12) consecutive
months under the lease in question and all other leases under which Borrower or
any of its Subsidiaries is then lessee would exceed One Million Dollars
($1,000,000). The term "Rentals" means, as of the date of determination, all
payments which the lessee is required to make by the terms of any lease.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than its Subsidiaries or
another Borrower.
8.2.15 Diamondback Seller Note. Make, or permit any of its
Subsidiaries to make, any payment to the holder of the Diamondback Seller Note,
except that so long as at the time of any such payment no Default or Event of
Default exists: (i) Borrower may make payments of interest under the Diamondback
Seller Note which were due and unpaid on July 2, 1998 and October 2, 1998, on
the following terms: (A) on the date hereof, Borrower may make an interest
payment of Sixty-Five Thousand Dollars ($65,000); (B) on January 2, 1999,
Borrower may make an interest payment of Twenty Thousand Four Hundred
Thirty-Four Dollars ($20,434); and (C) on April 2, 1999, Borrower may make an
interest payment of Twenty-Two Thousand Nine Hundred Thirty-Four Dollars
($20,434); (ii) Borrower may make all other payments of interest as they become
due under the Diamondback Seller Note; and (iii) Borrower may make payments of
principal under the Diamondback Seller Note as they become due if: (A) such
principal payments are fully funded by and made solely with funds obtained by
Borrower prior to the incurrence of such principal payment from: (x) the
issuance of capital
7
<PAGE>
stock of Borrower having terms and conditions acceptable to Lender in its
reasonable credit discretion; or (y) the issuance of Subordinated Debt having
terms and conditions acceptable to Lender in its reasonable credit discretion;
and (B) Borrower makes any such principal payment within fifteen (15) days after
the receipt of such funds or from a separate deposit account maintained by
Borrower in which the funds generated pursuant to the immediately preceding
subclause (iii)(A) hereof are segregated until paid. Without limiting the
foregoing, in no event shall any proceeds of any Loans be used to make any
principal payment to the holder of the Diamondback Seller Note. Borrower shall
obtain a written acknowledgment executed by the holder of the Diamondback Seller
Note in favor of Lender, that such holder has reviewed and has knowledge of this
Section 8.2.15 of the Agreement, all in form and substance acceptable to Lender.
8.2.16 St. James Subordinated Debt. Make, or permit any of its
Subsidiaries to make, any payment of all or any part of any St. James
Subordinated Debt or take any other action or omit to take any other action in
respect of the St. James Subordinated Debt (including, but not limited to, any
amendment, supplement or modification of any St. James Subordinated Debt
Documents) except in accordance with the St. James Subordination Agreement.
8.3 Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that unless otherwise consented to by Lender in writing, it shall:
8.3.1 Monthly Fixed Charge Ratio. Maintain, on a Consolidated
basis, for the cumulative period set forth below, a Fixed Charge Ratio of not
less than the ratio set forth below corresponding to such period:
Period Ratio
(i) Calendar month period ending on (ii) 0.50 to 1.0
November 30,1998
(ii) Calendar month period ending on (iii) 0.50 to 1.0
December 31, 1998
8.3.2 Rolling Three Month Fixed Charge Ratio. Maintain, on a
Consolidated basis, for the cumulative period set forth below, a Fixed Charge
Ratio of not less than the ratio set forth below corresponding to such period:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
(i) One calendar month period ending on (i) 0.40 to 1.0
January 31, 1999
(ii) Two calendar month period ending
February 28, 1999 (ii) 0.50 to 1.0
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
(iii) Three calendar month period ending on (iii) 0.70 to 1.0
March 31, 1999
(iv) Three calendar month period ending on (iv) 1.05 to 1.0
April 30, 1999
(v) Three calendar month period ending on May 31, (v) 1.25 to 1.0
1999
(vi) Three calendar month period ending on (vi) 1.25 to 1.0
June 30, 1999
(vii) Three calendar month period ending on (vii) 1.25 to 1.0
July 31, 1999
(viii) Three calendar month period ending on (viii) 1.25 to 1.0
August 31, 1999
(ix) Three calendar month period ending on (ix) 1.25 to 1.0
September 30, 1999
(x) Three calendar month period ending on October (x) 1.25 to 1.0
31, 1999
(xi) Three calendar month period ending on November (xi) 1.25 to 1.0
30, 1999
(xii) Three calendar month period ending on (xii) 1.25 to 1.0
December 31, 1999
(xiii) Three calendar month period ending (xiii) 1.25 to 1.0
respectively the last day of each thereafter
occurring month
</TABLE>
8.3.3 Rolling Twelve Month Fixed Charge Ratio (with ramp-up).
Maintain, on a Consolidated basis, for the cumulative period set forth below, a
Fixed Charge Ratio of not less than the ratio set forth below corresponding to
such period:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
(i) One calendar month period ending on (i) 0.40 to 1.0
January 31, 1999
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
(ii) Two calendar month period ending on (ii) 0.50 to 1.0
February 28, 1999
(iii) Three calendar month period ending on (iii) 0.70 to 1.0
March 31, 1999
(iv) Four calendar month period ending on (iv) 0.90 to 1.0
April 30, 1999
(v) Five calendar month period ending on (v) 1.00 to 1.0
May 31, 1999
(vi) Six calendar month period ending on (vi) 1.20 to 1.0
June 30, 1999
(vii) Seven calendar month period ending on (vii) 1.20 to 1.0
July 31, 1999
(viii) Eight calendar month period ending on (viii) 1.20 to 1.0
August 31, 1999
(ix) Nine calendar month period ending on (ix) 1.20 to 1.0
September 30, 1999
(x) Ten calendar month period ending on October (x) 1.20 to 1.0
31, 1999
(xi) Eleven calendar month period ending on (xi) 1.20 to 1.0
November 30, 1999
(xii) Twelve calendar month period ending on (xii) 1.20 to 1.0
December 31, 1999
(xiii) Twelve calendar month period ending (xiii) 1.20 to 1.0
respectively the last day of each
thereafter occurring month
</TABLE>
8.3.4 Senior Interest Coverage Ratio. Achieve for the cumulative
period set forth below, a Senior Interest Coverage Ratio equal to or greater
than the ratio set forth below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
(i) One calendar month period ending on November (i) 1.50 to 1.0
30, 1998
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C>
(ii) One calendar month period ending on (ii) 1.60 to 1.0
December 31, 1998
(iii) One calendar month period ending on (iii) 1.30 to 1.0
January 31, 1999
(iv) Two calendar month period ending on February (iv) 1.40 to 1.0
28, 1999
(v) Three calendar month period ending on (v) 1.70 to 1.0
March 31, 1999
(vi) Four calendar month period ending on (vi) 1.90 to 1.0
April 30, 1999
(vii) Five calendar month period ending on May 31, (vii) 2.25 to 1.0
1999
(viii) Six calendar month period ending on June 30, (viii) 2.25 to 1.0
1999
(ix) Seven calendar month period ending on (ix) 2.50 to 1.0
July 31, 1999
(x) Eight calendar month period ending on (x) 2.50 to 1.0
August 31, 1999
(xi) Nine calendar month period ending on (xi) 2.50 to 1.0
September 30, 1999
(xii) Ten calendar month period ending on October (xii) 2.50 to 1.0
31, 1999
(xiii) Eleven calendar month period ending on (xiii) 2.50 to 1.0
November 30, 1999
(xiv) Twelve calendar month period ending on (xiv) 2.50 to 1.0
December 31, 1999
(xv) Twelve calendar month period ending (xv) 2.50 to 1.0
respectively on the last day of each
thereafter occurring month
</TABLE>
11
<PAGE>
8.3.5 Adjusted Tangible Net Worth. Maintain, as of each date set
forth below, Consolidated Adjusted Tangible Net Worth of not less than the
corresponding amount set forth below:
<TABLE>
<CAPTION>
Date Amount
<S> <C> <C>
(i) November 30, 1998 (i) $9,700,000
(ii) December 31, 1998 (ii) $10,000,000
(iii) January 31, 1999 (iii) $9,500,000
(iv) February 28, 1999 (iv) $9,200,000
(v) March 31, 1999 (v) $8,850,000
(vi) April 30, 1999 (vi) $8,500,000
(vii) May 31, 1999 (vii) $8,500,000
(viii) June 30, 1999 (viii) $8,300,000
(ix) July 31, 1999 (ix) $8,300,000
(x) August 31, 1999 (x) $8,300,000
(xi) September 30, 1999 (xi) $8,300,000
(xii) October 31, 1999 (xii) $8,500,000
(xiii) November 30, 1999 (xiii) $8,500,000
(xiv) December 31, 1999 (xiv) $8,500,000
(xv) January 31, 2000 and on the last day of each (xv) $8,500,000;
thereafter occurring month
</TABLE>
provided, however, that in the event that the Term Loan E has not been funded
and the Second Additional Capital Contribution has not been made on or before
December 31, 1998, the amount corresponding to each date on or after December
31, 1998 shall instead be the corresponding amount set forth below for such date
(except that in the event that either the Term Loan E is funded or the Second
Additional Capital Contribution is made after December 31, 1998, this proviso
shall not apply from and after the date that the same was so funded or made, as
the case may be, and instead the portion of this Section 8.3.5 which precedes
this proviso shall apply from and after such date):
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<PAGE>
<TABLE>
<S> <C> <C>
(i) December 31, 1998 (i) $9,275,000
(ii) January 31, 1999 (ii) $8,750,000
(iii) February 28, 1999 (iii) $8,450,000
(iv) March 31, 1999 (iv) $8,100,000
(v) April 30, 1999 (v) $7,750,000
(vi) May 31, 1999 (vi) $7,750,000
(vii) June 30, 1999 (vii) $7,550,000
(viii) July 31, 1999 (viii) $7,550,000
(ix) August 31, 1999 (ix) $7,550,000
(x) September 30, 1999 (x) $7,550,000
(xi) October 31, 1999 (xi) $7,750,000
(xii) November 30, 1999 (xii) $7,750,000
(xiii) December 31, 1999 (xiii) $7,750,000
(xiv) January 31, 2000 and on the last day of each (xiv) $7,750,000
thereafter occurring month
</TABLE>
8.3.6 Total Liabilities to Adjusted Tangible Net Worth. Maintain
on a Consolidated basis, as of each date set forth below, a ratio of (i)
Borrower's Total Liabilities to (ii) Borrower's Adjusted Tangible Net Worth, of
not greater than the ratio set forth below for the date corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
(i) November 30, 1998 (i) 3.65 to 1.0
(ii) December 31, 1998 (ii) 3.75 to 1.0
(iii) January 31, 1999 (iii) 3.85 to 1.0
(iv) February 28, 1999 (iv) 4.00 to 1.0
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
(v) March 31, 1999 (v) 4.25 to 1.0
(vi) April 30, 1999 (vi) 4.50 to 1.0
(vii) May 31, 1999 (vii) 4.50 to 1.0
(viii) June 30, 1999 (viii) 4.50 to 1.0
(ix) July 31, 1999 (ix) 4.50 to 1.0
(x) August 31, 1999 (x) 4.50 to 1.0
(xi) September 30, 1999 (xi) 4.50 to 1.0
(xii) October 31, 1999 (xii) 4.50 to 1.0
(xiii) November 30, 1999 (xiii) 4.50 to 1.0
(xiv) December 31, 1999 (xiv) 4.50 to 1.0
(xv) January 31, 2000 and on the last day of each (xv) 4.50 to 1.0;
thereafter occurring month
</TABLE>
provided, however, that in the event that the Term Loan E has not been funded
and the Second Additional Capital Contribution has not been made on or before
December 31, 1998, the ratio corresponding to each date on or after December 31,
1998 shall instead be the corresponding ratio set forth below for such date
(except that in the event that either the Term Loan E is funded or the Second
Additional Capital Contribution is made after December 31, 1998, this proviso
shall not apply from and after the date that the same was so funded or made, as
the case may be, and instead the portion of this Section 8.3.6 which precedes
this proviso shall apply from and after such date):
<TABLE>
<S> <C> <C>
(i) December 31, 1998 (i) 4.25 to 1.0
(ii) January 31, 1999 (ii) 4.35 to 1.0
(iii) February 28, 1999 (iii) 4.50 to 1.0
(iv) March 31, 1999 (iv) 4.75 to 1.0
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
(v) April 30, 1999 (v) 5.00 to 1.0
(vi) May 31, 1999 (vi) 5.00 to 1.0
(vii) June 30, 1999 (vii) 5.00 to 1.0
(viii) July 31, 1999 (viii) 5.00 to 1.0
(ix) August 31, 1999 (ix) 5.00 to 1.0
(x) September 30, 1999 (x) 5.00 to 1.0
(xi) October 31, 1999 (xi) 5.00 to 1.0
(xii) November 30, 1999 (xii) 5.00 to 1.0
(xiii) December 31, 1999 (xiii) 5.00 to 1.0
(xiv) January 31, 2000 and on the last day of each (xiv) 5.00 to 1.0
thereafter occurring month
</TABLE>
8.3.7 Minimum Adjusted Net Earnings From Operations. Maintain, on
a Consolidated basis, for each calendar month ending on or after the date
hereof, Adjusted Net Earnings From Operations of not less than negative Seven
Hundred Fifty Thousand Dollars ($750,000).
SECTION 9. CONDITIONS PRECEDENT
9.1 Conditions Precedent to Funding of Term Loan D and Term Loan E.
Notwithstanding any other provision of this Agreement or any of the other Loan
Documents, and without affecting in any manner the rights of Lender under the
other sections of this Agreement, Lender shall not be required to make any
fundings under either Term Loan D or Term Loan E under this Agreement unless and
until each of the following conditions has been and continues to be satisfied:
9.1.1 Documentation. Lender shall have received, in form and
substance satisfactory to Lender and its counsel, a duly executed copy of this
Agreement and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel.
9.1.2 No Default. No Default or Event of Default shall exist.
9.1.3 Other Loan Documents. Each of the conditions precedent set
forth in the other Loan Documents shall have been satisfied.
9.1.4 Articles of Incorporation. To the extent not previously
delivered pursuant to the Existing Loan Agreement, Lender shall have received a
copy of the Articles or Certificate of Incorporation of Borrower and each of its
Subsidiaries, and all amendments thereto, certified
15
<PAGE>
by the Secretary of State or other appropriate official of the jurisdiction of
Borrower's and each Subsidiary's incorporation.
9.1.5 Good Standing Certificates. Lender shall have received good
standing certificates for Borrower and each of its Subsidiaries dated as of a
recent date, issued by the Secretary of State or other appropriate official of
Borrower's and each Subsidiary's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's or any of its Subsidiary's business
activities or ownership of its Property necessitates qualification.
9.1.6 Opinion Letters. Lender shall have received a favorable,
written opinion of counsel to Borrower, as to the transactions contemplated by
this Agreement, to be in form and substance satisfactory to Lender and Lender's
counsel, in their sole discretion.
9.1.7 Insurance. To the extent not previously delivered pursuant to
the Existing Loan Agreement, Lender shall have received copies of the casualty
insurance policies of Borrower and each of its Subsidiaries, together with loss
payable endorsements on Lender's standard form of loss payee endorsement naming
Lender as loss payee and copies of Borrower's and each such Subsidiary's
liability insurance policies, together with endorsements naming Lender as a
co-insured.
9.1.8 Disbursement Letter. Lender shall have received written
instructions from Borrower directing application of proceeds of the initial
Loans made pursuant to this Agreement, and an initial Borrowing Base Certificate
from Borrower, in form satisfactory to Lender.
9.1.9 Dominion Account. To the extent not previously delivered
pursuant to the Existing Loan Agreement, Lender shall have received the duly
executed agreement establishing the Dominion Account with a financial
institution acceptable to Lender for the collection or servicing of the
Accounts.
9.1.10 Landlord Agreements. To the extent not previously delivered
pursuant to the Existing Loan Agreement, Lender shall have received all landlord
or warehouseman agreements with respect to all premises leased by Borrower and
its Subsidiaries and which are disclosed on Exhibit K hereto, except for such
leased premises as may be noted on Exhibit K, at Lender's discretion, with
respect to which Borrower and Lender have agreed on reserves in lieu thereof.
9.1.11 No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of this Agreement or the Existing Loan Agreement or the consummation of the
transactions contemplated hereby.
9.1.12 Evidence of Perfection and Priority of Liens in Collateral. To
the extent not previously delivered pursuant to the Existing Loan Agreement,
Lender shall have received copies of all filing receipts or acknowledgments
issued by any governmental authority to
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evidence any filing or recordation necessary to perfect the Liens of Lender in
the Collateral and evidence in form satisfactory to Lender that such Liens
constitute valid and perfected security interests and Liens, and that there are
no other Liens upon any Collateral except for Permitted Liens.
9.1.13 Title Insurance Policies. To the extent not previously
delivered pursuant to the Existing Loan Agreement, Lender shall have received
fully paid mortgagee title insurance policies (or binding commitments to issue
title insurance policies, marked to Lender's satisfaction to evidence the form
of such policies to be delivered after the Closing Date), in standard ALTA form
issued by a title insurance company satisfactory to Lender, each in an amount
equal to not less than the fair market value of the real Property subject to
each relevant Mortgage, insuring such Mortgage to create a valid Lien on all
real Property described therein, with no exceptions which Lender shall not have
approved in writing.
9.1.14 Environmental Site Assessments. To the extent not previously
delivered pursuant to the Existing Loan Agreement, Lender shall have received a
Phase I environmental site assessment report, upon which Lender is expressly
entitled to rely, from environmental consulting firm(s) satisfactory to Lender,
stating such firms' (i) opinion as to Borrower's compliance with all
Environmental Laws with respect to all of the real Property acquired by Black
Warrior from Phoenix pursuant to the Acquisition and the Snyder, Texas, Midland,
Texas, and Wyoming properties, and (ii) estimation of costs required to place
Borrower in compliance with all Environmental Laws with respect to such real
Property.
9.1.15 Release by St. James. St. James shall have executed and
delivered a Release and Discharge in favor of Lender substantially in the form
of Exhibit T attached hereto and made a part hereof.
9.1.16 Subordinated Debt. Lender shall have received evidence
satisfactory to it that the indebtedness of approximately $500,000 incurred by
Borrower to St. James Capital Partners, L.P., SJMB, L.P., and/or St. James
Merchant Bankers, L.P. on or about July 1998 shall have been subordinated in
right of payment and otherwise to the Obligations in a manner satisfactory to
Lender pursuant to a written subordination agreement, substantially in the form
of Exhibit U hereto, executed by St. James Capital Partners, L.P., SJMB, L.P.,
and/or St. James Merchant Bankers, L.P. in favor of Lender.
9.1.17 Forecasted Financial Information. Lender shall have received
from Borrower a pro-forma balance sheet of Borrower dated as of the date of this
Agreement and the forecasted balance sheets, income statements and sources and
uses of funds (on a month-by-month basis) of Borrower for the 15-month period
commencing on the date of this Agreement, which pro-forma balance sheet shall
fairly present the financial position of Borrower on the date of this Agreement
and which forecasted balance sheets, income statements and sources and used of
funds shall be reasonable forecasts thereof for the periods covered thereby,
based upon the assumptions set forth therein.
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9.1.18 Capital Contribution. Lender shall have received evidence
satisfactory to it that a capital contribution of an additional Seven Hundred
Fifty Thousand Dollars ($750,000) from outside parties in the form of equity or
Subordinated Debt has been made to and received by Borrower (and Borrower may,
if such capital contribution described in this Section 9.1.18 is in the form of
Subordinated Debt, grant to the contributor of such capital contribution a
security interest in the Specified Five Offshore Skids (but no other assets or
properties of Borrower), and Lender will agree to subordinate its security
interest in the Specified Five Offshore Skids to the security interest of such
contributor therein pursuant to a written subordination agreement in form and
substance acceptable to Lender).
9.2 Conditions Precedent to Funding of Term Loan E. Notwithstanding any
other provision of this Agreement or any of the other Loan Documents, and
without affecting in any manner the rights of Lender under the other sections of
this Agreement, Lender shall not be required to make any fundings under Term
Loan E under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
9.2.1 Intercreditor Agreement With GECC. Borrower shall have caused
GECC to have executed and delivered to Lender an intercreditor agreement in the
form and substance of Exhibit W attached hereto and made a part hereof.
9.2.2 Receipt by GECC of Necessary Items to Perfect Security Interest
in GECC Equipment. Borrower shall have delivered to GECC all administrative fees
and other applications (with all information pertaining to Lender and Borrower
already completed) necessary to document Lender's security interest in the GECC
Equipment upon the certificates of title of all vehicles which are part of the
GECC Equipment to the extent of all vehicles with respect to which GECC has its
security interest documented on the certificate of title thereof and at least
ninety percent (90%) of the orderly liquidation value (as set forth in that
certain Appraisal for GE Capital Corporation (Black Warrior Wireline
Corporation) prepared by Superior Appraisals dated November 17, 1997, a copy of
which Borrower has delivered to Lender, which assigns orderly liquidation
values) to of all such vehicles, and Borrower shall have furnished to Lender
copies of all such applications, documents and information and evidence of
delivery to GECC of all such administrative fees and items contemplated in this
Section 9.2.2 in form and substance acceptable to Lender to evidence Borrower's
satisfaction of the condition of this Section 9.2.2.
9.2.3 Acknowledgment of Lien on Accessions. Borrower shall have caused
Navistar to acknowledge, confirm and consent to Lender's security interest in
and Lien upon all Accessions to the Four Navistar Wireline Trucks from time to
time as being a perfected security interest and Lien which is senior and prior
to the security interest and Lien of Navistar therein, all pursuant to written
instruments in form and substance acceptable to Lender which are executed by
Navistar in favor of Lender and delivered to Lender.
9.2.4 Qualified Turnaround Consultant. Borrower shall have hired a
Qualified Turnaround Consultant (as defined below) to advise Borrower in regards
to its business and financial operations, which Qualified Turnaround Consultant
shall be selected by Borrower and
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acceptable to Lender in its reasonable credit judgment (in the event that the
Qualified Turnaround Consultant is a company, both the company and the
individuals of the company that are providing the advisory services to Borrower
shall be selected by Borrower and be acceptable to Lender in its reasonable
credit judgment). "Qualified Turnaround Consultant" means a turnaround
management consultant or corporate recovery consultant that has expertise and
experience in assisting companies experiencing operating losses and declining
liquidity.
9.2.5 Capital Contribution. Lender shall have received evidence
satisfactory to it that a capital contribution of an additional Seven Hundred
Fifty Thousand Dollars ($750,000) over and above that required by Section 9.1.18
hereof from outside parties in the form of equity or Subordinated Debt has been
made to and received by Borrower (and Borrower may, if such capital contribution
described in this Section 9.2.5 is in the form of Subordinated Debt, grant to
the contributor of such capital contribution a security interest in the
Specified Five Offshore Skids (but no other assets or properties of Borrower),
and Lender will agree to subordinate its security interest in the Specified Five
Offshore Skids to the security interest of such contributor therein pursuant to
a written subordination agreement in form and substance acceptable to Lender).
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Note. Borrower shall fail to pay any installment of
principal, interest or premium, if any, owing on the Term A Note, Term B Note,
Term C Note, Term D Note or Term E Note on the due date of such installment.
10.1.2 Payment of Other Obligations. Borrower shall fail to pay any of
the Obligations that are not evidenced by the Term A Note, Term B Note, Term C
Note, Term D Note or Term E Note on the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise).
10.1.3 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or any other Loan Party in this Agreement, any of the
other Loan Documents or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto proves to have been false
or misleading in any material respect when made or furnished or when reaffirmed
pursuant to Section 7.2 hereof.
10.1.4 Breach of Specific Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in Section 5.2, 5.3, 6.1.1,
6.1.2, 6.2, 8.1.1, 8.1.3, 8.1.11, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
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10.1.5 Breach of Other Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Lender's satisfaction within
fifteen (15) days after the sooner to occur of Borrower's receipt of notice of
such breach from Lender or the date on which such failure or neglect first
becomes known to any officer of Borrower.
10.1.6 Default Under Security Documents/Other Agreements/Purchase
Documents. Any event of default shall occur under, or any Loan Party shall
default in the performance or observance of any term, covenant, condition or
agreement contained in, any of the Security Documents, the Other Agreements or
the Purchase Documents and such default shall continue beyond any applicable
grace period.
10.1.7 Other Defaults. There shall occur any default or event of
default on the part of Borrower or any of its Subsidiaries under any agreement,
document or instrument to which Borrower or any such Subsidiary is a party or by
which Borrower or any of its Subsidiaries or any of their respective Property is
bound, creating or relating to any Indebtedness (other than the Obligations) if
the payment or maturity of such Indebtedness is or may be accelerated in
consequence of such event of default or demand for payment of such Indebtedness
is made.
10.1.8 Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9 Adverse Changes. There shall occur any material adverse change
in the financial condition or business prospects of Borrower or any Loan Party.
10.1.10 Insolvency and Related Proceedings. Any Loan Party shall cease
to be Solvent or shall suffer the appointment of a receiver, trustee, custodian
or similar fiduciary, or shall make an assignment for the benefit of creditors,
or any petition for an order for relief shall be filed by or against a Loan
Party under the Bankruptcy Code (and if, with respect to any petition filed
against any Loan Party, such proceeding shall continue for more than thirty (30)
days), or any Loan Party shall make any offer of settlement, extension or
compromise to such Loan Party's unsecured creditors generally.
10.1.11 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower, any Subsidiary of
Borrower or any Guarantor for a period which significantly affects Borrower's,
such Subsidiary's or such Guarantor's capacity to continue its business, on a
profitable basis; or Borrower, any Subsidiary of Borrower or any Guarantor shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by Borrower, such Subsidiary or such Guarantor which is necessary to
the continued or lawful operation of its business; or Borrower, any Subsidiary
of Borrower or any Guarantor shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting all or
any material part of its business affairs; or any material lease or agreement
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pursuant to which Borrower, any Subsidiary of Borrower or any Guarantor leases,
uses or occupies any Property shall be canceled or terminated prior to the
expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
10.1.12 Change of Ownership. (i) St. James shall cease to own and
control, beneficially and of record, (a) at least fifty-five percent (55.0%) of
each class of the issued and outstanding capital stock of Black Warrior (on a
fully diluted basis), prior to a secondary public offering of capital stock (or
other securities acceptable to Lender) of Black Warrior, or, (b) pursuant to a
secondary public offering of capital stock (or other securities acceptable to
Lender) of Black Warrior, at least thirty percent (30.0%) of each class of the
issued and outstanding capital stock of Black Warrior (on a fully diluted
basis); or (ii) Black Warrior shall cease to own and control, beneficially and
of record, all of the issued and outstanding capital stock of each of its
Subsidiaries, including without limitation, Boone.
10.1.13 ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower or any Guarantor is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's, such Subsidiary's or such
Guarantor's complete or partial withdrawal from such Plan.
10.1.14 Challenge to Agreement. Borrower, any Subsidiary of Borrower
or any other Loan Party, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to
Lender.
10.1.15 Repudiation of or Default Under Guaranty Agreement. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
10.1.16 Criminal Forfeiture. Borrower, any Subsidiary of Borrower or
any Guarantor shall be criminally indicted or convicted under any law that could
lead to a forfeiture of any Property of Borrower, any Subsidiary of Borrower or
any Guarantor.
10.1.17 Judgments. Any (i) money judgment is filed against Borrower,
any Subsidiary of Borrower or any Guarantor or any of their respective Property,
and such judgment shall remain unpaid, unsatisfied by insurance, and unstayed
for more than thirty (30) days, whether or not consecutive, or (ii) writ of
attachment or similar process is filed against Borrower, any Subsidiary of
Borrower or any Guarantor, or any of their respective Property, and such writ of
attachment or similar process is not bonded or secured in an amount and manner
reasonably satisfactory to lender.
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10.2 Acceleration of the Obligations. Without in any way limiting the right
of Lender to demand payment of any portion of the Obligations payable on demand
in accordance with Section 3.2 hereof, upon or at any time after the occurrence
of an Event of Default, all or any portion of the Obligations shall, at the
option of Lender and without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration, or any other further notice by Lender,
become at once due and payable and Borrower shall forthwith pay to Lender, the
full amount of such Obligations; provided, however, that upon the occurrence of
an Event of Default specified in Section 10.1.10 hereof, all of the Obligations
shall become automatically due and payable without declaration, notice or demand
by Lender.
10.3 Other Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
10.3.1 All of the rights and remedies of a secured party under the
Code or under other Applicable Law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral, and
to (i) require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Borrower agrees that any requirement of notice
to Borrower of any proposed public or private sale or other disposition of
Collateral by Lender shall be deemed reasonable notice thereof if given at least
ten (10) days prior thereto, and any such sale may be held at such locations as
Lender may designate in said notice. Lender shall have the right to conduct such
sales on Borrower's premises, without charge therefor, and such sales may be
adjourned from time to time in accordance with Applicable Law. Lender shall have
the right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, and Lender may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. The proceeds realized from the
sale of any Collateral may be applied, after allowing two (2) Business Days for
collection, first to the costs, expenses and attorneys' fees incurred by Lender
in collecting the Obligations, in enforcing the rights of Lender under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivering any Collateral; second to
the interest due upon any of the Obligations; and third, to the principal of the
Obligations. If any
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deficiency shall arise, Borrower and each Guarantor shall remain jointly and
severally liable to Lender therefor.
10.3.4 The right to exercise all of Lender's rights and remedies under
any mortgage/deed of trust with respect to any real Property forming a part of
the Collateral.
10.3.5 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule or in any Guaranty Agreement given to Lender or contained in any other
agreement between Lender and Borrower, heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, and remedies shall continue in
full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and no
Event of Default by Borrower under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times as Lender or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
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11.1.2 At such time or times upon or after the occurrence of an Event
of Default as Lender or its agent in its sole discretion may determine: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement.
11.2 Indemnity. BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND SHALL
DEFEND LENDER AND ITS DIRECTORS, OFFICERS, AGENTS, COUNSEL AND EMPLOYEES
("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES,
DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS ("LOSSES") EVER
SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON,
BUT NOT INCLUDING ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE LENDER
AND EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN CONNECTION WITH
THE INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL OR THREATENED
CLAIM, ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH COSTS OF
RESPONDING TO DISCOVERY REQUESTS OR SUBPOENAS, REGARDLESS OF WHETHER LENDER OR
SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO). WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS ASSERTED
AGAINST LENDER OR ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER ANY
ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S OR ANY OTHER PERSON'S
FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID
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OR HAZARDOUS WASTE MATERIALS OR OTHER TOXIC SUBSTANCES. BORROWER MAY SELECT
COUNSEL WITH RESPECT TO ANY LOSSES; PROVIDED, HOWEVER, EACH INDEMNIFIED PERSON
SHALL HAVE THE RIGHT TO MONITOR THE PROGRESS OF ANY CLAIMS, SUITS AND
ADMINISTRATIVE PROCEEDINGS DEFENDED BY BORROWER HEREUNDER WITH COUNSEL OF SUCH
INDEMNIFIED PERSON'S CHOICE, OR CONDUCT ITS DEFENSE THROUGH COUNSEL OF SUCH
INDEMNIFIED PERSON'S CHOICE, IN THE EVENT THAT (I) SUCH INDEMNIFIED PERSON
DETERMINES IN GOOD FAITH THAT THE CONDUCT OF ITS DEFENSE BY BORROWER COULD BE
MATERIALLY PREJUDICIAL TO SUCH INDEMNIFIED PERSON'S INTERESTS OR THAT OTHER
REASONABLE GROUNDS EXIST WHICH DEMONSTRATE A LACK OF EFFECTIVENESS OR HIGH LEVEL
OF QUALITY IN THE CONDUCT OF SUCH DEFENSE BY BORROWER, AND (II) PRIOR TO
RETAINING SUCH COUNSEL FOR SUCH PURPOSE, SUCH INDEMNIFIED PERSON SHALL CONSULT
WITH BORROWER AND SHALL ATTEMPT IN GOOD FAITH TO AGREE UPON COUNSEL TO CONDUCT
THE DEFENSE ON BEHALF OF BORROWER AND SUCH INDEMNIFIED PERSON, AND IN EACH CASE
THE FEES AND DISBURSEMENTS OF SUCH COUNSEL SHALL BE PAID BY BORROWER; PROVIDED,
HOWEVER, THAT IF SUCH MUTUAL AGREEMENT IS NOT REACHED WITHIN A REASONABLE TIME
ON SELECTING COUNSEL, THEN SUCH INDEMNIFIED PERSON MAY RETAIN ITS OWN COUNSEL AT
BORROWER'S EXPENSE. NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT,
THE OBLIGATION OF BORROWER UNDER THIS SECTION 11.2 SHALL SURVIVE THE PAYMENT IN
FULL OF THE OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
11.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including Borrower's rights, title, interests, remedies,
powers, and duties hereunder or thereunder. Borrower hereby consents to Lender's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the event of a
participation, Lender will continue to administer this Agreement and any of the
other Loan Documents as the representative of such participants. In the case of
an assignment, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as it would if it were "Lender" hereunder
and Lender shall be relieved of all obligations hereunder upon any such
assignment. Borrower agrees that it will use its best efforts to assist and
cooperate with Lender in any manner reasonably requested by Lender to effect the
sale of participations in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential Participant or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any
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provision of this Agreement shall be prohibited by or invalid under Applicable
Law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which 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 instrument.
11.8 Notice. All notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, by personal delivery against receipt, by overnight courier or
by facsimile transmissions and shall be deemed to have been validly served,
given or delivered immediately when delivered against receipt or three (3)
Business Days after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile transmission, when sent, answerback
received, in each case addressed as follows:
If to Lender: Fleet Capital Corporation
2711 North Haskell Avenue
Suite 2100, LB 21
Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile No.: (214) 828-6530
With a copy to: Patton Boggs LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Facsimile No.: (214) 871-2688
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If to Borrower: Black Warrior Wireline Corp.
3748 Highway 45 North
Columbus, Mississippi 39701
Attention: Mr. William L. Jenkins
Facsimile No.: (601) 329-1089
With a copy to: Rosen, Cook, Sledge, Davis, Carroll & Jones, P.A.
217 Rivers Road
P.O. Box 2727
Tuscaloosa, Alabama 35403-2727
Attention: James J. Sledge, Esq.
Facsimile No.: (205) 758-8358
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to Section 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender. Any written notice or demand
that is not sent in conformity with the provisions hereof shall nevertheless be
effective on the date that such notice is actually received by the noticed
party.
11.9 Lender's Consent. Whenever Lender's consent is required to be obtained
under this Agreement, any of the Other Agreements or any of the Security
Documents as a condition to any action, inaction, condition or event, Lender
shall be authorized to give or withhold such consent in its sole and absolute
discretion.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender (but
Lender shall have no obligation) to respond to usual and customary credit
inquiries from third parties concerning Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
11.12 Entire Agreement; Appendix A and Exhibits and Schedules. This
Agreement and the other Loan Documents, together with all other instruments,
agreements and certificates executed by the parties in connection therewith or
with reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements,
whether express or implied, oral or written. Appendix A and each of the Exhibits
and Schedules attached hereto are incorporated into this Agreement and by this
reference made a part hereof.
11.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
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11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN DALLAS,
DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY
OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE
LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR
LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS
COUNTY, TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
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RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (II)
PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT,
NON-PAYMENT, INTENT TO ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY
TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR
TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (IV) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (V) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
11.16 WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ITS RIGHTS UNDER
THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT SECTION 17.41 ET. SEQ.
BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWER'S OWN SELECTION,
BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. BORROWER EXPRESSLY WARRANTS AND
REPRESENTS THAT BORROWER (I) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO LENDER, AND (II) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
11.17 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
11.18 Nonapplicability of Chapter 346. Borrower and Lender hereby agree
that, except for Section 346.004 thereof, the provisions of Chapter 346 of the
Texas Finance Code (regulating
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certain revolving credit loans and revolving tri-party accounts) shall not apply
to this Agreement or any of the other Loan Documents.
11.19 Certain Matters of Construction. All references to statutes and
related regulations in this Agreement, the Other Agreements and the Security
Documents shall include any amendments of same and any successor statutes and
regulations. All references in this Agreement, the Other Agreements and the
Security Documents to any of the Loan Documents shall include any and all
modifications thereto and any and all extensions or renewals thereof.
11.20 Amendment and Restatement. This Agreement is given in amendment,
restatement, renewal and extension (and not in extinguishment or satisfaction)
of the Existing Loan Agreement. With respect to matters relating to the period
prior to the date hereof, all the provisions of the Existing Loan Agreement are
hereby ratified and confirmed and shall remain in full force and effect.
Notwithstanding anything herein to the contrary, any and all Defaults or Events
of Default which occurred under the Existing Loan Agreement prior to the date
hereof are hereby waived.
11.21 NO COUNTERCLAIMS; RELEASE OF CLAIMS; WAIVER; HOLD HARMLESS. BORROWER
REPRESENTS AND WARRANTS THAT BORROWER HAS NO SET-OFF, RECOUPMENT, COUNTERCLAIM,
DEFENSE, CROSS-COMPLAINT, CLAIM, DEMAND OR OTHER CAUSE OF ACTION OF ANY NATURE
WHATSOEVER (TOGETHER, THE "COUNTERCLAIMS") AGAINST LENDER WHICH ARISE OUT OF THE
TRANSACTIONS EVIDENCED BY THIS AGREEMENT, THE EXISTING LOAN AGREEMENT, THE
SECURITY DOCUMENTS OR THE OTHER AGREEMENTS, ANY TRANSACTIONS THAT WERE RENEWED
OR EXTENDED BY THIS AGREEMENT, THE EXISTING LOAN AGREEMENT, THE SECURITY
DOCUMENTS OR THE OTHER AGREEMENTS, ANY OTHER TRANSACTION WITH LENDER, OR WHICH
COULD BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF BORROWER'S LIABILITY
TO REPAY THE OBLIGATIONS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR
NATURE FROM LENDER, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING
OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
DECLARATION OF ANY DEFAULTS UNDER THE EXISTING LOAN AGREEMENT, THE EXERCISE OF
ANY RIGHTS AND REMEDIES UNDER THIS AGREEMENT, THE EXISTING LOAN AGREEMENT, THE
SECURITY DOCUMENTS OR THE OTHER AGREEMENTS, THE NEGOTIATION FOR AND EXECUTION OF
THIS AGREEMENT AND ANY SETTLEMENT NEGOTIATIONS. TO THE EXTENT THAT ANY
COUNTERCLAIMS MAY EXIST, WHETHER KNOWN OR UNKNOWN, SUCH ARE WAIVED AND HEREBY
RELEASED BY BORROWER. FURTHERMORE, BORROWER, ON BEHALF OF BORROWER, ITS
SUCCESSORS, AGENTS, ATTORNEYS, OFFICERS, DIRECTORS, ASSIGNS AND PERSONNEL AND
LEGAL REPRESENTATIVES, DOES HEREBY
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RELEASE, REMISE, ACQUIT AND FOREVER DISCHARGE LENDER AND LENDER'S EMPLOYEES,
AGENTS, REPRESENTATIVES, CONSULTANTS, ATTORNEYS, FIDUCIARIES, SERVANTS,
OFFICERS, DIRECTORS, PARTNERS, PREDECESSORS, SUCCESSORS AND ASSIGNS, SUBSIDIARY
CORPORATIONS, PARENT CORPORATIONS, AND RELATED CORPORATE DIVISIONS (ALL OF THE
FOREGOING HEREINAFTER CALLED THE "RELEASED PARTIES"), FROM ANY AND ALL ACTIONS
AND CAUSES OF ACTION, JUDGMENTS, EXECUTIONS, SUITS, DEBTS, CLAIMS, DEMANDS,
LIABILITIES, OBLIGATIONS, DAMAGES AND EXPENSES OF ANY AND EVERY CHARACTER, KNOWN
OR UNKNOWN, DIRECT AND/OR INDIRECT, AT LAW OR IN EQUITY, OF WHATSOEVER KIND OR
NATURE, WHETHER HERETOFORE OR HEREAFTER ARISING, FOR OR BECAUSE OF ANY MATTER OR
THINGS DONE, OMITTED OR SUFFERED TO BE DONE BY ANY OF THE RELEASED PARTIES PRIOR
TO AND INCLUDING THE DATE OF EXECUTION HEREOF, AND IN ANY WAY DIRECTLY OR
INDIRECTLY ARISING OUT OF OR IN ANY WAY CONNECTED TO THIS AGREEMENT, THE
EXISTING LOAN AGREEMENT, THE SECURITY DOCUMENTS OR THE OTHER AGREEMENTS,
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS OR OTHERWISE, INCLUDING BUT NOT LIMITED TO, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST
IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE DECLARATION OF ANY DEFAULTS
UNDER THE EXISTING LOAN AGREEMENT, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE SECURITY DOCUMENTS OR ANY OF THE OTHER AGREEMENTS, THE NEGOTIATION FOR AND
EXECUTION OF THIS AGREEMENT, OR ANY SETTLEMENT NEGOTIATIONS (ALL OF THE
FOREGOING HEREINAFTER CALLED THE "RELEASED MATTERS"); AND BORROWER HEREBY
COVENANTS AND AGREES NEVER TO INSTITUTE ANY ACTION OR SUIT AT LAW OR IN EQUITY,
NOR INSTITUTE, PROSECUTE, OR IN ANY WAY AID IN THE INSTITUTION OR PROSECUTION
OF, ANY CLAIM, ACTION OR CAUSE OF ACTION, RIGHTS TO RECOVER DEBTS OR DEMANDS OF
ANY NATURE AGAINST ANY OF THE RELEASED PARTIES ARISING OUT OF OR RELATED TO
LENDER'S ACTIONS, OMISSIONS, STATEMENTS, REQUESTS OR DEMANDS IN ADMINISTERING,
ENFORCING, MONITORING, COLLECTING OR ATTEMPTING TO COLLECT, THE OBLIGATIONS,
INDEBTEDNESS AND OTHER OBLIGATIONS OF BORROWER TO LENDER. BORROWER AGREES TO
INDEMNIFY AND HOLD LENDER HARMLESS FROM ANY AND ALL COUNTERCLAIMS THAT BORROWER
OR ANY OTHER PERSON OR ENTITY CLAIMING BY, THROUGH, OR UNDER BORROWER MAY AT ANY
TIME ASSERT AGAINST LENDER. BORROWER ACKNOWLEDGES THAT THE AGREEMENTS IN THIS
PARAGRAPH ARE INTENDED TO BE IN FULL SATISFACTION OF ALL OR ANY ALLEGED INJURIES
OR DAMAGES TO BORROWER, ITS SUCCESSORS, AGENTS, ATTORNEYS, OFFICERS, DIRECTORS,
ASSIGNS AND PERSONAL AND LEGAL REPRESENTATIVES ARISING IN CONNECTION WITH THE
RELEASED MATTERS. BORROWER REPRESENTS AND WARRANTS TO LENDER THAT IT HAS NOT
PURPORTED TO TRANSFER, ASSIGN OR OTHERWISE CONVEY ANY
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RIGHT, TITLE OR INTEREST OF BORROWER IN ANY RELEASED MATTER TO ANY OTHER PERSON
AND THAT THE FOREGOING CONSTITUTES A FULL AND COMPLETE RELEASE OF BORROWER'S
CLAIMS WITH RESPECT TO ALL RELEASED MATTERS. THE PROVISIONS OF THIS SECTION
11.21 AND THE REPRESENTATIONS, WARRANTIES, RELEASES, WAIVERS, REMISES,
ACQUITTANCES, DISCHARGES, COVENANTS, AGREEMENTS AND INDEMNIFICATIONS CONTAINED
HEREIN (A) CONSTITUTE A MATERIAL CONSIDERATION FOR AND INDUCEMENT TO LENDER
ENTERING INTO THIS AGREEMENT, (B) DO NOT CONSTITUTE AN ADMISSION OF OR BASIS FOR
ESTABLISHING ANY DUTY, OBLIGATION OR LIABILITY OF LENDER TO BORROWER OR ANY
OTHER PERSON, (C) DO NOT CONSTITUTE AN ADMISSION OF OR BASIS FOR ESTABLISHING
ANY LIABILITY, WRONGDOING, OR VIOLATION OF ANY OBLIGATION, DUTY OR AGREEMENT OF
LENDER TO BORROWER OR ANY OTHER PERSON, AND (D) SHALL NOT BE USED AS EVIDENCE
AGAINST LENDER BY BORROWER OR ANY OTHER PERSON FOR ANY PURPOSE.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas, Texas,
on the day and year specified at the beginning of this Agreement.
BORROWER:
BLACK WARRIOR WIRELINE CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BOONE WIRELINE CO., INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Accepted in Dallas, Dallas County, Texas:
LENDER:
FLEET CAPITAL CORPORATION
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
[Counterpart Signature Page to Amended and Restated Loan and Security Agreement
dated as of October 30, 1998, by and among Fleet Capital Corporation,
Black Warrior Wireline Corp., and Boone Wireline Co., Inc.]
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APPENDIX A
GENERAL DEFINITIONS
When used in the Amended and Restated Loan and Security Agreement dated
October 30, 1998, by and between Fleet Capital Corporation, and Black Warrior
Wireline Corp. and Boone Wireline Co., Inc., the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
Accessions - any goods which are installed in or affixed or attached to
vehicles or other goods.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments
and documents, whether now owned or hereafter created or acquired by
Borrower or in which Borrower now has or hereafter acquires any interest.
Acquisition - the purchase by Borrower of all of Phoenix's domestic
directional drilling business and survey business and certain other
drilling and related assets of Phoenix pursuant to the Purchase Documents.
Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower, as reflected on the financial statement
of Borrower supplied to Lender pursuant to Section 8.1.3 of the Agreement,
but excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of a Borrower accrued prior to
the date it becomes a Subsidiary;
(iv) earnings of any corporation, substantially all the assets
of which have been acquired in any manner by a Borrower, realized by
such corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of a Borrower) in which such Borrower has an ownership
interest, unless such net earnings shall have actually been received by
Borrower in the form of cash distributions;
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(vi) any portion of the net earnings of any Subsidiary of a
Borrower which for any reason is unavailable for payment of dividends
to such Borrower;
(vii) the earnings of any Person to which any assets of a
Borrower shall have been sold, transferred or disposed of, or into
which such Borrower shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of
such transactions;
(viii) any gain arising from the acquisition of any Securities of
a Borrower;
(ix) any gain arising from extraordinary or non-recurring
items;
(x) the restructuring fee payable to Lender pursuant to
Section 2.3 hereof which is paid by Borrower during such fiscal period;
and
(xi) only with respect to fiscal periods ending on or before
January 31, 1999 and only in the event that Borrower receives funding
of all of the Term Loan D, the First Additional Capital Contribution,
the Term Loan E and the Second Additional Capital Contribution, an
amount equal to up to $250,000 of the aggregate amount of the
consulting fee paid by Borrower during the period commencing on the
date hereof and ending on January 31, 1999 to the Qualified Turnaround
Consultant hired by Borrower as contemplated in Section 9.2.4 hereof
which is paid by Borrower during such fiscal period.
Adjusted Tangible Assets - all assets except: (i) any surplus resulting
from any write-up of assets subsequent to September 30, 1998; (ii) deferred
assets, other than prepaid insurance and prepaid taxes; (iii) patents,
copyrights, trademarks, trade names, non-compete agreements, franchises and
other similar intangibles; (iv) goodwill, including any amounts, however
designated on a Consolidated balance sheet of a Person or its Subsidiaries,
representing the excess of the purchase price paid for assets or stock over
the value assigned thereto on the books of such Person; (v) Restricted
Investments; (vi) unamortized debt discount and expense; (vii) assets
located and notes and receivables due from obligors outside of the United
States of America; and (viii) Accounts, notes and other receivables due
from Affiliates or employees.
Adjusted Tangible Net Worth - at any date means a sum equal to:
(i) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves) at
which the Adjusted Tangible Assets of a Person would be shown on a
balance sheet at such date in accordance with GAAP, minus
(ii) the amount at which such Person's liabilities (other than
capital stock, surplus and Subordinated Debt) would be shown on such
balance sheet in
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accordance with GAAP, and including as liabilities all reserves for
contingencies and other potential liabilities.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, a Person; (ii) which beneficially owns
or holds 5% or more of any class of the Voting Stock of a Person; or (iii)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agreement - the Amended and Restated Loan and Security Agreement
referred to in the first sentence of this Appendix A, all Exhibits and
Schedules thereto and this Appendix A, as amended, renewed, extended and
restated from time to time.
Applicable Annual Rate - as defined in Section 2.1.1 of the Agreement.
Applicable Law - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Documents in question,
including all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes,
rules, regulations and orders of governmental bodies; and orders, judgments
and decrees of all courts and arbitrators.
Availability - the amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Lender may have paid
for the account of Borrower pursuant to any of the Loan Documents and which
have not been reimbursed by Borrower) is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing
Base, Availability is zero (0).
Average Monthly Revolving Credit Loan Balance - the amount obtained by
adding the aggregate unpaid principal amount of Revolving Credit Loans at
the end of each day during the month in question and by dividing such sum
by the number of days in such month.
Bank - Fleet National Bank, and its successors or assigns.
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its prime rate for commercial loans, whether or not such rate is
the lowest rate charged by Bank to its most preferred borrowers; and, if
such prime rate for commercial loans is discontinued by Bank as a standard,
a comparable reference rate designated by Bank as a substitute therefor
shall be the Base Rate.
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Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(a) Total Revolving Credit Facility minus the amount of any reserves
established by Lender pursuant to Section 1.1.1 at such date; or
(b) an amount equal to up to eighty-five percent (85%) of the net
amount of Eligible Accounts outstanding at such date minus the amount
of any reserves established by Lender pursuant to Section 1.1.1 at such
date.
For purposes of clause (b) hereof, the net amount of Eligible Accounts
at any time shall be the face amount of such Eligible Accounts less any and
all returns, rebates, discounts (which may, at Lender's option, be
calculated on shortest terms), credits, allowances or sales, excise or
withholding taxes of any nature at any time issued, owing, claimed by
Account Debtors, granted, outstanding or payable in connection with such
Accounts at such time.
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of Texas or is a day on which
banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Closing Date - the date on which all of the conditions precedent in
Section 9.1 of the Agreement are satisfied and Term Loan D is made under
the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the state
of Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of
the Obligations, with the sole exceptions of the Conroe Property and the
GECC Equipment.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
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Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and investments in Affiliates shall be excluded
therefrom.
Dated Assets - as defined in Section 1.3(C) of the Agreement.
Dated Liabilities - as defined in Section 1.3(C) of the Agreement.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in Section 2.1.2 of the Agreement.
Diamondback Seller Note - that certain promissory note dated September
1, 1997, executed by Black Warrior, as Maker, and payable to Diamondback
Directional, Inc., in the original principal amount of $3,000,000.
Distribution - in respect of any corporation means and includes: (i)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net
proceeds of the sale of Securities.
Dollars and the sign "$" - lawful money of the United States of
America.
Dominion Account - a special account of Lender established by Borrower
pursuant to the Agreement at a bank selected by Borrower, but acceptable to
Lender in its reasonable discretion, and over which Lender shall have sole
and exclusive access and control for withdrawal purposes.
EBIT - Adjusted Net Earnings from Operations plus Interest Expense plus
Taxes.
EBITDA - for any fiscal period of Borrower, means the sum of (i)
Adjusted Net Earnings from Operations for such period, plus (ii) Taxes for
such period, plus (iii) Interest Expense for such period, plus (iv)
depreciation and amortization for such period.
Eligible Account - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services which
is payable in Dollars and which Lender, in its sole discretion, deems to be
an Eligible Account. Without limiting the generality of the foregoing, no
Account shall be an Eligible Account if: (i) it arises out of a sale made
by Borrower to a Subsidiary or an Affiliate of Borrower or to a Person
controlled by an Affiliate of Borrower; (ii) it is due or unpaid more than
ninety (90) days after the original invoice date; (iii) twenty percent
(20%) or more of the Accounts from the Account Debtor are not deemed
Eligible Accounts hereunder; except that for Accounts for which the Account
Debtors are Burlington Resources, Conoco, Inc., Phillips
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Petroleum, Texaco or Union Pacific Exploration, such Accounts shall not be
Eligible Accounts if fifty percent (50%) or more of the Accounts from such
Account Debtor are not deemed Eligible Accounts hereunder; (iv) the total
unpaid Accounts of the Account Debtor exceed twenty percent (20%) of the
net amount of all Eligible Accounts, to the extent of such excess; (v) any
covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; (vi) the Account Debtor is also
Borrower's creditor or supplier, or the Account Debtor has disputed
liability with respect to such Account, or the Account Debtor has made any
claim with respect to any other Account due from such Account Debtor to
Borrower, or the Account otherwise is or may become subject to any right of
setoff, counterclaim, reserve or chargeback, provided that, in any event,
the Accounts of such Account Debtor shall be ineligible only to the extent
of the amount owing by Borrower to such creditor or supplier or to the
extent of such offset, counterclaim, disputed amount, reserve or
chargeback; (vii) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court
having jurisdiction in the proceedings in respect of the Account Debtor in
an involuntary case under the federal bankruptcy laws or any other petition
or other application for relief under the federal bankruptcy laws has been
filed against the Account Debtor, or if the Account Debtor has failed,
suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs; (viii) it arises
from a sale to an Account Debtor with its principal office, assets or place
of business outside the United States, unless the sale is backed by an
irrevocable letter of credit issued or confirmed by Bank and is in form and
substance acceptable to Lender, payable in the full amount of the Account
in freely convertible Dollars at a place of payment within the United
States; (ix) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; (x) (a) the Account
Debtor is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of
such Account to Lender, in a manner satisfactory to Lender, so as to comply
with the Assignment of Claims Act of 1940 (31 U.S.C. ss.203 et seq.) or (b)
the Account Debtor is a state, county or municipality, or a political
subdivision or agency thereof, which is subject to any Applicable Law that
would disallow an assignment of Accounts on which it is the Account Debtor;
(xi) the Account Debtor is located in New Jersey, Minnesota, Indiana, West
Virginia or any other state imposing similar conditions on the right of a
creditor to collect accounts receivable unless Borrower has either
qualified to transact business in such state as a foreign corporation or
filed a Notice of Business Activities Report or other required report with
the appropriate officials in those states for the then current year; (xii)
the Account is subject to a Lien other than a Permitted Lien; (xiii) the
goods giving rise to such Account have not been delivered to and accepted
by the Account Debtor or the services giving rise to such Account have not
been performed by Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; (xiv) the Account is
evidenced by chattel paper or an instrument of any kind, or has been
reduced to judgment; (xv) Borrower has made any agreement with the Account
Debtor for any deduction therefrom, except for discounts or allowances
which are made in the
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ordinary course of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value of each
invoice related to such Account; or (xvi) Borrower has made an agreement
with the Account Debtor to extend the time of payment thereof.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety or environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or
owned by Borrower or in which Borrower has an interest, whether now owned
or hereafter acquired by Borrower and wherever located, and all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor, with the sole exception of the
GECC Equipment.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Excess Interest - as defined in Section 2.1.3(B) of the Agreement.
Existing Loan Agreement - as defined in Section A of the Preliminary
Statements of the Agreement.
First Additional Capital Contribution - The capital contribution
described in Section 9.1.18 hereof.
Fixed Charge Ratio - for any fiscal period means, the ratio of (i) an
amount equal to (a) the sum of (1) Adjusted Net Earnings from Operations
for such period, (2) depreciation and amortization for such period and (3)
the portion of Borrower's Interest Expense for such period comprised of
interest on the St. James Subordinated Debt which is paid in kind (i.e.,
not paid in cash or payable in cash) minus (b) Unfinanced Capital
Expenditures during such period to (ii) Fixed Charges for such period.
Fixed Charges - for any fiscal period means the sum of scheduled
principal payments required to be made during such period in respect to
Senior Debt; provided, however, that (a) Fixed Charges shall not include
the amount of payments of principal on the Diamondback Seller Note during
such period which are paid in accordance with Section 8.2.5 hereof, and (b)
in the event that Borrower receives funding of all of the Term Loan D, the
First Additional Capital Contribution, the Term Loan E and the Second
Additional Capital Contribution, then with respect to the calendar month in
which the latest such funding thereof is made Fixed Charges shall not
include fifty percent (50%) of
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the scheduled principal payments to Lender under the Term Notes which are
due in such calendar month.
Four Navistar Wireline Trucks - The following four motor vehicle cabs
and chassis: (i) 1998 International Harvester Company Navistar 4900 single
axle cab and chassis, serial number 1HTSDANW518734; (ii) 1999 International
Harvester Corporation Eagle 9400 6x4 tandem axle cab and chassis, serial
number 02HSFHAER6WC047753; (iii) 1999 International Harvester Company 9300
6x4 tandem axle cab and chassis, serial number 2HTFBAER8WC057181; and (iv)
1999 International Harvester Company 4900 4x2 single axle cab and chassis,
serial number 1HTSDABN5XH597.
GAAP - generally accepted account principles in the United States of
America in effect from time to time.
GECC - General Electric Capital Corporation, a New York corporation,
its successors and assigns.
GECC Amendment - the Amendment dated as of March 12, 1998 executed by
and among GECC and Borrower pursuant to which GECC modifies the terms of
that certain Master Security Agreement dated as of November 19, 1997, by
and among GECC, as Secured Party, and Borrower, as Debtor, so as to release
certain collateral designated by Lender.
GECC Equipment - the equipment described in Exhibit S attached hereto,
which is the same equipment covered by the GECC Security Agreement as
amended by the GECC Amendment.
GECC Security Agreement - that certain Master Security Agreement dated
as of November 19, 1997, by and among GECC, as Secured Party, and Borrower,
as Debtor.
General Intangibles - all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including all choices
in action, causes of action, corporate or other business records, deposit
accounts, inventions, blueprints, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, service
marks, goodwill, brand names, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, computer programs,
operational manuals, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of
the Accounts by an Account Debtor, all rights to indemnification and all
other intangible property of every kind and nature (other than Accounts).
Guarantor - Any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations.
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Guaranty Agreements - collectively, any and all continuing guaranty
agreements which are executed by a Guarantor in form and substance
satisfactory to Lender.
Indebtedness - as applied to a Person means, without duplication: (i)
all items which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of which Indebtedness is to be determined,
including Capitalized Lease Obligations; (ii) all obligations of other
Persons which such Person has guaranteed; and (iii) in the case of Borrower
(without duplication), the Obligations.
Indemnified Persons - as defined in Section 11.2 of the Agreement.
Interest Expense - with respect to any fiscal period, the interest
expense incurred for such period as determined in accordance with GAAP.
Inventory - all of Borrower's inventory, whether now owned or hereafter
acquired, including, but not limited to, all goods intended for sale or
lease by Borrower, or for display or demonstration; all work in process;
all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in Borrower's business; and all
documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loan Party - Borrower, each Guarantor and each other Person (other than
Lender) who is at any time a party to any Loan Document.
Loans - all loans and advances of any kind made by Lender pursuant to
the Agreement.
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Losses - as defined in Section 11.2 of the Agreement.
Material Adverse Effect - the effect of any event or condition which,
alone or when taken together with other events or conditions occurring or
existing concurrently therewith, (a) has a material adverse effect upon the
business, operations, Properties, condition (financial or otherwise) or
business prospects of Borrower or any Subsidiary of Borrower; (b) has any
material adverse effect whatsoever upon the validity or enforceability of
the Agreement or any of the other Loan Documents; (c) has or may be
reasonably expected to have any material adverse effect upon the value of
the whole or any material part of the Collateral, the Liens of Lender with
respect to the Collateral or any material part thereof or the priority of
such Liens; (d) materially impairs the ability of Borrower or any other
Loan Party to perform its obligations under this Agreement or any of the
other Loan Documents, including repayment of the Obligations when due; or
(e) materially impairs the ability of Lender to enforce or collect the
Obligations or realize upon any of the Collateral in accordance with the
Loan Documents and Applicable Law.
Maximum Legal Rate - as defined in Section 2.1.3(A) of the Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of
money by any Person to Borrower; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to Borrower, (A)
which is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; and (iv)
Indebtedness of Borrower under any guaranty of obligations that would
constitute Indebtedness for Money Borrowed under clauses (i) through (iii)
hereof, if owed directly by Borrower.
Mortgages - each respective mortgage or deed of trust to be executed by
Borrower in favor of Lender, and by which Borrower shall grant and convey
to Lender, as security for the Obligations, a Lien upon all real Property
owned in fee by Borrower, including, without limitation, the real Property
owned in fee by Borrower and located at Broussard (LaFayette), Louisiana,
and Corpus Christi and Odessa, Texas.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Navistar - Navistar Credit Corporation, a _______________ corporation,
along with its successors and assigns.
Obligations - all Loans, and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and
other charges thereon, owing, arising, due or payable from Borrower to
Lender of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, whether arising
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under the Agreement or any of the other Loan Documents or otherwise, and
whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other
third party and delivered to Lender in respect of the transactions
contemplated by the Agreement.
Out-of-Formula Condition - at any date of determination thereof, a
condition such that the outstanding principal amount of Revolving Credit
Loans on such date exceeds the Borrowing Base on such date.
Participant - each Person who shall be granted the right by Lender to
participate in any of the Loans described in the Agreement and who shall
have entered into a participation agreement in form and substance
satisfactory to Lender.
Permitted Lien - a Lien of a kind specified in Section 8.2.5 of the
Agreement.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Petro Wireline - Nygren Investment Company, a New Mexico Limited
Partnership, doing business as Petro Wireline Services.
Phoenix - Phoenix Drilling Services, Inc., a Delaware corporation.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Properly Contested - in the case of any Indebtedness of a Loan Party
(including any Taxes) that is not paid as and when due or payable by reason
of such Loan Party's bona fide dispute concerning its liability to pay same
or concerning the amount thereof, that (i) such Indebtedness and any Liens
securing same are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, (ii) such Loan
Party has established appropriate reserves as shall be required in
conformity with GAAP, (iii) the non-payment of such Indebtedness will not
have a Material Adverse Effect and will not result in a forfeiture of any
assets of such Loan Party; (iv) no Lien is imposed upon any of such Loan
Party's assets with respect to such Indebtedness unless such Lien is at all
times junior and subordinate in priority to the Liens in favor of Lender
(except only with respect to property taxes that have priority as a matter
of applicable
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state law); (v) if the Indebtedness results from the entry, rendition or
issuance against a Loan Party or any of its assets of a judgment, writ,
order or decree, such judgment, writ, order or decree is stayed or bonded
pending a timely appeal or other judicial review; and (vi) if such contest
is abandoned, settled or determined adversely to such Loan Party, such Loan
Party forthwith pays such Indebtedness and all penalties and interest in
connection therewith.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Documents - the Asset Purchase Agreement between Black Warrior
and Phoenix dated January 1, 1998 and all documents and instruments
executed or delivered in connection therewith.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or
after the acquisition of any fixed assets for the purpose of financing all
or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
Qualified Turnaround Consultant - as defined in Section 9.2.4 of the
Agreement.
Rentals - as defined in Section 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to the extent
existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in the
ordinary course of business of Borrower and its Subsidiaries;
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(iv) investments in direct obligations of the United States of America,
or any agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the
date of acquisition thereof;
(v) investments in regular checking, "money-market" or like accounts,
certificates of deposit maturing within one year from the date of
acquisition issued by a bank or trust company organized under the laws
of the United States or any state thereof having capital surplus and
undivided profits aggregating at least $100,000,000; and
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from
the date of creation thereof.
Revolving Credit Loan - a Loan made by Lender as provided in Section
1.1 of the Agreement.
Schedule of Accounts - as defined in Section 6.2.1 of the Agreement.
Second Additional Capital Contribution - The capital contribution
described in section 9.2.5 hereof.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - the Guaranty Agreements and all other instruments
and agreements now or at any time hereafter securing the whole or any part
of the Obligations.
Senior Debt - means all Money Borrowed, excluding Subordinated Debt.
Senior Interest Coverage Ratio - with respect to any period of
determination, the ratio of (i) EBITDA for such period, to (ii) Interest
Expense for such period in respect of all Senior Debt, all as determined in
accordance with GAAP.
SJMB - SJMB, L.P., a Delaware limited partnership, its successors and
assigns.
Solvent - as to any Person, such Person (i) owns Property whose fair
salable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
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Specified Five Offshore Skids - Those certain five offshore skids
(exclusive of any and all tooling, other equipment or other goods located
thereon, attached thereto or accessions thereto) specifically described on
Exhibit V attached hereto and made a part hereof.
St. James - St. James Capital Partners, L.P., a Delaware limited
partnership, its successors and assigns.
St. James Subordinated Debt - the Indebtedness in the aggregate
principal amount of Fifteen Million Four Hundred Thousand Dollars
($15,400,000) owing collectively to St. James and SJMB and evidenced by the
St. James Subordinated Debt Documents.
St. James Subordinated Debt Documents - the Agreement for Purchase and
Sale dated January 23, 1998 between Black Warrior and St. James, the
Agreement for Purchase and Sale dated October 10, 1997 between Black
Warrior and St. James, the Agreement for Purchase and Sale dated June 5,
1997 between Black Warrior and St. James, and all other agreements,
instruments and documents evidencing the St. James Subordinated Debt.
St. James Subordination Agreement - the Subordination Agreement dated
as of March 16, 1998 executed by and between Lender, St. James and SJMB,
together with any and all amendments, substitutions and modifications
thereto.
Subordinated Debt - Indebtedness of Borrower that is subordinated in
right of payment and otherwise to the Obligations in a manner satisfactory
to Lender pursuant to a written subordination agreement, in form and
substance acceptable to Lender, executed by the holder thereof in favor of
Lender.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
Taxes - any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including, without limitation, income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise
taxes now or hereafter imposed or levied by the United States, or any
state, local or foreign government or by any department, agency or other
political subdivision or taxing authority thereof or therein and all
interest, penalties, additions to tax and similar liabilities with respect
thereto.
Term Loan A - the Loan described in Section 1.2.1 of the Agreement.
Term Loan B - the Loan described in Section 1.2.2 of the Agreement.
Term Loan C - the Loan described in Section 1.2.3 of the Agreement.
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Term Loan D - the Loan described in Section 1.2.4 of the Agreement.
Term Loan E - the Loan described in Section 1.2.5 of the Agreement.
Term A Note - the Secured Promissory Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loan A,
which shall be in the form of Exhibit A-1 to the Agreement.
Term B Note - the Secured Promissory Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loan B,
which shall be in the form of Exhibit A-2 to the Agreement.
Term C Note - the Secured Promissory Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loan C,
which shall be in the form of Exhibit A-3 to the Agreement.
Term D Note - the Secured Promissory Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loan D,
which shall be in the form of Exhibit A-4 to the Agreement.
Term E Note - the Secured Promissory Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loan E,
which shall be in the form of Exhibit A-5 to the Agreement.
Term Notes - collectively, the Term A Note, the Term B Note, the Term C
Note, the Term D Note and the Term E Note.
Texas Finance Code - as defined in Section 2.1.3(A) of the Agreement.
Total Credit Facility - Eighteen Million Two Hundred Eight-Four
Thousand Nine Hundred Thirty-Six Dollars Seventy-Seven Cents
($18,284,936.77).
Total Liabilities - at any date means all amounts properly classified
as liabilities on a balance sheet at such date in accordance with GAAP,
less Subordinated Debt, plus all reserves for contingencies and all other
potential liabilities for which no reserves have previously been
established on such balance sheet, to the extent such amounts are not
already classified as liabilities in accordance with GAAP.
Total Revolving Credit Facility - Eight Million Dollars
($8,000,000.00).
Two GECC Wireline Trucks - The following two motor vehicle cabs and
chassis: (i) 1998 International Harvester
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Corporation-Navistar 9400EX4 tandem axle cab and chassis, serial number and
(ii) 1998 International Harvester Corporation IHC 4900 single axle cab and
chassis, serial number 1htsdadn4wh492814.
Unfinanced Capital Expenditures - for any fiscal period means, Capital
Expenditures not financed by: (i) Purchase Money Indebtedness, (ii) the
issuance of capital stock pursuant to Section 8.2.8 hereof, or (iii) the
issuance of Subordinated Debt pursuant to Section 8.2.8 hereof.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any of the
Loan Documents shall include any and all modifications thereto and any and all
extensions or renewals thereof. Wherever the phrase "including" shall appear in
the Agreement, such word shall be understood to mean "including, without
limitation."
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16
AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale (the "Agreement"), is made and entered
as of October 30, 1998, by and between Black Warrior Wireline Corp., a Delaware
corporation ("Black Warrior"), and SJMB, L.P., a Delaware limited partnership
(the "Purchaser"), and its assigns or transferees pursuant to Section 5.5 and
sets forth the terms and conditions of the sale and purchase of a 10%
Convertible Promissory Note in the original principal amount of up to
$2,000,000, substantially in the form attached hereto as Exhibit A (the "Note").
For purposes of this Agreement, the term "Seller" is defined to mean Black
Warrior and the Active Subsidiary (defined in Section 2.8 below).
WHEREAS, Seller desires to issue and sell to Purchaser, and Purchaser
desires to purchase and accept from Seller, the Note in the form of Exhibit A,
on the terms and subject to the conditions set forth herein.
WHEREAS, the obligations of Seller under the Note are secured by that
certain Borrower Security Agreement between Seller and St. James Capital
Partners, L.P., a Delaware limited partnership ("SJCP"), dated as of June 5,
1997, as may be amended or modified and as amended on March 1, 1998 to include
the Purchaser and as further amended as of the date herewith, (the "Security
Agreement"), that certain Subsidiary Security Agreement (herein so called)
between the subsidiaries of Black Warrior and SJCP dated as of June 5, 1997, as
may be amended or modified and as amended on March 1, 1998 to include the
Purchaser and as further amended as of the date herewith (the "Subsidiary
Security Agreement"), and are guaranteed by that certain Subsidiary Guaranty by
the subsidiaries of Black Warrior in favor of SJCP, dated as of June 5, 1997, as
may be amended or modified and as amended on March 1, 1998 to include the
Purchaser and as further amended as of the date herewith (the "Subsidiary
Guaranty").
WHEREAS, Seller and Purchaser desire to make certain representations,
warranties and agreements in connection with the purchase and sale of the Note
contemplated hereby.
WHEREAS, Seller desires to sell to Purchaser warrants ("Warrants") to
purchase, in the aggregate, 1,333,333 shares of Seller's common stock, par value
$0.0005 per share (the "Common Stock"), which Warrants shall be delivered to
Purchaser or, at Purchaser's discretion, to Purchaser's designee, at the time of
each advance of the Note Consideration and for a number of shares of Common
Stock equal to two-thirds (2/3) of the principal pursuant amount of such
advance, and which Warrants shall have the terms and be subject to the
conditions set forth in the form of Warrants attached hereto as Exhibit B.
WHEREAS, Seller desires to grant to Purchaser certain registration rights
in respect of the Common Stock that may be acquired on conversion of the Note
and on the exercise of the Warrants, which registration rights shall have the
terms and be subject to the conditions set forth in the Registration Rights
Agreement dated as of June 5, 1997 between Seller and SJCP as amended on March
1, 1998, to include the Purchaser and as further amended and modified (the
"Registration Rights Agreement").
WHEREAS, this Agreement, the Note, the Security Agreement, the Subsidiary
Security Agreement, the Subsidiary Guaranty, the Warrants, and the Registration
Rights Agreement are collectively referred to herein as the "Transaction
Documents".
<PAGE>
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of the Note and the Warrants. Subject to the terms of
this Agreement, Seller agrees to and does hereby issue, sell and deliver the
Note and the Warrants to Purchaser at the Closing (as defined herein), and
Purchaser agree to and do hereby purchase and accept the Note and the Warrants
from Seller.
1.2 Consideration for Purchase of the Note. Subject to the terms of this
Agreement, Purchaser hereby agrees to pay to Seller, by check or wire transfer
to the account of Black Warrior, $2,000,000, as the consideration for the
purchase of the Note (the "Note Consideration"), in one or more advances, which
advances shall be made at Purchaser's sole and absolute discretion. Purchaser
hereby agrees to exercise reasonable good faith in the exercise of its
discretion. Interest under the Note shall accrue on amounts actually advanced.
1.3 Acknowledgment of Prior Advances. Seller hereby acknowledges that
$500,000 of the total $2,000,000 Note Consideration has, as of the date of this
Agreement, been advanced by Purchaser for Seller's account.
1.4 Consideration for Purchase of the Warrants. Subject to the terms of
this Agreement, Purchaser hereby agree to pay by check or wire transfer to the
account of Black Warrior $0.03 per share subject to the Warrants as the
consideration for the purchase of each of the Warrants issued and to be issued
hereunder (the "Warrant Consideration"; the Note Consideration and the Warrant
Consideration are collectively referred to herein as the "Consideration").
1.5 Origination Fee. Seller agrees to pay Purchaser at Closing and at each
other time an advance of the Note Consideration is made, an origination fee (the
"Origination Fee") equal to 2% of the entire amount of each such advance, for
the payment of the Note Consideration.
1.6 Subordination. Purchaser agrees that the indebtedness hereunder and the
security granted therefor are subject to the Subordination Agreement with Fleet
Capital Corporation (the "Senior Lender"), pursuant to which Purchaser
subordinates its security interests and rights to the security interests of the
Senior Lender, except for Purchasers's security interest in certain offshore
skids owned by the Seller.
1.7 Future Financings. If Seller, at any time so long as the Note is
outstanding, intends to issue or sell any shares of capital stock, debt
securities or securities convertible into, exchangeable for or exercisable for
shares of capital stock or debt securities (a "Financing"), Seller shall give
Purchaser written notice (the "Offer") of its intent to engage in a Financing,
specifying its basic terms and conditions. If Purchaser gives notice to Seller,
specifying Purchaser's basic terms and conditions, of its intent to provide
Financing on a basis materially similar to the proposal set forth in the Offer
within five (5) business days after receipt of the Offer (a "Financing Notice"),
then Seller shall be obligated to consummate the Financing only with Purchaser
and Purchaser shall be obligated to provide the financing at the time committed
by the third party whose commitment gave rise to the Offer. If Purchaser does
not within five (5) business days after receipt of the Offer give to Seller a
Financing Notice, Purchaser shall be deemed
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to have waived their rights to provide the Financing under this Section, and
Seller may thereafter obtain such Financing from a third party or parties if
such third party Financing is on the same basic terms and conditions as those
set forth in the Offer. Any proposed Financing on terms materially different
from those basic terms and conditions in the Offer deemed waived by Purchaser
shall require a new Offer and compliance by Seller with the provisions of this
Section. Notwithstanding the foregoing, Seller shall not be required to comply
with this Section in connection with: (i) the issuance and sale of Common Stock
or convertible securities in connection with any employee stock option plan,
arrangement or agreement now or hereafter in effect; (ii) the issuance of
capital stock of Seller upon exercise of the Warrants or otherwise issued to
Purchaser or their assigns; (iii) the issuance of capital stock upon exercise of
any stock purchase warrant or option (other than the options referred to in
clause (i) above) or other convertible security outstanding on the date hereof
or hereafter issued; (iv) a public offering of securities; or (v) any loan from
a regular commercial lending source.
1.8 Future Advances. The exercise of Purchaser's discretion in making
advances after the date hereof is conditioned upon the delivery by Seller to
Purchaser of the following:
(a) a written request for such advance at the address for the Purchaser
in Section 5.2 hereof, setting forth (i) the amount requested, (ii) the
account to which such advance is to be funded, and (iii) the proposed use
of such advance, which shall be in accordance with Section 2.19 herein;
(b) a certificate of an officer of Seller certifying that, as of the
date of the advance, no Event of Default hereunder has occurred, that
Seller is in compliance with all covenants herein and that all of the
representations and warranties set forth herein are true and correct as of
such date;
(c) such security documents respecting the assets of the Seller or its
Active Subsidiary as may be reasonably requested by Purchaser;
(d) such other documents, certificates, agreements or instruments as
may be reasonably requested by Purchaser in connection with any or all of
the foregoing; and
(e) payment by Seller of any and all expenses or other amounts due and
owing to Purchaser; and
(f) Warrants to purchase a number of shares of Common Stock equal to
two-thirds (2/3) of the principal amount of such advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each of the following
statements (i) are true and correct on the date hereof and (ii) will be true and
correct in all material respects on the date each advance of the Note
Consideration is made:
2.1 Organization, Standing and Qualification. Each of Black Warrior and the
Active Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state
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of its incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted. Each of Black Warrior and the Active Subsidiary is licensed and
qualified to do business as a foreign corporation in each jurisdiction in which
the character of its properties, owned or leased, or the nature of its
activities makes such qualification or license necessary.
2.2 Authority; No Defaults. Each of Black Warrior and the Active Subsidiary
has all requisite corporate power and authority to enter into the Transaction
Documents and to consummate the transactions contemplated thereby. The execution
and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Seller. The Transaction Documents have been
executed and delivered by Seller and constitute the valid and binding obligation
of Seller, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, moratorium and other similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The execution
and delivery of the Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in a breach of or the acceleration of any obligation under, or constitute a
default or event of default (or event which, with notice or lapse of time or
both, would constitute a default or event of default) under, any provision of
any charter, bylaw, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, ordinance or regulation, or any restriction
to which any property of Seller is subject or by which Seller is bound, the
effect of which would be materially adverse to Seller. Seller is not, nor does
Seller have knowledge that it is alleged to be, in material violation or default
of any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a "Governmental
Entity"), relating to or affecting the operation, conduct or ownership of the
property or business of Seller.
2.3 Approvals. There is no legal impediment to the execution and delivery
of the Transaction Documents by Seller or to the consummation of the
transactions contemplated thereby, and no filing or registration with, or
authorization, consent or approval of, a Governmental Entity, shareholders or
any other third party is necessary for the consummation by Seller of the
transactions contemplated thereby.
2.4 Charter and Bylaws. Seller has furnished to Purchaser true and complete
copies of its charter and bylaws, each as amended to date and as presently in
effect.
2.5 SEC Documents.
(a) Seller has made all filings with the Securities and Exchange
Commission ("SEC") that it has been required to make under the Securities
Act of 1933, as amended (the "Securities Act"), and the Securities Exchange
Act of 1934, as amended (the "Exchange Act") since December 31, 1994.
Seller has provided to Purchaser true, complete and correct copies of
Seller's annual report on Form 10-K ("Seller's Form 10-K") for the fiscal
year ended December 31, 1997, together with all amendments thereto,
Seller's quarterly report on Form 10-Q for the fiscal quarters ended March
31, 1998 and June 30, 1998, together with all amendments thereto, and any
and all filings with the SEC made by Seller (including all requested
exhibits to such filings) since the filing of said Form 10-K (all such
documents that have been filed with the SEC, as amended, are referred to as
the "Seller SEC Documents"). As of their respective dates, and except as
amended, Seller SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and none of Seller SEC Documents contained any untrue
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statement of a material fact or omitted 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.
(b) The financial statements of Seller included in the Seller SEC
Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form
10-Q) and fairly present (subject, in the case of the unaudited statements,
to normal recurring audit adjustments) the consolidated financial position
of Seller as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended. Since June 30, 1998,
(i) there have been no material adverse changes in Seller's business,
operations or financial condition and (ii) Seller's operations have been
conducted in the ordinary course of business except as disclosed in writing
to Purchaser.
2.6 Litigation. Except as set forth on Schedule 2.6, as of the date of this
Agreement, there is no suit, action, proceeding or investigation pending or, to
the best knowledge of Seller, threatened against or affecting Seller, nor is
there any outstanding judgment, order, writ, injunction or decree against
Seller, which judgment would have a material adverse effect on Seller. Seller is
not subject to any court order, writ, injunction, decree, settlement agreement
or judgment that contains or orders any on-going obligations, whether
prohibitory or mandatory in nature, the performance of which would have a
material adverse effect on Seller.
2.7 Capitalization. Black Warrior has authorized capital stock of (a)
____________ shares of Common Stock of which, as of the date hereof, there are
____________ shares issued and outstanding, and (b) _________ shares of
preferred stock of which, as of the date hereof, there are no shares issued and
outstanding. All of the issued and outstanding shares of Common Stock were duly
and validly issued and are fully paid and non-assessable. None of the
outstanding shares of Common Stock has been issued in violation of any
preemptive rights of the current or past stockholders of Seller. As of the date
hereof, Black Warrior has reserved for issuance (i) an aggregate of __________
shares of Common Stock issuable on issuance of stock options to employees,
officers, directors and other persons, and the Board of Directors of Black
Warrior has approved amendments to the plans in respect of such options to
increase the shares available thereunder to an aggregate of __________ shares of
Common Stock, subject to the approval of the shareholders of Black Warrior, and
(ii) an aggregate of __________ shares of Common Stock issuable on the exercise
of outstanding warrants, options, or of convertible securities other than those
listed in (i) above. Except as set forth on Schedule 2.7 or described above in
(i) and (ii), there are no outstanding options, warrants or rights to subscribe
for, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of
Black Warrior or contracts, commitments, understandings or arrangements by which
Black Warrior is or may be obligated to issue additional shares of its capital
stock or options, warrants, or rights to purchase or acquire any additional
shares of its capital stock. All of the Common Stock issued on the exercise of
the Warrants will be fully paid, non-assessable and free and clear of any
Encumbrances. As used in this Agreement, the term "Encumbrance" means and
includes (i) any security interest, mortgage, deed of trust, lien, charge,
pledge, proxy, adverse claim, equity, power of attorney, or restriction of any
kind, including but not limited to, any restriction or servitude on the use,
transfer, receipt of income, or other exercise of any attributes of ownership,
and (ii) any Uniform Commercial Code financing statement or other public filing,
notice or
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record that by its terms purports to evidence or notify interested parties of
any of the matters referred to in clause (i) that has not been terminated or
released by another proper public filing, notice or record.
2.8 Subsidiaries. Schedule 2.8 sets forth the only active subsidiary of
Seller, including state or country of organization and address of its principal
executive offices ("Active Subsidiary"). For purposes of this Agreement and the
other agreements contemplated hereby, the Active Subsidiary is the only
"subsidiary" of Seller. Schedule 2.8 also discloses four inactive corporations
and/or limited partnerships owned by Seller (the "Inactive Organizations"), all
four of which are at this time inactive, defunct, and have no value. No
representation, warranty, financial standard or other provision of this
Agreement, or any agreement contemplated hereby, shall be deemed violated by
virtue of the fact that any of the Inactive Organizations do not meet said
representation, warranty, financial standard or other provision. However, if any
Inactive Organization begins to conduct any business (other than activities to
"wind down" such organization) such Inactive Organization shall be considered an
Active Subsidiary (and cease to be an Inactive Organization) from that point
forward. The Active Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, has
all requisite corporate power and authority to own, to lease or to operate its
properties and to carry on its business as it is now being conducted and is duly
qualified or licensed to do business in each jurisdiction in which the character
of its properties, owned or leased, or the nature of its activities makes such
qualification or license necessary, unless the failure to be so licensed or
qualified would not have a material, adverse effect on Seller. Except as set
forth in Schedule 2.8, all outstanding shares of capital stock of the Active
Subsidiary were duly and validly issued and are fully paid, nonassessable and
owned by Seller or a subsidiary of Seller, free and clear of all Encumbrances.
There are no options, warrants or other rights, agreements or commitments
(including preemptive rights) obligating Seller or the Active Subsidiary to
issue, to sell or to transfer any shares of capital stock or other securities of
the Active Subsidiary. There are _____ shares of capital stock of Active
Subsidiary issued and outstanding, all of which has been pledged to Purchaser.
2.9 Liabilities. Except as set forth in Schedule 2.9, Seller has no
liabilities or obligations, either accrued, absolute, contingent, or otherwise
that have a material adverse effect on the value or business of Seller, and
Seller has no knowledge of any potential liability that it reasonably believes
would likely result in a material adverse effect on the value or business of
Seller, other than those (a) reflected or reserved against in the balance sheets
reported on Seller's Form 10-Q for the fiscal quarter ended June 30, 1998, or
(b) incurred in the ordinary course of business since June 30, 1998.
2.10 Licenses, Permits, Authorizations, Etc. Seller holds all approvals,
authorizations, consents, licenses, orders, franchises, rights, registrations
and permits of any type required to operate its business as presently conducted.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any revocation,
cancellation, suspension or modification of any such approval, authorization,
consent license, order, franchise, right, registration or permit.
2.11 Title to Assets; Encumbrances. Except as set forth in Schedule 2.11:
(a) Seller has good and indefeasible title to its assets, whether real,
personal or intangible, free and clear of all Encumbrances except (i) liens
for current taxes and assessments not yet due or being contested in good
faith by appropriate proceedings, (ii) mechanic's liens arising under the
operation of law for actions contested in good faith or for which payment
arrangements have been made, (iii) liens granted or incurred by Seller in
the ordinary course of its business or financing of equipment, office
space, furniture and computers in the ordinary course
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of its business, and (iv) easements, rights of way, encroachments or other
restrictions or matters affecting title which do not prevent the assets
from being used for the purpose for which they are currently being used;
(b) There are no parties in possession of any of the assets of Seller
other than personal property held by third parties in the reasonable and
ordinary course of business. Seller enjoys full, free and exclusive use and
quiet enjoyment of its assets and its rights pertaining thereto. Seller
enjoys peaceful and undisturbed possession under all leases under which it
is a lessee, and all such leases are legal, valid and binding obligations
of Seller, enforceable against Seller in accordance with their terms.
2.12 Taxes and Returns. Seller has filed all required tax returns and
reports. Seller has paid all taxes, assessments and governmental charges and
penalties which it has incurred, except such as are being or may be contested in
good faith by appropriate proceedings. Seller is not delinquent in the payment
of any tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted, or assessed against Seller, and no requests for
waivers of the time to assess any such tax are pending. For the purposes of this
Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
2.13 Insurance. Each policy of property, fire and casualty, product
liability, worker's compensation, professional liability and title insurance and
other forms of insurance (except group, health and life policies) and each bond
issued or posted by any person with respect to any operations or other
activities of Seller is, to the knowledge of Seller, the legal, valid and
binding obligation of the insurer or bond issuer, enforceable in accordance with
its terms, and is in an amount and provides for coverage as is customary in the
ordinary business practices of Seller's industry.
2.14 Patents, Trademarks, Etc. Seller has no patents, trademarks, service
marks, works of authorship, tradenames, brandnames or copyrights. Seller is not
using, and does not have any plan to manufacture, use or sell anything which
would violate or infringe on any patent or proprietary right (of which Seller is
aware) of any other person, firm or corporation or which would require a license
under any such patent or proprietary right. Seller has not received any
communications alleging that Seller has violated or, by conducting its business
as proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, works of authorship or trade secrets or other
proprietary rights in processes of any other person or entity.
2.15 Material Contracts and Obligations. Attached hereto as Schedule 2.15
is a list of all material agreements of any nature to which Seller is a party or
by which it or any of its properties is bound, including without limitation, the
Master Service Agreement with the ten top customers (based on dollar volume) of
Seller, all employment and consulting agreements, loan agreements, leases,
purchase contracts, employee benefit, bonus, pension, stock option, stock
purchase and similar plans and arrangements, and distributor and sales
representative agreements. True and complete copies of such written agreements
have been provided to Purchaser. All such agreements and contracts are valid,
binding and in full force and effect. Seller is not in default on any of the
agreements listed on Schedule 2.15.
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2.16 Compliance. Except as set forth on Schedule 2.16, Seller has complied
in all material respects with all laws, and is not in violation of any charter
or other corporate restrictions or any law, ordinance, requirement, regulation,
judgment, injunction, award, decree, or other order applicable to its business.
There is no term or provision of any mortgage, indenture, contract, agreement or
instrument to which Seller is a party or by which it is bound, any provision of
any state or federal judgment, decree, order, injunction, writ, statute, rule or
regulation applicable to or binding upon Seller, which materially adversely
affects or, in the future is reasonably likely to affect materially and
adversely the business, prospects, condition, affairs or operations of Seller or
any of its properties or assets. To the knowledge of Seller, no employee of
Seller is in violation of any term of any employment contract, patent or other
proprietary information disclosure agreement or any other contract or agreement
relating to the employment of such employee with Seller.
2.17 Employees. Seller has obtained employment agreements, some of which
contain nondisclosure and assignment of invention provisions and non-competition
provisions, with Seller from some employees and consultants of Seller whose
employment responsibility requires access to confidential and proprietary
information of Seller, in a form satisfactory to Purchaser. Seller has complied
in all material respects with all applicable and material state and federal laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and other laws related to employment, and there are
no arrears in the payment of wages, or social security taxes.
2.18 Transactions with Affiliates and Stockholders. Except as set forth on
Schedule 2.18, no stockholder, officer, director or employee of Seller, nor any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), is presently a
party to any transaction with Seller, including without limitation, any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to, any such person or entity.
2.19 Use of Proceeds. Seller will not use the Consideration, except (a) to
provide Seller with working capital, and (b) to fund the company capital
expenditure programs. Seller shall not use the Consideration for any other
purpose without the prior consent of Purchaser.
2.20 Books and Records. The minute books of Seller furnished to counsel to
Purchaser for review contain complete and accurate records of all meetings and
other corporate actions of its stockholders and its Board of Directors and
committees thereof. The stock ledger and stock transfer records of Seller
furnished by Liberty Transfer Company to Purchaser for review is complete and
reflects all issuances, transfers of which Seller is aware, repurchases and
cancellations of shares of capital stock of Seller.
2.21 Stockholder Agreements. Except as set forth in Schedule 2.21 or as
contemplated by this Agreement, there are no agreements, written or oral, which
are (i) between Seller and any holder of its capital stock, or (ii) to the
knowledge of Seller, among any persons holding five percent (5%) or more of
Seller's capital stock, relating to the acquisition, disposition or voting of
the capital stock of Seller.
2.22 ERISA. Except as disclosed on Schedule 2.22, Seller has no employee
benefit plans subject to the Employment Retirement Income Security Act of 1974.
2.23 Accounts Receivable. All accounts receivable of Seller (including
those reflected on the Balance Sheet or acquired on or prior to the Closing
Date) arose in the ordinary and usual course of business of Seller, represent
valid obligations due to Seller and have been collected or are, to Seller's best
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knowledge, collectible in the ordinary and usual course of business of Seller in
the aggregate recorded amounts thereof in accordance with their terms less in
the case of accounts receivable reflected in the Financial Statements, all
allowance for doubtful accounts marked therein, and in the case of accounts
receivable thereafter, all allowances for doubtful accounts consistent with past
practices of Seller.
2.24 Hazardous Wastes and Substances. Neither the operations of Seller nor
the use of its assets violates any applicable federal, state or local law,
statute, ordinance, rule, regulation, memorandum of understanding, order or
notice requirement pertaining to the collection, transportation, storage,
treatment, discharge, release or disposal of hazardous or non-hazardous waste or
substances, including without limitation (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C, ss.ss. 9601 et
seq.), as amended from time to time on or before the Closing Date ("CERCLA")
(including, without limitation, as amended pursuant to the Superfund Amendments
and Reauthorization Act of 1986), and such regulations promulgated under CERCLA
on or before the Closing Date, (ii) the Resources Conservation and Recovery Act
of 1976 (42 U.S.C. ss.ss. 6901 et seq.), as amended from time to time ("RCRA")
on or before the Closing Date, and such regulations promulgated under RCRA,
(iii) any applicable federal, state or local laws or regulations relating to the
environment in effect on the Closing Date (collectively, the "Applicable
Environmental Laws"). Except as disclosed on Schedule 2.24, none of the
operations of Seller has ever been conducted nor have any of its assets been
used in such a manner as to constitute a violation of any of the Applicable
Environmental Laws. No notice has been served on Seller by any person or
Governmental Entity regarding any existing, pending or threatened investigation
or inquiry related to violations under any Applicable Environmental Law, or
regarding any claims for corrective action, remedial obligations or contribution
for removal costs or damages under any Applicable Environmental Law, or
regarding the designation of Seller or any of its affiliates as a potentially
responsible party for any facility under the Applicable Environmental Laws, nor
does any fact or circumstance exist which, if disclosed publicly, would be
reasonably likely to result in the service on Seller of any such notice. There
has been no action taken, or omitted to be taken by Seller which has caused, or
would be reasonably likely to cause, a "release" of any "hazardous substance" at
any "facility," without limitation, within the meaning of such terms as defined
in the Applicable Environmental Laws.
2.25 Disclosures. Neither this Agreement nor any Exhibit or Schedule
hereto, nor any certificate or other instrument furnished to Purchaser or
Purchaser or its counsel by Seller in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE III
COVENANTS
3.1 New Subsidiaries. Seller agrees that (i) any Inactive Organization
which becomes an Active Subsidiary after the execution of this Agreement and
(ii) any other entity of which Seller obtains control (directly or indirectly)
of more than 50% of the outstanding voting stock or equity interests shall
execute a written agreement to be bound by that certain Subsidiary Security
Agreement dated as of even date herewith, before the events set forth in (i) or
(ii) above have occurred.
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ARTICLE IV
THE CLOSING
4.1 Time and Place. Subject to the provisions of Section 1.2 herein, the
closing of the purchase and sale of the Note and the Warrants (the "Closing")
will take place on a date agreed to by the parties (the "Closing Date"), at the
offices of Gardere, Wynne, Sewell & Riggs L.L.P., unless another time and place
are agreed to by the parties.
4.2 Conditions to the Obligation of Seller. The obligation of Seller to
effect the Closing is subject to Purchaser delivering, or causing to be
delivered, to Seller at the Closing the Consideration.
4.3 Conditions to the Obligation of Purchaser. The obligation of Purchaser
to effect the Closing is subject to payment by Seller of the Origination Fee.
The obligation of Purchaser is further subject to Seller delivering, or causing
to be delivered, to Purchaser at the Closing the following documents:
4.3.1 an Amended and Restated Intercreditor Agreement, executed by the
Senior Lender, subordinating the first and prior lien on the offshore
"skids" held by the Senior Lender to the lien thereon held by Purchaser;
4.3.2 copies, certified by the Secretary of State of Delaware as of a
recent date, of the charter of Black Warrior and all amendments thereto and
a certificate of an Officer of Black Warrior certifying that there have
been no amendments to such charter since such date, and copies, certified
by the Secretary of Active Subsidiary as of the Closing Date, of the
charter of Active Subsidiary and all amendments thereto;
4.3.3 copies, certified by the Secretary of each of Black Warrior and
Active Subsidiary as of the Closing Date, of the bylaws of each of Black
Warrior and Active Subsidiary, respectively, and all amendments thereto;
4.3.4 copies, certified by a certificate of the Secretary of each of
Black Warrior and Active Subsidiary as of the Closing Date, of resolutions
duly adopted by the board of directors of each of Black Warrior and Active
Subsidiary, respectively, authorizing the execution and delivery by each of
Black Warrior and Active Subsidiary, respectively, of the Transaction
Documents and all other agreements attached hereto as Exhibits or
contemplated herein, the completion of the sale of the Note and Warrants
and the taking of all such other corporate action as shall have been
required as a condition to, or in connection with, the sale of the Note and
Warrants;
4.3.5 the Agreement;
4.3.6 the Note;
4.3.7 Warrants to purchase up to 333,333 shares of Common Stock;
4.3.8 the Registration Rights Agreement;
4.3.9 the Security Agreement;
10
<PAGE>
4.3.10 the Subsidiary Security Agreement;
4.3.11 the Subsidiary Guaranty;
4.3.12 an opinion of Rosen, Cook, Sledge and Davis, counsel to Seller,
in form and substance acceptable to Purchaser and addressing the matters
set forth in Sections 2.1, 2.2, 2.3, 2.7 and 2.8; and
4.3.13 a certificate of an Officer of each of Black Warrior and Active
Subsidiary to the effect that the representations and warranties of each of
Black Warrior and Active Subsidiary, respectively, herein contained shall
be true as of and at the Closing Date with the same effect as though made
at such date, except as affected by transactions permitted or contemplated
by this Agreement; and further to the effect that each of Black Warrior and
Active Subsidiary shall have performed and complied with all covenants
required by this Agreement to be performed or complied with by each before
the Closing Date.
ARTICLE V
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained in this Agreement shall
survive the Closing.
5.2 Notices. All notices or other communications which are required or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, transmitted by telecopier (with
receipt confirmed) or mailed by registered or certified first class mail,
postage prepaid, return receipt requested to the parties hereto at the address
set forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such other
person as may be designated by either party hereto in writing.
(a) If to Seller: Black Warrior Wireline Corp.
3748 Highway #45 North
Columbus, Mississippi 39701
Attn: William L. Jenkins
(b) If to Purchaser: SJMB, L.P.
777 Post Oak Boulevard, Suite 950
Houston, Texas 77056
Attn: Mr. Jay Brown
5.3 Miscellaneous. This Agreement (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter
hereof,(ii) shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns and is not intended to confer upon
any other person any rights or remedies hereunder, (iii) shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Delaware and (iv) may be executed in two or more counterparts which
together shall constitute a single agreement.
11
<PAGE>
5.4 Publicity. Seller and Purchaser promptly shall advise and cooperate
with the other prior to issuing, or permitting any of its directors, officers,
employees or Purchaser to issue, any press release with respect to this
Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, without the prior consent of Purchaser, neither Seller nor any of its
directors, officers, employees or Purchaser shall issue any press release which
includes the name of Purchaser or any of Purchaser's affiliates.
5.5 Assignment.
(a) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by Seller (whether by operation of
law or otherwise) without the prior written consent of the Purchaser.
(b) Purchaser may assign its rights and obligations hereunder, under
the Note, the Warrants or any other Transaction Document, subject to the
terms hereof and upon prior written notice to Seller. Each such assignee
(an "Assignee") shall execute an Assignment and Acceptance substantially in
the form of Exhibit G. Upon the execution of such Assignment and Acceptance
by such Assignee, (i) the Assignee shall be a "Purchaser" hereunder and, to
the extent provided in the Assignment and Acceptance, shall have the rights
and obligations of a Purchaser hereunder, and (ii) the assigning Purchaser
(an "Assignor") shall, to the extent provided in the Assignment and
Acceptance, be released from its obligations hereunder.
(c) An Assignor hereunder shall, if requested by the Assignee, deliver
the Note and Warrants in favor of such Assignor to the Seller, and the
Seller shall issue replacement Notes and Warrants in favor of the Assignor
and the Assignee in the amounts and for such shares as are indicated in the
Assignment and Acceptance. The replacement Warrants shall be issued for an
exercise price per share equal to the exercise price set forth in the
Warrants to be delivered to Seller under this Section 5.5(c).
5.6 Schedules. All statements contained in any exhibit, schedule, appendix,
certificate or other instrument delivered by or on behalf of the parties hereto,
or in connection with the transactions contemplated hereby, are an integral part
of this Agreement and shall be deemed representations and warranties hereunder.
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitute a single document.
5.8 Expense Reimbursement. Seller will reimburse Purchaser, within 10 days
after Purchaser's presentation of an invoice therefor, all of Purchaser's direct
costs relating to the negotiation, documentation and closing of the transactions
contemplated by this Agreement, including without limitation the direct fees and
expenses of counsel for Purchaser.
5.9 Restrictions on Transfer.
(a) Purchaser shall not transfer their rights under the Note except by
the grant of a security interest to its lender or lenders, or as provided
by Section 5.5 hereof. As between a Purchaser and its lender or lenders,
the Note is transferrable in the same manner and with the same effect as in
the case of a negotiable instrument payable to a specified person. Any
lender to which
12
<PAGE>
Holder grants a security interest in the Note shall be entitled to exercise
all remedies to which it is entitled by contract or by law, including
(without limitation) transferring the Note into its own name or into the
name of any purchaser at any sale undertaken in connection with enforcement
by such lender of its remedies.
(b) Purchaser shall not transfer the Warrants or any new warrants
described in Section 1.4 of this Agreement, except as provided in the
Warrants and provided further that the Warrants may be distributed to the
partners of the Purchaser.
5.10 Expenses of Dispute Resolution. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or any of the
other Transaction Documents, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled.
13
<PAGE>
SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date first
written above.
BLACK WARRIOR WIRELINE CORP.
By:
----------------------------------------
William L. Jenkins, President
14
<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
SJMB, L.P.
By: SJMB, L.L.C., its General Partner
By:
---------------------------------------
Jay Brown, Executive Vice President
15
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
THIS NOTE MAY BE SUBORDINATE TO CERTAIN INDEBTEDNESS OF BLACK WARRIOR WIRELINE
CORP. AS AND TO THE EXTENT SET FORTH IN THAT CERTAIN AGREEMENT FOR PURCHASE AND
SALE DATED AS OF JANUARY 23, 1998 BETWEEN BLACK WARRIOR WIRELINE CORP. AND ST.
JAMES CAPITAL PARTNERS, L.P. (90% OF THE INTERESTS AND 100% OF THE OBLIGATIONS
UNDER WHICH WERE ASSIGNED TO SJMB, L.P. ON MARCH 1, 1998, AND THE REMAINING 10%
OF THE INTERESTS UNDER WHICH WERE ASSIGNED TO SJMB, L.P. AS OF MARCH 16, 1998).
THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF MARCH
13, 1998 IN FAVOR OF FLEET CAPITAL CORPORATION, AS LENDER, WHICH AGREEMENT IS
INCORPORATED HEREIN BY REFERENCE.
THIS NOTE IS GIVEN IN REPLACEMENT OF THAT CERTAIN $500,000 CONVERTIBLE
PROMISSORY NOTE DATED JULY 27, 1998 OF BLACK WARRIOR WIRELINE CORP. TO SJMB,
L.P., HOWEVER, THE LIENS SECURING SUCH $500,000 NOTE AND THE INTEREST ACCRUED
THEREON ARE NOT EXTINGUISHED HEREBY, BUT ARE CARRIED FORWARD.
BLACK WARRIOR WIRELINE CORP.
$2,000,000 CONVERTIBLE PROMISSORY NOTE
$2,000,000 Houston, Texas October 30, 1998
BLACK WARRIOR WIRELINE CORP., a Delaware corporation (hereinafter called
the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to SJMB, L.P., a Delaware limited partnership (hereinafter called the "Holder"),
or its registered assigns, the principal sum of up to Two Million Dollars
($2,000,000), together with interest on the amount of such principal sum from
time to time
<PAGE>
outstanding, payable in accordance with the terms set forth below. It is the
intention of the parties that the principal sums of this Note shall be advanced
in multiple Advances (as defined below), subject to the satisfaction of the
conditions precedent set forth in Section 1.8 of the Agreement of Purchase and
Sale between the Company and the Holder dated as of the date hereof (the
"Agreement"). No Advance shall be made under this Note if an Event of Default
(as defined below) exists or would exist but for the passage of time. Interest
under this Note shall accrue on amounts actually advanced.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO THAT
CERTAIN BORROWER SECURITY AGREEMENT BETWEEN THE COMPANY AND ST. JAMES CAPITAL
PARTNERS, L.P., A DELAWARE LIMITED PARTNERSHIP ("SJCP"), DATED AS OF JUNE 5,
1997, AS MAY BE AMENDED OR MODIFIED AND AS AMENDED MARCH 1, 1998 TO INCLUDE THE
HOLDER AND AS FURTHER AMENDED AS OF THE DATE HEREWITH (THE "SECURITY
AGREEMENT"). THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE FURTHER
SUBJECT TO THE TERMS OF A SUBSIDIARY SECURITY AGREEMENT BETWEEN THE SUBSIDIARIES
OF THE COMPANY AND SJCP DATED AS OF JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED
AND AS AMENDED MARCH 1, 1998 TO INCLUDE THE HOLDER AND AS FURTHER AMENDED AS OF
THE DATE HEREWITH (THE "SUBSIDIARY SECURITY AGREEMENT"), AND A SUBSIDIARY
GUARANTY BY EACH OF THE SUBSIDIARIES OF THE COMPANY IN FAVOR OF SJCP DATED AS OF
JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED AND AS AMENDED MARCH 1, 1998 TO
INCLUDE HOLDER AND AS FURTHER AMENDED AS OF THE DATE HEREWITH (THE "SUBSIDIARY
GUARANTY").
ARTICLE I
DEFINITIONS
1.1 Definitions. For all purposes of this Note, except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as promulgated from time to time by the
Association of Independent Certified Public Accountants; and (c) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Note as a whole and not to any particular Article, Section or other
subdivision.
"Advances" shall have the meaning assigned to that term in Article II,
Section 2.1 hereof.
"Board of Directors" means the board of directors of the Company as elected
from time to time or any duly authorized committee of that board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
<PAGE>
"Common Stock" means shares of common stock, par value $0.0005 per share,
of the Company.
"Conversion Price" means the price per share determined in accordance with
Articles IV and V (as adjusted in accordance with the terms of this Note) at
which shares of Common Stock shall be delivered to Holder upon conversion of
this Note.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Event of Default" has the meaning specified in Section 3.1.
"Indebtedness" of any Person means all indebtedness of such Person, whether
outstanding on the date of this Note or hereafter created, incurred, assumed or
guaranteed, (a) for the principal of and premium, if any, and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created (i) for money borrowed by such Person (including capitalized lease
obligations), (ii) for money borrowed by others (including capitalized lease
obligations) and guaranteed, directly or indirectly, by such Person, or (iii)
constituting purchase money indebtedness, or indebtedness secured by property at
the time of the acquisition of such property by such Person, for the payment of
which the Person is directly or contingently liable; (b) for all accrued
obligations of the Person in respect of any contract, agreement or instrument
imposing an obligation upon the Person to pay over funds; (c) for all trade debt
of the Person; and (d) for all deferrals, renewals, extensions and refundings
of, and amendments, modifications and supplements to, any of the indebtedness
referred to in (a), (b) or (c) above.
"Maturity Date", when used with respect to this Note, means March 16, 2001
(or such earlier date upon which this Note becomes due and payable under Section
3.2).
"Note" means this $2,000,000 10% Convertible Promissory Note, as hereafter
amended, modified, substituted or replaced.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
other entity, unincorporated organization or government or any agency or
political subdivision thereof.
"Subsidiary" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries of the Company, or by any combination of the Company and one or
more other Subsidiaries, provided, however, that the following shall not be
deemed Subsidiaries for purposes of this Note: Black Warrior International,
Inc.; Black Warrior International (Bermuda), Ltd.; Black Warrior Oil and Gas,
Inc.; and Black Warrior Syria, Ltd. (collectively, the "Inactive
Organizations"). However, if any Inactive Organization begins to
<PAGE>
conduct any business (other than activities to "wind down" such organization),
such Inactive Organization shall be considered a Subsidiary under this Agreement
from that point forward. For purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"Transaction Documents" shall have the meaning assigned to such term in the
Agreement and Purchase for Sale executed as of even date herewith.
ARTICLE II
COMMITMENT AND ADVANCES
2.1 Advances. Subject to the terms and conditions and relying on the
representations and warranties set forth herein and in the other Transaction
Documents, Holder agrees to advance to the Company a sum equaling a principal
amount not to exceed $2,000,000 in one or more advances, which advances shall be
made at Holder's sole and absolute discretion. Holder shall exercise reasonable
good faith in the exercise of its discretion, and shall not unreasonably
withhold additional advances. All such advances shall mature and be due and
payable in full on the Maturity Date (or such earlier date upon which this Note
becomes due and payable under Section 3.2). Each advance shall be made in
accordance with the procedures set forth in Article II, Section 2.2 and as
provided in Article I, Section 1.8 of the Agreement.
2.2 Borrowing Procedures of Advances. In order to effect an advance, the
Company shall submit a Request for Advance in writing or by telecopy (or
telephone notice promptly confirmed in writing or by telecopy) to Holder not
later than 10:00 a.m., Houston, Texas time, on such dates as Company determines.
The Requests for Advances shall refer to this Note and specify in sufficient
detail the corporate use of the proceeds of such Advance, and the principal
amount of such Advance. The obligation of the Holder to make any advance
pursuant to such a Request for Advance is subject to the satisfaction of the
Holder that (i) the proceeds will be used for a proper purpose and (ii) on the
date of such advance, no Default or Event of Default, as those terms are defined
herein, then exists or will exist after such advance is made.
2.3 Interest. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to ten percent (10%) per annum calculated on the basis of a
360-day year. All past due amounts of principal and interest shall bear interest
at fifteen percent (15%) per annum calculated on the basis of a 360-day year
until paid. The Company acknowledges that interest at the rate of ten percent
(10%) per annum on the principal amount of $500,000 has accrued since July 27,
1998 and is payable under this Note.
2.4 Payment of Principal and Interest. The principal and all accrued and
unpaid interest under this Note shall be due and payable in full on the Maturity
Date. At any time, the Holder may, at its option and in lieu of cash, elect to
be paid all accrued and unpaid interest owed to Holder by
<PAGE>
the Company in the form of Common Stock, based on a price per share equal to the
Conversion Price (the "Price Per Share"). The amount of all accrued and unpaid
interest on the Maturity Date shall be divided by the Price Per Share into a
whole number of shares of Common Stock, with the remainder, if any, being paid
in cash.
2.5 Prepayments. Subject to Holder's right to convert, at any time before
the Maturity Date, the Company may prepay this Note, in whole or in part,
without penalty or discount, upon five days' prior written notice given to
Holder pursuant to Section 7.5. All payments made under this Note shall be
applied first to accrued interest, and the balance, if any, to principal;
provided, however, that interest shall accrue on any remaining principal balance
and shall be payable at the rate provided above.
2.6 Manner of Payment. Cash payments of principal and interest on this Note
will be made by delivery of a check to Holder at its address as set forth in
this Note or a wire transfer pursuant to instructions from Holder.
2.7 Use of Proceeds. The proceeds of all advances shall be used to provide
working capital required by the Company and to provide funds necessary to
complete various capital projects, namely the construction and completion of two
offshore "skids". No portion of the proceeds of any Advance under this Note
shall be used by the Company in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation U, Regulation T, or
Regulation X or any other regulation of the Federal Reserve Board or to violate
the Securities Exchange Act of 1934, as amended, in each case as in effect on
the date of such borrowing and such use of proceeds.
ARTICLE III
REMEDIES
3.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment or mandatory prepayment of the
principal or interest on this Note when such principal or interest becomes
due and payable and such default remains uncured for a period of five days;
or
(b) the Company or any Subsidiary defaults in the performance of any
covenant made by the Company, and such default remains uncured for a period
of 45 days in and of (i) that certain Agreement for Purchase and Sale dated
as of even date herewith (the "Purchase Agreement"); (ii) the Common Stock
Purchase Warrants issued by the Company to Holder pursuant to the terms of
the Purchase Agreement and dated as of the date hereof (the "Warrants");
(iii) the Registration Rights Agreement; (iv) the Security Agreement,
Subsidiary Security Agreement or Subsidiary Guaranty; or (v) this Note
(other than a default in the performance of a covenant specifically
addressed elsewhere in this Section 3.1);
<PAGE>
provided that a default in the performance of any covenant in Sections
8(a), 8(b), 8(c), 8(d), 8(e), 8(f), 8(h), 8(i), 8(j), 8(k), 8(l), 8(m) or
8(n) of the Security Agreement or Section 6.1 of this Note shall be an
Event of Default immediately upon occurrence; or
(c) any representation or warranty made by the Company or any
Subsidiary in the Purchase Agreement, the Warrants, the Registration Rights
Agreement, the Security Agreement or this Note or in any certificate
furnished by the Company in connection with the consummation of the
transaction contemplated thereby or hereby, is untrue in any material
respect as of the date of making thereof and such default remains uncured
for a period of 45 days; or
(d) the Company or any Subsidiary defaults in the payment when due
(whether by lapse of time, by declaration, by call for redemption or
otherwise) of the principal of or interest on any Indebtedness of the
Company or such Subsidiary (other than the Indebtedness evidenced by this
Note) having an aggregate principal amount in excess of $100,000 or on any
Indebtedness of the Company to any of its stockholders and such default
remains uncured for a period of 45 days; or
(e) a court of competent jurisdiction enters a judgment or judgments
against the Company or any Subsidiary, or any property or assets of the
Company or any Subsidiary, for the payment of money aggregating $100,000 or
more in excess of applicable insurance coverage (other than the judgment
disclosed on Schedule 3.1(e) hereto) and such default remains uncured for a
period of 45 days; or
(f) a court of competent jurisdiction enters (i) a decree or order for
relief in respect of the Company or any Subsidiary in an involuntary case
or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company or any Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Subsidiary under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Subsidiary or of any substantial part of the property of
the Company or any Subsidiary or ordering the winding up or liquidation of
the affairs of the Company or any Subsidiary and any such decree or order
of relief or any such other decree or order remains unstayed for a period
of 90 days from its date of entry; or
(g) the Company or any Subsidiary commences a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the Company or any Subsidiary files
a petition, answer or consent seeking reorganization or relief under any
applicable federal or state law, or the Company or any Subsidiary makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts generally as they become due; or
<PAGE>
(h) any person or group (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) becomes the beneficial owner of 40% or
more of the total voting power of the Company and was not the beneficial
owner of 40% or more of the total voting power of the Company as of the
date hereof; provided that the foregoing shall not include any person or
group who or which acquires the Warrants or shares of the Company's Common
Stock issuable upon exercise of the Warrants or upon conversion of this
Note; and further provided that such default has not been cured or waived
within ninety (90) days following such change of beneficial ownership.
(i) the Company or any Subsidiary (1) merges or consolidates with or
into any other Person (unless the Company or any of its Subsidiaries is the
surviving or acquiring party); (2) dissolves or liquidates; or (3) sells
all or any substantial portion of its assets (unless the purchaser is a
Subsidiary of the Company).
3.2 Acceleration of Maturity. This Note and all accrued interest shall
automatically become immediately due and payable if an Event of Default
described in Sections 3.1(f), 3.1(g) or 3.1(i) occurs and, this Note shall, at
the option of the Holder in its sole discretion, become immediately due and
payable if any other Event of Default occurs, and in every such case the Holder
of the Note may declare the principal and interest on the Note to be due and
payable immediately.
ARTICLE IV
CONVERSION OF NOTE
Subject to and upon compliance with the provisions of this Article, at the
option of Holder, all or any part of this Note may be converted at any time, at
the principal amount hereof together with accrued and unpaid interest thereon,
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock. The Conversion Price shall
initially be $2.25 per share. Notwithstanding anything else to the contrary set
forth herein, the Holder shall have the right to convert this Note pursuant to
the terms set forth herein at any time, including the 30 Business Days following
(i) the Maturity Date or (ii) any prepayment pursuant to Section 2.5 hereof. If
Holder elects to convert this Note after a prepayment has been made pursuant to
Section 2.5, then Holder shall return all or such portion of the funds paid to
Holder as to which Holder has elected to convert.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
<PAGE>
5.1 Anti-Dilution Provisions. The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
5.2 Adjustment of Conversion Price Upon Issuance of Common Stock.
5.2.1 (A) If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per
share less than the Conversion Price, issue convertible securities other
than this Note, issue warrants other than the Warrants issued as of the
date hereof, grant stock options, or issue any other common stock
equivalent (other than shares reserved for issuance to officers, employees,
directors, consultants or advisors of the Company pursuant to existing
stock option or restricted stock purchase plans) then, forthwith, upon such
issue or sale, the Conversion Price shall be reduced (but not increased,
except as otherwise specifically provided in Section 5.2.2), to the lower
price per share (calculated to the nearest one-ten thousandth of a cent,
but in any event not less than $0.001 per share).
(B) Notwithstanding the provisions of this Section 5.2, no
adjustment shall be made in the Conversion Price in the event that the
Company issues, in one or more transactions, (i) Common Stock upon exercise
of any options issued to officers, directors or employees of the Company
pursuant to a stock option plan or an employment, severance or consulting
agreement as now or hereafter in effect, in each case approved by the Board
of Directors (provided that the aggregate number of shares of Common Stock
which may be issuable, including options issued prior to the date hereof,
under all such employee plans and agreements shall at no time exceed the
number of such shares of Common Stock outstanding on the date hereof on a
fully diluted basis that are issuable under currently effective employee
plans and agreements); (ii) Common Stock upon conversion of this Note or
any other warrant issued pursuant to the terms of the Purchase Agreement;
(iii) Common Stock upon exercise of any stock purchase warrant or option
(other than the options referred to in clause (i) above) or other
convertible security outstanding on the date hereof; or (iv) Common Stock
issued as consideration in acquisitions.
<PAGE>
5.2.2 For purposes of this Section 5.2, the following shall be
applicable:
(A) Issuance of Rights or Options. In case at any time after the date
hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors, or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of Common
Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in the
case of such rights or options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the Conversion Price
in effect as of the date of granting such rights or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be
deemed to be outstanding as of the date of the granting of such rights or
options and to have been issued for such price per share, with the effect
on the Conversion Price specified in Section 5.2.1 hereof. Except as
provided in Section 5.2.2 hereof, no further adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any right or option referred to in Section 5.2.2 above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5.2.2(A) hereof, or the rate
at which any Convertible Securities referred to in Section 5.2.2(A) hereof,
are convertible into or exchangeable for Common Stock shall change (other
than under or by reason of provisions designed to protect against
dilution), the Conversion Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Conversion
Price that would have been in effect at such time had such rights, options
or Convertible Securities still outstanding provided for such changed
purchase price, additional
<PAGE>
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any such option or right
referred to in Section 5.2.2(A) hereof, or on the termination of any such
right to convert or exchange any such Convertible Securities referred to in
Section 5.2.2(A) hereof, the Conversion Price then in effect hereunder
shall forthwith be readjusted (increased or decreased, as the case may be)
to the Conversion Price that would have been in effect at the time of such
expiration or termination had such right, option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold, and the Common Stock
issuable thereunder shall no longer be deemed to be outstanding. If the
purchase price provided for in Section 5.2.2(A) hereof or the rate at which
any Convertible Securities referred to in Section 5.2.2(A) hereof are
convertible into or exchangeable for Common Stock shall be reduced at any
time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Common Stock upon
the exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such Common Stock and had adjustments
been made upon the issuance of the Common Stock delivered as aforesaid, but
only if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
(C) Consideration for Stock. In case at any time Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration therefor shall be deemed to be the amount received by the
Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. In case at any time any Common Stock, Convertible Securities or
any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to
such Common Stock, Convertible Securities, rights or options as the case
may be. In case at any time any rights or options to purchase any shares of
Common Stock or Convertible Securities shall be issued in connection with
the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options
shall be deemed to have been issued without consideration.
(D) Record Date. In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or
<PAGE>
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the Common Stock
or Convertible Securities deemed to have been issued or sold as a result of
the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as
the case may be.
(E) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned directly by the Company in
treasury, and the disposition of any such shares shall be considered an
issuance or sale of Common Stock for the purpose of this Section 5.2.
5.3 Stock Dividends. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 Stock Splits and Reverse Splits. In the event that the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Shares into which this Note
may be converted immediately prior to such subdivision shall be proportionately
increased, and conversely, in the event that the outstanding shares of Common
Stock shall at any time be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased and the number of Shares into which this Note may be
converted immediately prior to such combination shall be proportionately
reduced. Except as provided in this Section 5.4 no adjustment in the Conversion
Price and no change in the number of Shares shall be made under this Article V
as a result of or by reason of any such subdivision or combination.
5.5 Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in Section 5.5.3), lawful and adequate
provisions shall be made whereby the holder of this Note shall thereafter
have the right to purchase and receive upon the terms and conditions
specified in this Note and in lieu of the shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares
of capital stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares immediately theretofore so receivable
<PAGE>
had such reorganization, reclassification, consolidation, merger, share
exchange or sale not taken place, and in any such case appropriate
provision reasonably satisfactory to such holder shall be made with respect
to the rights and interests of such holder to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Conversion Price and of the number of shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any
shares of capital stock, securities or assets thereafter deliverable upon
the exercise of this Note.
5.5.2 In the event of a merger, share exchange or consolidation of the
Company with or into another Person as a result of which a number of shares
of common stock or its equivalent of the successor Person greater or lesser
than the number of shares of Common Stock outstanding immediately prior to
such merger, share exchange or consolidation are issuable to holders of
Common Stock, then the Conversion Price in effect immediately prior to such
merger, share exchange or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock.
5.5.3 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other
than the Company) resulting from such consolidation, share exchange or
merger or the Person purchasing or otherwise acquiring such assets shall
have assumed by written instrument executed and mailed or delivered to the
Holder hereof at the last address of such Holder appearing on the books of
the Company the obligation to deliver to such Holder such shares of capital
stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to receive, and all other
liabilities and obligations of the Company hereunder. Upon written request
by the Holder hereof, such Successor Person will issue a new Note revised
to reflect the modifications in this Note effected pursuant to this Section
5.5.
5.5.4 If a purchase, tender or exchange offer is made to and accepted
by the holders of 50% or more of the outstanding shares of Common Stock,
the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the
Company's assets with the Person having made such offer or with any
affiliate of such Person, unless prior to the consummation of such
consolidation, merger, share exchange, sale, transfer or other disposition
the holder hereof shall have been given a reasonable opportunity to then
elect to receive upon the conversion of this Note either the capital stock,
securities or assets then issuable with respect to the Common Stock or the
capital stock, securities or assets, or the equivalent, issued to previous
holders of the Common Stock in accordance with such offer.
5.6 Adjustment for Asset Distribution. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Conversion Price in effect
immediately prior to
<PAGE>
such declaration of such dividend or other distribution shall be reduced by an
amount equal to the amount of such dividend or distribution payable per share of
Common Stock, in the case of a cash dividend or distribution, or by the fair
value of such dividend or distribution per share of Common Stock (as reasonably
determined in good faith by the Board of Directors of the Company), in the case
of any other dividend or distribution. Such reduction shall be made whenever any
such dividend or distribution is made and shall be effective as of the date as
of which a record is taken for purpose of such dividend or distribution or, if a
record is not taken, the date as of which holders of record of Common Stock
entitled to such dividend or distribution are determined.
5.7 De Minimis Adjustments. No adjustment in the number of shares of Common
Stock purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which by reason of this Section 5.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
5.8 Notice of Adjustment. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 Notifications to Holder. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other
than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of
its Common Stock any additional shares of capital stock of any class or
other rights;
(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share
exchange of the Company
<PAGE>
with another Person, or sale, transfer or other disposition of all or
substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 Company to Prevent Dilution. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares of the type contemplated in Section 5.4 hereof, and then
in no event to an amount greater than the Conversion Price as adjusted pursuant
to Section 5.4 hereof.
<PAGE>
ARTICLE VI
COVENANTS
The Company covenants and agrees that, so long as this Note is outstanding:
6.1 Payment of Principal and Accrued Interest. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 Corporate Existence. The Company will, and will cause each Subsidiary
to, do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the Company or a Subsidiary shall not be
required to preserve any such right or franchise if it shall reasonably
determine that the preservation thereof is no longer desirable in the conduct of
its business.
6.3 Taxes; Claims; etc. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all lawful taxes, assessments, and governmental
charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal, or mixed, before the same shall become in
default, as well as all lawful claims for labor, materials, and supplies or
otherwise which, if unpaid, might become a lien or charge upon such properties
or any part thereof, and which lien or charge will have a material adverse
effect on the business of the Company; provided, however, that neither the
Company nor any Subsidiary shall be required to pay or cause to be paid any such
tax, assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
6.4 Maintenance of Existence and Properties. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 SEC Reports. The Company will deliver to the Holder within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required or elects to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. The Company will timely comply
with its reporting and filing obligations under the applicable federal
securities laws.
6.6 Notice of Defaults. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event
<PAGE>
of default would result upon any payment with respect to this Note) with respect
to any Indebtedness as such event of default is defined therein or in the
instrument under which it is outstanding, permitting holders to accelerate the
maturity of such Indebtedness.
6.7 Compliance with Laws. The Company will promptly comply with all laws,
ordinances and governmental rules and regulations to which it is subject, the
violation of which would materially and adversely affect the Company.
6.8 Amendments to Charter. The Company will not amend or modify its charter
without the prior written consent of Holder.
6.9 Mergers and Acquisitions. Without the consent of the Holder, the
Company or any Subsidiary will not dissolve, liquidate, consolidate, merge or
enter into a share exchange with or sell or transfer all or a substantial
portion of its assets to any Person.
ARTICLE VII
MISCELLANEOUS
7.1 Consent to Amendments. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of this Note.
7.2 Benefits of Note; No Impairment of Rights of Holder of Senior
Indebtedness. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.3 Successors and Assigns. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.4 Restrictions on Transfer. Holder shall not transfer this Note except
(by the grant of a security interest) to its lender or lenders. As between
Holder and its lender or lenders, this Note is transferable in the same manner
and with the same effect as in the case of a negotiable instrument payable to a
specified person. Any lender to which Holder grants a security interest in this
Note shall be entitled to exercise all remedies to which it is entitled by
contract or by law, including (without limitation) transferring this Note into
its own name or into the name of any purchaser at any sale undertaken in
connection with enforcement by such lender of its remedies.
7.5 Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been
<PAGE>
sufficiently given or served for all purposes on the third business day after
being sent as certified or registered mail, postage and charges prepaid, to the
following addresses: if to the Company: Black Warrior Wireline Corp., 3748
Highway #45 North, Columbus, Mississippi 39701, or at any other address
designated by the Company in writing to Holder; if to Holder: SJMB, L.P., c/o
St. James Capital Corp., 777 Post Oak Boulevard, Suite 950, Houston, Texas
77056, Attn: Jay Brown, or at any other address designated by Holder to the
Company in writing.
7.6 Separability Clause. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.7 Governing Law. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware (without regard to
principles of choice of law).
7.8 Usury. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Delaware and the United States of
America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (hereinafter referred to in this
Section 7.8 as "Applicable Law"). The Holder shall have no right to claim, to
charge or to receive any interest in excess of the maximum rate of interest, if
any, permitted to be charged on that portion of the amount representing
principal which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(hereinafter referred to in this Section 7.8 as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
BLACK WARRIOR WIRELINE CORP.
By:
William L. Jenkins, President
[Signature Page -- Convertible Note]
